[MCN] A question for the candidates : Why is the US economy a repeatedly endangered species?

[Lance Olsen]

Fed’s Kashkari decries ‘absurd’ U.S. financial system that needs bailout every 10 years

Kashkari, who was a key player in trying to avert a more severe financial crisis in 2008-2009, favors stronger financial market regulation than many of his colleagues.

MarketWatch Published: Sept. 18, 2020 at 4:34 p.m. ET
<<https://www.marketwatch.com/story/feds-kashkari-decries-absurd-us-financial-system-that-needs-bailout-every-10-years-2020-09-18 <https://www.marketwatch.com/story/feds-kashkari-decries-absurd-us-financial-system-that-needs-bailout-every-10-years-2020-09-18>>>

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"The ultimate outcome of a policy is not what determines its qualification as folly. …. It qualifies as folly when it is a perverse persistence in a policy demonstrably unworkable or counter-productive.”

 "It is almost superfluous to say that the present study stems from the ubiquity of this problem in our time."

Barbara W. Tuchman, The March of Folly. 
New York: Ballantine Books, 1984

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Years of low interest rates made the current economic crisis worse, Fed's Rosengren says <https://news.google.com/articles/CAIiEEpRvixnPyI1faJBhY-muYUqGQgEKhAIACoHCAow2Nb3CjDivdcCMMHF0wY?hl=en-US&gl=US&ceid=US%3Aen>
Boston Fed President Eric Rosengren said years of low interest rates that encouraged risk-taking are making the current economic downturn worse.
CNBC <https://news.google.com/publications/CAAqBwgKMNjW9wow4r3XAg?hl=en-US&gl=US&ceid=US%3Aen>

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“Access to more capital makes bigger crises feasible: every now and then, somewhere in the world, one is going to happen.

“Is this because the same mistakes are made again and again, or is each crisis unique?  The answer is yes to both :  each crisis is unique, and the same mistakes are made again and again.”


The Economist, “A cruel sea of capital : A survey of global finance,” May 3rd, 2003.

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“Still, imagine for a moment that governments embrace [ Modern Monetary Theory ] MMT. Imagine too, as MMT proponents suggest, that control of the printing press is taken away from unelected central bankers and given to “accountable” elected fiscal representatives. Would we be any better off? 

“Far from it. Giving elected representatives the keys to the printing press is the equivalent of giving a gambling addict the keys to the casino. For many politicians, the primary objective is to remain in power. As such, they will too often be incentivised to pursue instant gratification at the expense of longer-term stability.” 

Financial Times Oct 21, 2020

MMT: The case against Modern Monetary Theory 
The deficit reality is that we are in effect borrowing from our collective economic futures 

<<https://www.ft.com/content/bcb523c3-7448-4cd6-a2d2-69b8f13be8f3 <https://www.ft.com/content/bcb523c3-7448-4cd6-a2d2-69b8f13be8f3>>>


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 “I have simply tended to be negative about booms,” investments guru Marc Faber told Asiaweek magazine in a February 2001 interview, because booms “easily turn into bubbles that become bigger and go bust.”  
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In a July 2001 issue, The Economist said “It is no coincidence that the deepest and most protracted recessions in recent decades have taken hold in countries that experienced booms ...”  

That same month, Barron's columnist Gene Epstein said easy money “helps bring boom and bust in the first place” by throwing money at “unsustainable projects.”

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“In the end, we are left with a dilemma. On the one hand, we have a banking sector that has a demonstrated capacity to generate huge crises because of the incentives to take on under-appreciated risks. On the other hand, we lack the will and even the capacity to regulate it.”

“As William White of the Bank for International Settlement has noted, banks almost always get into trouble together.* The most recent cycle of mad lending, followed by panic and revulsion, is a paradigmatic example.”

Martin Wolf. Why it is so hard to keep the financial sector caged
Financial Times February 6 2008 
<<http://www.ft.com/cms/s/0/9987c5c4-d41f-11dc-a8c6-0000779fd2ac.html <http://www.ft.com/cms/s/0/9987c5c4-d41f-11dc-a8c6-0000779fd2ac.html>>>

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“Real estate speculation must be as old as the land - in the United States, it is certainly as old as the frontier - and the first bad bank loan was no doubt made around the time of the opening of the first bank."

"Still, the boom of the 1980s was unique. Not only did creditors lend more freely than they had in the past, but the government intervened more actively than it had ever done before to absorb the inevitable losses."

“The fundamental investment question is whether even the government is big enough to underwrite, with good money, the losses born of the lending practices of the 1980s.”

“In the early 1990s  …. Tommy Mullaney, eleven, of Crownsville, Maryland, returned home from camp in the summer of 1990 to find his name inscribed on a MasterCard complete with a $5,000 credit line. 'I jumped up and down and said Wow - the hologram was cool,' Tommy told the Washington Post. 'But it sure made me wonder who was running that bank'.”

"By standing behind good banks and bad banks alike, the government in effect removed the oldest charter in banking -- that is, safekeeping."

James Grant. Money of the Mind: Borrowing and Lending in America from the Civil War to Michael Milken. Farrar Straus Giroux. 1992.  Introduction, p.5.
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"Proponents of the loan push notion suggest that the banks have victimized themselves by their absurd lending decisions ....  From this perspective, bankers as loan pushers become active door to door salesmen (albeit in pin stripe suits)."

William Darity and Bobbie Horn. The Loan Pushers: The role of commercial banks in the international debt crisis. 1988. Ballinger Publishing Company, a subsidiary of Harper & Row. 

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In his 1998 book, The Crisis of Global Capitalism,  George Soros says, “Construction is notorious for its boom/bust character and after each bust bank managers become very cautious and resolve never to become so exposed again. But when they are again awash in liquidity and desperate to put money to work, a new cycle begins.”

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"But the scale of climate change engulfs even the most fortunate. There is now no weather we haven’t touched, no wilderness immune from our encroaching pressure. The world we once knew is never coming back.

"I have no hope that these changes can be reversed. We are inevitably sending our children <https://onbeing.org/blog/kate-marvel-we-should-never-have-called-it-earth> to live on an unfamiliar planet. But the opposite of hope is not despair. It is grief.”

"We are all fated to live lives shot through with sadness, and are not worth less for it. Courage is the resolve to do well without the assurance of a happy ending." 

"We need courage, not hope."

Kate Marvel, physicist, climate scientist, NASA’s Goddard Institute for Space Studies and Columbia University’s Department of Applied Physics and Applied Mathematics

<<https://onbeing.org/blog/kate-marvel-we-need-courage-not-hope-to-face-climate-change/ <https://onbeing.org/blog/kate-marvel-we-need-courage-not-hope-to-face-climate-change/>>>

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