They fear deflation
Ernest Mandel published his final major work — Late Capitalism — in 1972 and gave us student radicals the idea that the system was on its last legs, headed for collapse within decades.
Not.
Yet it is possible that future books, looking back, will discuss a period of late capitalism that they will discern did, in fact, date from the 1980s.
It has been a distinctive period where (a) globalization and hyper-industrialization have generated deflationary economic forces, and (b) the governmental and financial authorities have been emboldened toward systemic management under the aegis of Keynesianism.
In other words, it ain’t your grandfather’s old capitalism.
And the fate of this MMC system (Modern Managed Capitalism) is still very much playing out, with consequences unknowable.
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MMC these days is toying with MMT (money printing influenced by Modern Monetary Theory).
To some it seems reckless:
I think the financial authorities have felt they have no choice because the alternative would be a dire extent of deflation.
The Catch-22 of the situation is that their low interest rates tend to encourage the piling up of debt that could exacerbate an ultimate DDD (Debt Deflation Disaster).
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https://www.amazon.com/Lords-Easy-Money-Federal-American/dp/1982166630
The New York Times bestselling business journalist Christopher Leonard infiltrates one of America’s most mysterious institutions — the Federal Reserve — to show how its policies over the past ten years have accelerated income inequality and put our country’s economic stability at risk.
If you asked most people what forces led to today’s unprecedented income inequality and financial crashes, no one would say the Federal Reserve. For most of its history, the Fed has enjoyed the fawning adoration of the press. When the economy grew, it was credited to the Fed. When the economy imploded in 2008, the Fed got credit for rescuing us.
But the Fed also has a unique power to reshape the American economy for the worse, which it did, fatefully, on November 4, 2010 through a radical intervention called quantitative easing. In just a few short years, the Fed more than quadrupled the money supply with one goal: to encourage banks and other investors to extend more risky debt. Leaders at the Fed knew that they were undertaking a bold experiment that would produce few real jobs, with long-term risks that were hard to measure. But the Fed proceeded anyway…and then found itself trapped. Once it printed all that money, there was no way to withdraw it from circulation. The Fed tried several times, only to see markets start to crash, at which point the Fed turned the money spigot back on. That’s what it did when COVID hit, printing 300 years’ worth of money in two short months.
Which brings us to now: Ten years on, the gap between the rich and poor has grown dramatically, stock prices are trading far above what’s justified by actual corporate profits, corporate debt in America is at an all-time high, and this debt is being traded by big banks on Wall Street, leaving them vulnerable — just as they were during the mortgage boom. Middle-class wages have barely budged in a decade, and consumers are buried under credit card debt, car loan debt, and student debt.
The Lords of Easy Money tells the shocking, riveting tale of how quantitative easing is imperiling the American economy through the story of the one man who tried to warn us. This will be the first inside story of how we really got here — and why we face a frightening future.
