Notice that the need for reform and rebalancing the system never really comes up in the discussion. This is old thinking, and its killing the economy.
As you know, I think both 'expansionary austerity' and 'stimulative easing' are missing the point and ineffective, because the economic, financial, and global trade system is broken, corrupted, and badly in need of reform and structuring.
What the Fed is doing is keeping the zombie banks upright at the expense of the long suffering middle class and savers. Michael Hudson has called it 'the endowing of a financial elite to rule in the 21st century.' The monied interests are gorging themselves on malinvestment, public policy failures, and a well financed campaign of economic propaganda such as that which led to the tragic lapses of regulation and the overturn of Glass-Steagall.
The effective tax rates of the super wealthy are less than 15 percent, because they draw a major portion of their annual increase in wealth from capital gains and dividends, and unrecognized entitlements. as well as a wide menu of tax avoiding schemes.
And while they moan about the nominal headline tax rates, paid only by the 'little people' even if they do not know they are little, corporations and the truly wealthy have not enjoyed just low effective tax rates in the post WW II era. And yet it is still not enough.
In light of the severe unemployment problems plaguing a large portion of families, austerity seems like a cruel joke, a coup de grâce delivered by the bankers to the income producing classes who depend on labor in the creation and delivery of real products, and not artificial arbitrage and gaming the system.
But on the other hand, stimulus seems just another excuse for the special interests to put on the feedbag once again to the detriment of the many of the next generation. There is no comparison between the Obama Administration and the New Deal in terms of real change and productive innovation.
There has been a very strong recovery in corporate profits in the non-financial sector, and the financiers barely missed a beat in distributing a healthy chunk of GDP to themselves in bonuses, while the ashes of the financial crises which they caused still glowing. And their behaviour in the mortgage and derivatives markets has been despicable. I am appalled that people put up with this sort of thing, much less defend it out of some mistaken belief in neoliberal 'free markets.'
The people should never have to bailout reckless banks who engaged in speculative self-interest, and particular when they did so with the intent to personally enrich themselves, come what may.
"The UK Chancellor of the Exchequer's guiding philosophy is refreshingly pro-market: 'All banks should be allowed to fail safely without affecting vital banking serviceswithout imposing costs on the taxpayer.'" George Osborne
UK Considers Separating Retail and Investment Banking
The second chart gives some indication of the nature of the problem. The US enjoyed an extraordinary period of productivity and expansion, and the middle class was thrown under a bus. And now they are expected to pay to subsidize the unsustainable bonuses and lifestyles of the monied interests.
h/t Mark Thoma
