Nobel Prize Winning Economist Supports Protests

Nobel Prize Winning Economist Endorses Protests

Yesterday, Nobel prize-winning economist Joe Stiglitz met with the “Occupy Wall Street” protesters to support their cause. Stiglitz said, among other things, that Wall Street got rich by “socializing losses and privatizing gain… that’s not capitalism… its a distorted economy.”


He is not the only high-level economist who supports the protests. Many other high-level economists and financial experts support the protests as well, including:

I will update this post as more economists weigh in on the protests.

* Personal communication

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  • Michael

    Ironic Joseph Stiglitz supports the protestors when Keynesianism and it’s associated monetary meddling is the principal cause for the situation the protestors resent (ie enrichment of the banking elite at the expense of the ordinary worker/professional).

    Under free banking which most modern Austrians support the rotten banks would fail and the well managed ones would prosper whilst serving their customerrs, we wouldn’t have a situation in which decades of extreme failure has enriched the banking elite far beyond all others.

    Read Henry Hazlitt’s ‘The Failure Of New Economics’ for a great synopsis on the lunacy of Stiglitz’s beliefs.

    • erichwwk

      ??? A little knowledge is a dangerous thing.

    • Amin

      Well put.

    • http://www.garshol.priv.no/blog/ Lars Marius Garshol

      Michael: Keynesianism says the government should increase spending to offset the loss of demand. That’s very different from giving handouts to bankers. Sure, giving money to bankers could be construed a form of stimulus, but it’s one with a terrible multiplier (meaning: it produces very little effect on the economy per dollar spent).

      “Under free banking which most modern Austrians support the rotten banks would fail” That’s true, but the consequences would be disastrous. Remember Lehman? That was just one bank.

    • Majorajam

      Brilliant. A hard money type talking about lunacy. Are you even familiar with the reason the Fed was created in the first place? Hint: it wasn’t to manage the money supply. It was informed by experience of the abject failure of 19th and early 20th century hard money free enterprise.

      Keynes observations and keen insight into the functioning of the macroeconomy were normative and have been resoundingly vindicated by history. They most certainly did not advocate the socialization of banking losses, the profound implications of which Keynes well understood. Modern Austrianism by contrast is little more than rank ignorance, notwithstanding the important contributions of some of its former exponents (if you consider the Austrian national Joseph Schumpeter an Austrian, which is a stretch. Hayek not so much).

      Bottom line, the magic of the market doesn’t work to regulate money and credit. Quite the opposite, it produces inflations, bubbles and extended, destructive busts. Do yourself a favor and pick up a copy of Hyman Minsky’s ‘Stabilizing an Unstable Economy’ for more details. Moreover, gold standards are untenable unstable tinder boxes in the context of international trade. Google Triffin’s paradox. Read up, and be informed.

      As for Stiglitz, this is a man who has been consistently against the kinds of deregulation of the financial markets which have enabled the looting of the-too big-to-fails, not to mention the precarious mountain of debt that forebodes ominously for the global economy. He against even 70s era mortgage securitization, long before the development of the full fledged securitization-derivative-leveraged speculation credit bubble it helped to create, a practice which has been very effective at lining the pockets of fat cat bankers whilst impoverishing everyone else.

      If you want to point the dirty end of the stick at someone, no better place to start than that infamous Randian acolyte and one time gold-standard advocate, Alan Greenspan.

      • Joseph

        Strong post!

  • Harry Johnson

    And keep in mind that the elder Koch brought hayek to this country arranging to get him medical coverage under medicare and social security because hayek was scared he would lose his government paid medical care that he was using in Austria. Your Austrians are as full of crap as ayn rand (alyssa rosenbaum) withj her social security scam or ronnie reagan who went to college from a welfare grant under the New Deal. The libertaricons are as full of it as the traditional CONservatives and republiCONs.

    • Jaedon S.

