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NBBooks hit the top of the Daily Kos rec list last night with a Diary on this, and I felt I should put in my three penno'rth (which I rarely do there....)

Daily Kos:  The Economy: "No Return to Normal" - Galbraith UPDATED

Nice Diary, NB Books, we could use it to spice up EuroTrib tonight!

Humpty Dumpty is definitely broken, and can't be put back together again.

The first point is that most of the capital that underpinned the Mother of All Bubbles didn't come from banks, it came from investors, many of them overseas, through the mechanisms of securitisation, credit derivatives, credit insurance, and toxic cocktails of these three.

So while recapitalising Banks might treat the visible wounds, it won't stop the invisible internal bleeding of credit from the shadow banking part of the economy, and the further collapse of asset prices and disappearance of jobs.

The second point is that pumping capital into banks, and providing them with more liquidity through buying up their holdings of debt will not make their potential borrowers any more creditworthy than they have now become.

So the shortage is not of credit, it's of creditworthy borrowers. Monetary solutions are IMHO doomed to failure. and the Fed is utterly powerless.

The only solutions are fiscal.

The effect of the existing system of financial capital - a toxic combination of leverage and private property in commons - has been to transfer wealth from the 99% to the 1% who are even now clamouring that the 99% are to blame and should bail out the 1%.

This is the effect of what Jerome calls the Anglo Disease.

Apart from the stimulus of investment in public assets - a Green New Deal etc - and massive investment in public services, I believe that Systemic Fiscal Reform is necessary.

Simply put, we should tax Privilege and not People.

All taxes on earned income and profits, and transaction taxes should be abolished, as should means-tested benefits.

To replace them I advocate:

(a) Location Benefit Levy - a tax on the rental value of land.  This is a tax on the privilege of exclusive occupation of the Commons of land;

(b) Carbon Levy - a tax on the privilege of the exclusive use of the commons of non-renewable energy;

(c) Limited Liability Levy - a levy on the GROSS revenues of Corporations - this is a tax on the privilege enjoyed by investors of limitation of liability.

From the proceeds I would pay a National Dividend - as of right - to all citizens, and provide decent education and health services to all within a framework of what Dr Yunus of Grameen Bank calls "Social Business" operating on a "Not for Loss" basis.

The savings in the operating costs of the existing fiscal system - both in the Public and private sectors - would be phenomenal, and those involved would be far happier doing something socially useful, I suspect....

There we are. Solved the problems of the World. ;-)

Now back to ET....



"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Fri Mar 20th, 2009 at 06:26:17 AM EST
Yes. I read his piece yesterday. Damned good.
Wish he's diary here more often.

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Sat Mar 21st, 2009 at 05:29:53 AM EST
[ Parent ]
ChrisCook:
The second point is that pumping capital into banks, and providing them with more liquidity through buying up their holdings of debt will not make their potential borrowers any more creditworthy than they have now become.

this should be repeatedly drilled....i see one of those luminous boardings in times and piccadiily squares...

it really is the nub of the issue, the final rag falling off the naked emperor, the 'duh!' understanding moment, the great unanswered question most don't even want to contemplate.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Mar 21st, 2009 at 07:29:47 AM EST
[ Parent ]
... get the recession to the bottom with the smallest feasible decline to set a higher platform for the recovery ... during a serious recession like this, sparked by a fundamental flaw in the generation of new spending capacity and recirculation of that spending capacity through the spending/income cycle, monetary policy can at best accommodate recovery ... it cannot generate recovery.

And on the one hand, burning through money to paper over insolvency of financial institutions undermines the political and public finance position to pursue sufficiently aggressive fiscal stimulus, and on the other hand, it is vital to have a banking systam that can accommodate the credit demand of credit-worth borrowers if the recession bottoms out.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Mar 21st, 2009 at 08:03:54 PM EST
[ Parent ]
yup, that's increasingly clear, even to little bear brains.

the real shock comes when you think of a trillion put into highspeed rail, green grids etc, and then i put it together it's gone to be squatted on by people who are already ungodly rich, and don't give a rat's ass about the the environment, or us for that matter.

we're all just commodities, methinks, to them...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Mar 23rd, 2009 at 09:49:22 AM EST
[ Parent ]

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