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Ben Bernanke’s point in his recent memoir is that central banks can only do so much. At the end of the day, monetary policy is not social change, moral evoluti

Ben Bernanke’s point in his recent memoir is that central banks can only do so much. At the end of the day, monetary policy is not social change, moral evolution, or political coalition building. These things happen outside the Central Banking system and are just as important for a functioning economy. I know this sounds controversial, but at this point quite frankly the deficit does not matter. There is so much debt in the world, we are likely heading towards a global debt write-off. It doesn’t help that China has essentially been spewing entirely fictitious accounting numbers for the last 20 years. It’s not even about padding an extra 10-15% anymore. There are journal articles out there claiming that Alibaba, a company as big as Oracle, is making up whole cloth 95% of it’s accounting statements. Ridiculous...

cobbzilla 8y ago
Writing off sovereign debt always comes with strings attached for the creditors - the terms will by definition be anti-democratic and could be incredibly dangerous. An improvement in global inequality is not a likely outcome.
- RobertoG 8y ago
  That's only true if the debt is in a foreign currency. Not sure you can call that "sovereign debt".
the_watcher 8y ago
> There are journal articles out there claiming that Alibaba, a company as big as Oracle, is making up whole cloth 95% of it’s accounting statements. Do you have a source for this? I'm not doubting you, but I've never heard this and would like to learn more if possible.
staplers 8y ago
we are likely heading towards a global debt write-off. Household debt has gone down quite a bit since 2008. It's government that is spending more. Household debt: https://fred.stlouisfed.org/series/HDTGPDUSQ163N https://fred.stlouisfed.org/series/HDTGPDUSQ163N "Public" (Government) debt: https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S
nickik 8y ago
> Ben Bernanke’s point in his recent memoir is that central banks can only do so much. Yeah and he is totally wrong in that. His own writing before the recession argued for that to be false. Once in power of the central bank many other people were involved and they were not willing (in the beginning to use those tools). Eventually they figured it out but by that point it was way to late. The problem was that people were so obsessed with inflation that the central bank flat out refused to go above 2% and that would clearly have been needed from a monetary perspective. This was a clearly a flat out instiutional failure from the Fed and Bernanke tried his best in his book to shovel that under the table. We know this because the meeting are public, they were debating about fear of to much inflation in late 2008 when all economic indicated were pointing to a major collapse. > At the end of the day, monetary policy is not social change, moral evolution, or political coalition building. These things happen outside the Central Banking system and are just as important for a functioning economy. But those things did not cause the economy to collapse. The economy collapsed because of a massive demand shortfall with NGDP going almost 9% below trend. > I know this sounds controversial, but at this point quite frankly the deficit does not matter. There is so much debt in the world, we are likely heading towards a global debt write-off. Easy to say. But the fact is that those things almost never happen and the only cases where it did was after major wars. > It doesn’t help that China has essentially been spewing entirely fictitious accounting numbers for the last 20 years. Whatever they claim go to China and see the growth.
mullen 8y ago
No one believes any of the economic numbers coming out of China. There is a whole art and science in trying to find and figure out the real Chinese GDP and GDP growth numbers.
pjc50 8y ago
> global debt write-off This would also be a global abolition of the private pension system, FYI. People keep talking about debt write-off, but interest rates are bouncing off the lower bound. These are difficult to reconcile.
- AnimalMuppet 8y ago
  Well... the low interest rates mean that we can borrow large amounts and be able to afford the interest payments. "Large amounts", as in, more than we can comfortably pay back the principle on. But we're doing OK because the rates are low. One day the rates will (probably) rise. At that point, it will be more painful even to pay the interest.
- deleted 8y ago
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deleted 8y ago
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beiller 8y ago
I've heard that its more likely we will see massive inflation ramp up. And since the debts are all fixed interest rates at the time of borrowing, they will be inflated away to nothing, not "written off".
pm90 8y ago
> It doesn’t help that China has essentially been spewing entirely fictitious accounting numbers for the last 20 years. It’s not even about padding an extra 10-15% anymore. There are journal articles out there claiming that Alibaba, a company as big as Oracle, is making up whole cloth 95% of it’s accounting statements. Ridiculous... That can't be any good. The very foundation of modern nations is built on good accounting purposes. In fact, I read a book about how double entry accounting was one of the fundamental reasons for the growth of the British and later the American empire. And yes while the deficit doesn't matter, good accounting absolutely does. Fudge those numbers and people lose trust in the system. That's how you create economic panics...
- vba 8y ago
  What was the book?

cobbzilla 8y ago

Writing off sovereign debt always comes with strings attached for the creditors - the terms will by definition be anti-democratic and could be incredibly dangerous. An improvement in global inequality is not a likely outcome.