      “I shouldn’t like it to come into your head, Gracchus, to divide up my property among all the citizens. But if you were to do so, I would come for my share.” – Senator Piso, as recounted by Cicero.

      • Bill Bergman

        Thanks for that, Jaedon!

      • Wooten Berston

        Stolen property or that acquired by fraud is not exempt from confiscation. Although the thieves have managed to steal enough liquid assets to enable them to meddle deeply in the electoral process and interfere with the judiciary, only self-serving moral degenerates can pretend to rationalize their fraud with faulty philosophical arguments.

    • Amin

      How about let people opt out of FICA and Social-Security and Medicare. You can’t tax someone and then call them a hypocrite when they come to collect what they’ve been promised in exchange.

      You socialists have no respect for others rights, and want to persecute them when they try to manage as well as they can under the order that you forced on them.

  • http://mamvas.blogspot.com mamvas

    I also join this movement, and wish them strength and courage
    We must unmask the thieves of Wall Street and banking

  • Clayton

    “Keynesianism and it’s associated monetary meddling” So there are a few things incorrect here. First it is important not to distort the money given to the banks to avert a credit crisis and the stimulus. Two extremely different things with extremely different purposes. The bank bailout was to avoid a credit crunch and the sky high interest rates that would follow. This would have thrown the world into a global depression. This is not opinion this is mathematical fact. There would not be enough money in the system to make payments or lend. Banks would still have physical or “fiat” money but the ability for an employer to transfer funds from their bank to yours would cease. This is because the money you put in the bank was leveraged and bet with.

    Keynesianism says that in a time of recession demand needs to be increased. This is just a fact of what has to occur to get out of a recession. Now it is important to distinguish long term and short term effects here. If people do not spend money the government can, however this increases the debt in the long run but eases the economy short term, “to prevent larger recession”, this is a sort of stopper in the economy to keep the hole leaking from getting larger. Without this money more people would have lost jobs which would have resulted in more people loosing houses. This would have lead to them not paying their mortgage back and the banks holding more non liquid assets. However since some banks were leveraged 40 times a person that defaults on their mortgage who still owes 200k would lead to a bank being out 8million dollars. This then makes the credit crisis larger. “DO YOU SEE THE CYCLE?” So yes all of that was necessary. QE1 and QE2 increases the money supply and this is done exclusively to keep interest rates down. If they had not done this interest rates would have rose leading to lower investment as Investment is a function of r, I(r). This induces a multiplier through the economy of lower growth for years to come reducing the possible long term GDP. In the NEO CLASSICAL SYNTHESES which is mainstream ECON, the things 99% of the econ community agree on. Money supply has no effects long term so it is a great way to keep rates low short to mid term.

    The main argument against Keynesian ideas is that it is deficit spending but the problem here is that in all views even supply sidder we are in a position where any attempt is deficit spending. We are only reducing the rate of increase in our debt. Reaganomics is a similar demand increase idea where you reduce taxes and then people have more money to spend. yes demand increased but the tax base shrunk and governments spending stayed the same. This also increases debt and you can look it up if you find a debt as a % of GDP graph with the administrations on it. The base did not increase enough to cover the offset.
    http://athensboy.files.wordpress.com/2009/08/national-debt-gdp.gif?w=509&h=312
    The marginal rates where also above 70% when Regan started this they are half that now.

    This is why S&P downgraded us they aren’t stupid, they are aware a cut in the rate if increased debt is far different from actually doing anything about it. You actually have people arguing that the rich pay most of the taxes. Well that would make sense considering the top 1% owns 30% of all the wealth and the top 1% owns 70%. So yes the top 10% should pay 70% of the taxes. This is simple math. The problem right now is that they are not paying even close 70% of all taxes. This is because many people in the top 1% get the 15% rate.

  • Pete

    I’m sorry, im not really with it when it comes to financial specifics, would someone mind explaining his quote in relatively simple terms? thanks

    also, as a side note. THANK GOD PEOPLE ARE FINALLY DOING SOMETHING. This country has been sitting idly by as it is torn apart from the inside. I have never been more proud of my generation, or the people of this country than right now. lets get out there and exercise those first amendment rights we love so much.

