Thursday, June 14, 2012


A private firm is all about cash flow.  If the cash flow is negative it can't survive for long.  But, the government (Federal Reserve) is not about cash flow.  It is about estimating the the real productive potential of the economy and increasing the money supply to bring it forward.  Discussion of austerity misses the point of our present unrealized and wasted capacity.  If the banks don't create enough money (loans) to create full employment, the the US Treasury and Federal Reserve must do it.
     Government needs to spend more not less using loans from its own bank, not more borrowing from financial markets. As a recent New York Times editorial says, our problem is inadequate consumer demand.  It is inadequate because unemployed people can't buy and that now includes laid off teachers, police, and fire fighters. What a waste.  All due to myth and superstition and false analogies between private debt and public. 

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