Monday, July 4, 2011

Valence Chartbook ...from the Center of the Universe

Available there. Lots of graphs. Probably worth a look. (PDF)

In it, Warren Mosler says:

Personal income, in particular, is looking sideways and relatively weak, at least partially due to reduced interest income due to lower rates.

No doubt it's true. But if Uncle Warren is saying we need to jack up interest rates in order to raise personal income, then he's not invited over for Thanksgiving this year.

Focus on the problem. The problem is that we have too much debt. Not the government. We, the people. The private sector. And government, too. That is the problem.

If we have too much debt, it's because we have used too much credit, and because we did not pay it back quickly enough. Ergo, the solution is to reduce the encouragement of credit-use by policy, and to accelerate the repayment of debt by policy.

Under no circumstance is it the solution, to jack up interest rates so that "the rentier class" can make more money for doing nothing. Wait... What was it Lewis said?...

You can still earn plenty of money by doing a good job at investing. Nothing entitles you to earn money by doing absolutely nothing other than having money.

Lewis the apt.

One does not fix the economy by focusing on a particular group and tending to its needs. That is how one destroys the economy. Have we not learned this by now?


Clonal said...


I agree with your thoughts. However, not with Lewis' statement:

You can invest in stocks, bonds, commodities, currencies, etc......You can still earn plenty of money by doing a good job at investing.

The activities he just described, are not "investments" - they are the purchase of an asset, and on the whole speculative. There are only some times when such purchases would classify as an investment for example, when investing in a start up, or when a company is raising money for certain activities, or when a bond issue is floated to raise money for a private or public purpose.

In my view, the secondary market serves a very limited purpose, and is mainly speculative, and a prime driver of asset bubbles.

The Arthurian said...

"You can invest in stocks, bonds, commodities, currencies, etc......"

Ah, but I didn't quote that part of it! :)

Well said.

I think there is some requirement for credit-use in a healthy economy. (Not as much credit as we use, but that is another matter.) And therefore there is some need for 'secondary market' investment. A person who hopes to retire one day might want to invest that way.

On the other hand, when Winterspeak asked "Why would [the government] need to [save]?" my reaction was:
"I'm not even sure it makes sense for a business to save. Business is supposed to invest."