  • Dempster

    I don’t know who you are Washington, but I’m glad you make the effort to put information out onto the internet.

    Thankyou

  • steve

    I have some sympathy for the protestors. But, I think the Austrians are correct about the FED. Yes, the FED was created to eliminate the bubbles caused by fractional reserve banking. But, it didn’t really work. Previous to the FED there were small (compared to today) frequent bubbles, the FED can and does smooth over each of these with more more printing and more debt. Unfortanetely, the succesively larger pile of money and debt has the result of producing succesively larger bubbles. Eventually you get to a point where the bubbles are too large for even the FED to handle. They are pushing money out the door as hard as they can but no one dares to take it and inflate another bubble. Everyone is just in too much debt already.

    The FED tried and failed. Time to eliminate it.

    What about the banks? The bankrupt ones need to fail, let them. How do you think rich people ever become poor people anyway. Increased income taxes wont do it. That just prevents new people from becoming rich, the already rich barely care about income. For the most part, the way rich people lose their money is they leverage up, borrowing even more money to buy a bank or factory. Then the investment goes bad and they go bankrupt. Let it happen already.

    What about TARP? Huge mistake in my opinion. If your gonna insist on bailing out the rich when their investments go bad with the excuse of saving American jobs for the middle class. Well then, guess what. The rich are gonna stay rich. Hardly matters what the tax rates are if you insist that no large company can fail. You simply create a permanent class of rich people who can’t go bankrupt.

  • Bev

    http://www.monetary.org/how-the-economists-facilitated-the-crisis-and-how-hr-6550-solves-it/2011/06


    Creating an Interest- and Debt- Free Money System 


    MAJOR, HISTORIC PROGRESS BEING MADE

    
How the Economists Facilitated the Crisis and How HR 6550* Solves it


    Economist Jamie Galbraith in testimony to the Senate Crime subcommittee on May 4th, 2010:

    
False “monetary” beliefs (some call them theories) have misdirected public policy decisions for decades, with devastating effect! Errors of Concept, methodology and factual errors led to disastrous outcomes for our nation and have the potential to gradually take America down into an unprecedented abyss of lawlessness and deprivation. Consider the present insane calls for austerity. Economists have allowed the idea to prevail that a government has to be run the way a shopkeepers runs his store. These times call for greater care and some heroism among economists; and cowardice is no longer tolerable among those who do understand.


    Which particular monetary errors? Most importantly, economists have not understood or appreciated the difference between money and credit. That using credit for money is dangerous, harmful and unnecessary. Can’t they read Knapp’s “State Theory of Money, available in English since the early 1920s, to understand credit is just one type of money system, and not a good one at that?

    Even Minsky who pointed out that such a fractional reserve system always collapses, regarded that as a problem inherent in “Capitalism, and didn’t consider eradicating it but merely called for government providing jobs when the credit structure was in collapse. A solution that one of AMIs researchers said was like “trimming poison ivy!

    ”
Many economists have falsely concluded that “all money is debt,” and while most money in our particular mis structured system is debt, this attitude ignores the possibility and necessity to define a better system based on government money, not private debt. This failure to understand the concept of government money as opposed to private credit, has had immense and deadly repercussions. The Great Henry Simons summed it up in one magnificent sentence in the 1930s:

    
“The mistake … lies in fearing money and trusting debt.”

    Henry Simons, (Economic Policy for a Free Society, 1930s, P.199)


    This fundamental error has allowed the most egregious banking and money system to dominate our society for a century. It has caused immense damage:

    
For example: The privatization of our monetary system, with control over public policy being in unelected hands, for whoever controls the money system, over time will control the nation.


