Stirling states the economic case for regime change….
Party Like It’s 1926 | The Agonist
Bernanke has now allowed brokers to borrow directly from the Federal Reserve, and created a series of instruments which, in effect, allow the creation of money based on speculatively held money. Bernanke’s moves in the last few days have, in effect, created a new basis for the US currency. It is one that has been building for some time. That basis is the value of stocks held. This was visible by the “Poor Pound” thesis: that priced in independently generated currencies, the American stock market has been remarkably flat.
This change was inevitable, and predictable. Sooner or later the American Dollar must be based, in a global economy, on the global evaluation of our production. However, the question, as with every previous monetary order, is whether the pieces fit together. Presently, they do not.
The reason they don’t is because there is no narrow channel which keeps the powers that be from leaning too far in one direction. There is no consequence for those temporarily in power from simply spewing dollars in every direction, and letting those that they do not like pay the costs. That is what is happening now, the coalition of farmers and oil men that held Bush in power, are doing very well. The defense contractors have made out very well, and those that loan money to the government are doing well. Those that are being bailed out have seen their share of national wealth and income skyrocket.
The key is not re-regulation, but a Nash equilibrium, a state where no group can unilaterally improve its position at the expense of others. This state is the challenge for the next administration. It will require a fundamentally different political order, as the great overturns of monetary basis in the past have been based on different constitutional orders to both create, and navigate, the narrow channel which their monetary system rests upon.
The pieces must interlock to the regulation of the financial system, and they must end the disequilibrium where the wealthy can dump risk on others, and take the profits for themselves.
2 Responses
Nash equilibria depend on players not coordinating changes of strategy with other players.
“It will require a fundamentally different political order . . .”
Right. Like that’s gonna happen.
I believe some highly flawed economic theorists and their theories have usurped common sense, and no politician I know of has the stones to turn to more reasonable economic advisors.