Must-Read: Paul Krugman: More on the Political Economy of Permahawkery

Must-Read: Yet another straw in the wind–that we really need to rebalance the Federal Reserve system to lessen the influence of commercial bankers within it. Carter Glass and company made a good try to set up a central bank that would administer finance in the general rather than in the bankers’ interest, but the past decade would have certainly taught us that they did not do a good enough job–if we had not already known that:

Paul Krugman: More on the Political Economy of Permahawkery: “How to make sense of the ever-changing rationales for the ever-changing demand for higher interest rates[?]…

…If you try to understand the political economy of trade policy, what you see is much narrower interests at play…. Capital is temporarily stuck in a particular industry; in the long run it may be fungible, but lobbyists don’t worry about that…. [The] long discussion of the distributional effects of QE… [is] irrelevant…. It’s bad for bankers, because it leads to a compression of the net interest margin…. And that is why there’s so much agitation for rate hikes on the part of finance…. Institutions… pick up by osmosis from all the bankers they meet the general prejudice… leading to increasingly baroque attempts to justify rate hikes despite low inflation…. The common claim that QE is a giveaway to bankers is the opposite of the truth…. Journalists with close ties to bankers spread this story… [are] Orwellian. Remember, the Fed isn’t lending money at low interest to banks–banks, with their $2.5 trillion (!) of excess reserves, are lending vast sums at low interest to the Fed. It’s all falling into place.

September 25, 2015

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