    And look what they have done with that power:


    * They’ve given special privilege to create money to some, and disadvantage to others; which has led to an obscene concentration of wealth and a corresponding poverty! This has encouraged lawlessness and corruption among the privileged; pushing them to diseased excess for acquisition, and ignoring those among us in great need.


  • Joseph

    This is a wonderful moment and Joe Stiglitz is taking full advantage of it. Dean Baker wonders why everyone isn’t out occupying Wall Street? Not everyone has courage and a Nobel Prize with which to vanquish political consequences. I am surprized that Dennis Kucinich is not out on the street preaching his latest proposed legislation that would fundamentally alter the monetary system as we know it. We are becoming more financially literate. Hell, we might even get as smart as the farmers who created the Populist movement in the 19th Century. No Populist of yore would be fooled for one minute by the con game Stiglitz refers to as “allocation of capital”. It was bullshit then and it’s still bullshit and it’s always been called “Wall Street”.

  • Bev

    Monetary Reform:

    http://www.monetary.org/demonstrations

    What do the Occupiers want? Mainly Economic Justice!

    To
    get economic justice, you must have monetary justice and the AMI has
    been working at gaining monetary justice since 1996. We have made
    progress. Our research results, The Lost Science of Money by Stephen
    Zarlenga demonstrate that decades of research and centuries of
    experience shows that three things are absolutely needed:

    The
    present form of the Federal Reserve System must be ended – it must
    become a part of our government – what people mistakenly think it is
    now! In the Treasury Department is best.

    The accounting privilege
    that banks now have to create what we use for money out of debt, must
    stop once and for all. What’s called fractional reserve banking must be
    decisively ended.

    The Congress must understand and be empowered
    to create new money and spend it into circulation as money, not debt.
    For example the $2.2 trillion dollars the Engineers tell us is needed
    for infrastructure over the next 5 years. As the system progresses,
    health care and education, and grants to the states are made.

    Now
    some good news: Congressman Dennis Kucinich (D Ohio. 10th Dist) on
    September 21st, introduced HR2990 which does those very things!!!!
    Congressman Conyers of Detroit co-sponsored it.

    We need to see
    that people realize there is a bill which achieves these goals, already
    in the Congress. That they can help by asking their representatives and
    Senators to support it. Also their school Boards, State reps and
    Senators, City Councils, newspaper editors, etc, etc, etc.

    We
    have materials which can help them do all that, available for the
    asking, but first they have to become aware of HR 2990, and there are
    four attachments which will help you make it clear to them:

    First, a half page Flyer announcing the HR 2990 which should be handed to everyone at a demonstration.

    Second,
    “The Need for Monetary Reform”, a one page (double-sided) sheet for
    those who want to know more. It’s exactly 800 words and you can reprint
    it easily, even get it into newspapers.

    Third, a fact sheet on HR
    2990 describing what the bill does to stabilize America’s financial
    situation, including the creation of 7 million of jobs.

    Fourth,
    our 32 page booklet, which includes some history, our answers to the 20
    most frequently asked questions, the American Monetary Act, and much
    more. Copy and photocopy the one attached, or get pre printerd ones from
    us at 10 copies for $30.

    I ‘m suggesting you print these out,
    photocopy several hundred of them and head to the nearest demonstration!
    Stay at least a few hours. Let me know what happens. To find the
    nearest demonstration to your location, Google: “Occupy(insert your city
    here)” and check it out.

    Warm regards to you and good luck! Remember this is a non-partisan activity!

    Stephen Zarlenga
    AMI

    ………
    ………

    http://www.monetary.org/how-the-economists-facilitated-the-crisis-and-how-hr-6550-solves-it/2011/06

    


How the Economists Facilitated the Crisis and How HR 6550* Solves it




    (Now HR 2990 for 2011)


    Economist Jamie Galbraith in testimony to the Senate Crime subcommittee on May 4th, 2010:




    False “monetary” beliefs (some call them theories) have misdirected
    public policy decisions for decades, with devastating effect! Errors of
    Concept, methodology and factual errors led to disastrous outcomes for
    our nation and have the potential to gradually take America down into an
    unprecedented abyss of lawlessness and deprivation. Consider the
    present insane calls for austerity. Economists have allowed the idea to
    prevail that a government has to be run the way a shopkeepers runs his
    store. These times call for greater care and some heroism among
    economists; and cowardice is no longer tolerable among those who do
    understand.




