Why the Fed Needs Public Banks
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But first, a look at why the Fed’s own efforts have failed.
The Fed Lacks the Tools to Inject Liquidity into the Real Economy
Congress has charged the Federal Reserve with a dual mandate: to maintain the stability of the currency (prevent inflation or deflation) and maintain full employment. Not only are we a long way from full employment, but the stability of the currency is in question, although economists disagree on whether we are headed for massive inflation or crippling deflation. Food prices and other at-home costs are up; but away-from-home costs (gas, flights, hotels, entertainment, office apparel) are down. Food prices are up not because of “too much money chasing too few goods” (demand/pull inflation) but because of supply and production problems (cost/push inflation). In terms of “output,” we are definitely looking at deflation. An August Bloomberg article quotes economist Lacy Hunt:
[A]ccording to the figures of the Congressional Budget Office, the output gap will be a record this year and we will have a deflationary gap. In other words, potential GDP will be well above real GDP. And according to the CBO, we’re going to have a deflationary output gap through 2030.
“Never argue with a fool, onlookers may not be able to tell the difference.”
December 4, 2020 at 6:59 AM #383137Snort McDorkParticipant
- Total Posts: 4,338
Was told a couple of weeks ago by a store clerk I chat with occasionally, that there was an aluminum shortage. Wouldn’t think that seeing there is a ton of soda stacked up all over. Plus you add the ability of the warehouse or supply point to be stricken with sick staff, and no trucks available to deliver, then you have a major problem. I had a neighbor tell me they were looking for something at Wall-Fart (hate the place) and were told by store clerk they had no freaking truck driver available. Imagine that.
I'm Snort McDork and I approved this message.
"I like birdy num-nums"
December 6, 2020 at 5:17 AM #383624snotParticipant
- Total Posts: 1,116
when we’re already struggling to pay those we have.
The Fed should not have the power to do what it did for Wall St. If it didn’t, Congress might have been forced to act; and if they’d been forced to act, there might have been more focus on whether, how much, and in what ways more money should be injected into which parts of the economy – rather than, e.g., bailing out junk bond speculators.
We need a WPA. We need to roll back all the many changes in our laws and systems that have resulted in the impoverishment of the 99% and the hollowing out of the real economy.
I’m all for certain utilities being publicly owned, including more of them than most people probably think about; but I don’t see a need for public banks; I do see a need for much greater limitations on what banks can do and much tighter bank regulation.
Destruction is easy; creation is hard, but more interesting.
December 6, 2020 at 6:41 AM #383630HassleCatParticipant
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But we don’t need more of the same. We don’t need the government setting up some scheme to start “quasi public” banks or some kind of “public-private partnership.” Postal banks are an idea to provide low income people with banking services, but they should not be making loans or otherwise creating more debt.
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