Must-Read: Jared Bernstein: Wall St, Injured Dogs, and the Election

Must-Read: Jared Bernstein: Wall St, Injured Dogs, and the Election: “Those of us in the first Obama administration were driving along…

…and saw an injured Doberman on the side of the road. We picked it up and nursed it back to health… and once it was back to full strength, it attacked us. The analogy is more artful than accurate. The economic system must have credit flows, and given the failure of this aspect of the market, it wasn’t a question as to whether or not we should try to heal the injured dog (of course, how we went about it has been controversial, but that’s a different argument; my take is here). And there is one narrative that says the dog only attacked us after we attacked it, i.e., after President Obama started serving up some heated rhetoric to the denizens of the finance sector….

I’m not interested in demonizing anyone, or more precisely, any sector of the economy (so I probably won’t get very far). Because that’s what “Wall St.” is—it’s another sector…. It currently is an inflated sector… claiming more wealth than it should… “rents”… while too often engaging in counterproductive speculation and bubble-generation…. Financial regulatory policy goosed by bad economics—theories of “rational expectations” which conclude that traders accurately price risk and that banks will self-regulate—has devolved in such a way as to amp up the greed beyond that of Gordon Gekko’s wildest dreams. So the policy target asks: what will it take to get this sector functioning productively again[?]