RobertoG 8y ago
That's only true if the debt is in a foreign currency. Not sure you can call that "sovereign debt".

the_watcher 8y ago

> There are journal articles out there claiming that Alibaba, a company as big as Oracle, is making up whole cloth 95% of it’s accounting statements. Do you have a source for this? I'm not doubting you, but I've never heard this and would like to learn more if possible.

staplers 8y ago

we are likely heading towards a global debt write-off. Household debt has gone down quite a bit since 2008. It's government that is spending more. Household debt: https://fred.stlouisfed.org/series/HDTGPDUSQ163N https://fred.stlouisfed.org/series/HDTGPDUSQ163N "Public" (Government) debt: https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S

nickik 8y ago

> Ben Bernanke’s point in his recent memoir is that central banks can only do so much. Yeah and he is totally wrong in that. His own writing before the recession argued for that to be false. Once in power of the central bank many other people were involved and they were not willing (in the beginning to use those tools). Eventually they figured it out but by that point it was way to late. The problem was that people were so obsessed with inflation that the central bank flat out refused to go above 2% and that would clearly have been needed from a monetary perspective. This was a clearly a flat out instiutional failure from the Fed and Bernanke tried his best in his book to shovel that under the table. We know this because the meeting are public, they were debating about fear of to much inflation in late 2008 when all economic indicated were pointing to a major collapse. > At the end of the day, monetary policy is not social change, moral evolution, or political coalition building. These things happen outside the Central Banking system and are just as important for a functioning economy. But those things did not cause the economy to collapse. The economy collapsed because of a massive demand shortfall with NGDP going almost 9% below trend. > I know this sounds controversial, but at this point quite frankly the deficit does not matter. There is so much debt in the world, we are likely heading towards a global debt write-off. Easy to say. But the fact is that those things almost never happen and the only cases where it did was after major wars. > It doesn’t help that China has essentially been spewing entirely fictitious accounting numbers for the last 20 years. Whatever they claim go to China and see the growth.

mullen 8y ago

No one believes any of the economic numbers coming out of China. There is a whole art and science in trying to find and figure out the real Chinese GDP and GDP growth numbers.

pjc50 8y ago

> global debt write-off This would also be a global abolition of the private pension system, FYI. People keep talking about debt write-off, but interest rates are bouncing off the lower bound. These are difficult to reconcile.

AnimalMuppet 8y ago
Well... the low interest rates mean that we can borrow large amounts and be able to afford the interest payments. "Large amounts", as in, more than we can comfortably pay back the principle on. But we're doing OK because the rates are low. One day the rates will (probably) rise. At that point, it will be more painful even to pay the interest.
deleted 8y ago
[deleted]

deleted 8y ago

[deleted]

beiller 8y ago

I've heard that its more likely we will see massive inflation ramp up. And since the debts are all fixed interest rates at the time of borrowing, they will be inflated away to nothing, not "written off".

pm90 8y ago

> It doesn’t help that China has essentially been spewing entirely fictitious accounting numbers for the last 20 years. It’s not even about padding an extra 10-15% anymore. There are journal articles out there claiming that Alibaba, a company as big as Oracle, is making up whole cloth 95% of it’s accounting statements. Ridiculous... That can't be any good. The very foundation of modern nations is built on good accounting purposes. In fact, I read a book about how double entry accounting was one of the fundamental reasons for the growth of the British and later the American empire. And yes while the deficit doesn't matter, good accounting absolutely does. Fudge those numbers and people lose trust in the system. That's how you create economic panics...

vba 8y ago
What was the book?