14 October 2011

A little of this, a little of that

A summary of unpleasant events that people do not like.

I have some sympathy for the problems of income inequality. But I don't think we're getting that resolved by passing a "Buffett rule" or a millionaires tax, etc. Major tax reform, either taxing capital gain as income (you would have to stop taxing corporations in order to do it) or taxing consumption instead of income, would go a lot further to dealing with that. Neither seems likely to come out of the people protesting as options they would be willing to support.

But the major point is the litany of woe caused by the banking/financial sector. 

As one can tell from these charts, monetary policy doesn't appear to have panned out in an ideal way. We are currently paying money for banks to sit on money rather than lend it back out, their intended economic utility (as the market's diviners of capital loan requirements in the general economy). And if one looks at this, one can see why we've basically been fucked for the last 3-4 years. Our monetary policy has a target inflation rate. We haven't hit it for 3 or 4 years now. One reason is that the banking sector is hording money instead of circulating currency as it is supposed to do. A good question is why? Why are they not making loans? Well one reason is that the government is paying better returns than they feel they could earn on those loans (I think they are wrong there, but that's because I know how issuing loans works for banks and just how well it can profit them to do it).

I'm not sure what sound monetary purpose that serves, but it clearly isn't panning out for the rest of us. I don't think you are likely to find a protest movement coalescing around reforming monetary policy (besides hardcore Paul-ites who don't want monetary policy to exist in the first place) or for having Obama appoint new members to the Fed board (he's had two open slots for his entire term and has done nothing). But I'd have to think it would be more effective for the economy than screaming about college loans.
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