    Which particular monetary errors? Most importantly, economists have
    not understood or appreciated the difference between money and credit.
    That using credit for money is dangerous, harmful and unnecessary. Can’t
    they read Knapp’s “State Theory of Money, available in English since
    the early 1920s, to understand credit is just one type of money system,
    and not a good one at that?

    snip

    


Many economists have falsely concluded that “all money is debt,”
    and while most money in our particular mis structured system is debt,
    this attitude ignores the possibility and necessity to define a better
    system based on government money, not private debt. This failure to
    understand the concept of government money as opposed to private credit,
    has had immense and deadly repercussions. The Great Henry Simons summed
    it up in one magnificent sentence in the 1930s:


“

    The mistake … lies in fearing money and trusting debt.”




    Henry Simons, (Economic Policy for a Free Society, 1930s, P.199)

    This fundamental error has allowed the most egregious banking and
    money system to dominate our society for a century. It has caused
    immense damage:

    For example: The privatization of our monetary system, with control over public policy being in unelected hands, for whoever controls the money system, over time will control the nation.

    And look what they have done with that power:

    * They’ve given special privilege to create money to some, and
    disadvantage to others; which has led to an obscene concentration of
    wealth and a corresponding poverty! This has encouraged lawlessness and
    corruption among the privileged; pushing them to diseased excess for
    acquisition, and ignoring those among us in great need.

    * They’ve turned economics into a primitive religion, and worshipped
    the “market” as a god, despite all evidence to the contrary. A primary
    tool they use is to denigrate and ignore evidence. “Anecdotal” was the
    description Greenspan used for real evidence that challenges their
    theories. A fundamental sin of poor methodology.

    * They have placed an unnecessary ball and chain on the leg of every
    producer by having the money supply itself bear an unnecessary interest
    cost to society.

    * They’ve foisted a “fractional reserve” system on us prone to
    periodic collapse. Credit will collapse during a crisis. Money does not
    collapse. Credit will collapse during a crisis. Money does not collapse. Money does not collapse.

    In our present system most of what we use for money – more accurately
    purchasing media – comes into existence as an interest bearing debt,
    when banks make loans. In that sense, most money in our fractional
    reserve system – is debt. But economists can’t seem to grasp that those
    rules can and must be changed. Afraid to confront their paymasters, who
    are benefitting from the injustice, they can’t conceive of practical
    ways we can use real government issued money for money instead of
    substituting private debt for it. They ignore previous attempts such as
    the Chicago Plan of the 1930s; and smear prior periods when such real
    money was used successfully.

    Errors of methodology regarding money include refusal to examine the
    facts and a tendency to ignore history where the monetary facts are
    found. This leads to the silliest errors of fact regarding monetary
    history including:

    * Being unaware of the colonial periods’ excellent experience with government money.

    * The Continental Currency – they are generally unaware they were destroyed by Brit counterfeiting.

    * The Greenbacks – which is mistakenly characterized as worthless
    paper money, ignoring that they ultimately exchanged one for one with
    gold.

    * The French Assignats – where they have again ignored Brit
    counterfeiting and enshrined the propaganda book written by a banking
    heir as unbiased fact (White’s Fiat Money in France)!

    * The German Hyperinflation is not recognized as occurring under a privately owned and privately controlled Reichsbank!

    * Regarding the FED as part of the government!

    * The Free banking Schools misidentify the Free banking period
    because New York’s “Free Banking Law” gave better results. But despite
    its title it imposed much stronger requirements and regulations and was
    the opposite of free banking!

 

 

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