As a result, we missed out on doing other worthwhile things. All those smart and talented heads, and all those benjamins, didn’t progress the economic base in a way we’re going to care about tomorrow. And that’s a damn shame.

It’s not surprising that the parties have moved ever further apart since the 1970s. There used to be substantial overlap: There were moderate and even liberal Republicans, like New York’s Jacob Javits, and there were conservative Democrats. Today the parties are totally disjointed, with the most conservative Democrat to the left of the most liberal Republican, and the two parties’ centers of gravity very far apart.

What’s more surprising is the fact that the relatively nonpolarized politics of the post-war generation is a relatively recent phenomenon — before the war, and especially before the Great Depression, politics was almost as polarized as it is now. And the track of polarization closely follows the track of income inequality, with the degree of polarization closely correlated over time with the share of total income going to the top 1 percent.

Why does higher inequality seem to produce greater political polarization? Crucially, the widening gap between the parties has reflected Republicans moving right, not Democrats moving left. This pops out of the Poole-Rosenthal-McCarty numbers, but it’s also obvious from the history of various policy proposals. The Obama health care plan, to take an obvious example, was originally a Republican plan, in fact a plan devised by the Heritage Foundation. Now the GOP denounces it as socialism.

The most likely explanation of the relationship between inequality and polarization is that the increased income and wealth of a small minority has, in effect, bought the allegiance of a major political party. Republicans are encouraged and empowered to take positions far to the right of where they were a generation ago, because the financial power of the beneficiaries of their positions both provides an electoral advantage in terms of campaign funding and provides a sort of safety net for individual politicians, who can count on being supported in various ways even if they lose an election.

...............

In summary, then, the role of rising inequality in creating the economic crisis of 2008 is debatable; it probably did play an important role, if nothing else than by encouraging the financial deregulation that set the stage for crisis. What seems very clear to us, however, is that rising inequality played a central role in causing an ineffective response once crisis hit. Inequality bred a polarized political system, in which the right went all out to block any and all efforts by a modestly liberal president to do something about job creation. And rising inequality also gave rise to what we have called a Dark Age of macroeconomics, in which hard-won insights about how depressions happen and what to do about them were driven out of the national discourse, even in academic circles.

This implies, we believe, that the issue of inequality and the problem of economic recovery are not as separate as a purely economic analysis might suggest. We’re not going to have a good macroeconomic policy again unless inequality, and its distorting effect on policy debate, can be curbed.

Economics is performative. Economics doesn’t just describe the world; it is the basis of policy and action and is instrumental in shaping society and producing aspects of its reality. This is why he is ambivalent about just claiming establishment economics is wrong. It is certainly demonstrably wrong in some of its assumptions about society, human nature and so on. But there is some sense in which it is correct simply because the world it describes has been partly produced according to its theories and models. It studies and describes phenomenon that to some extent have been produced and made real according to its dictates and templates.

As if a major solution is in the careful uber-measurement of economic metrics. Sure it could have enabled earlier response, but the issue is that the policy is causing this problem and each stimulus has only artificially delayed the onset and fed its leverage and unavoidable weighty fall all the more, requiring more stimulus and more malinvestment, feeding the leverage even more. We've reached the onset of the end of the experiment. The sooner we face it, the less devastating the ultimate correction.

From the EPI. Good data

'Across the Atlantic, the global financial troubles have reached the UK, as it becomes the latest nation to feel the pinch. Rating's giant Moody's has downgraded 12 of Britain's financial firms and banks, including the Royal Bank of Scotland and Lloyds TSB. That comes after the Bank of England chief said the country's economy is at its lowest point since the 1930s if not ever. RT gets more on this from British Euro MP, Godfrey Bloom.' -- "If [money-printing] was successful, why doesn't he give money-printing machines to every family in the United Kingdom, that they could put in their attic and print money whenever they wanted to go buy something?"

'"More money printing? My masters are you mad? ... According to the BBC, the Bank of England has decided to 'inject a further £75 billion into the economy'. Who knew it was that easy? I mean, why not inject £500 billion? Or a trillion? According to the BBC's logic, it would surely make us the wealthiest nation on Earth." – Daniel Hannan, UK Telegraph' -- 'Dominant Social Theme: Let the printing presses roll. It must be done. -- Central banks are inflation MANUFACTURERS. They are money-printing factories. They are set up to produce inflation, which they do by performing their designated function, which is printing money.These paper producers fix the price of money with interest rates and money printing – and fix it downward. Over time they devalue currency and ruin the savings of the middle class. Since the Anglosphere power elites are at war with the middle class – seeing them rightfully as an impediment to world government – central banking is a great way to diminish opposition. To make people so miserable that they cannot concentrate on anything but ensuring their next meal is a recipe to implement the coming new world order. It's been going on, worldwide, for at least a century with evermore velocity and malice aforethought.'

'"Britain has become a zombie economy. Capital is no longer being allocated. – UK Telegraph" -- ...people (normal people) are aware of the elite money giveaways. To them it doesn't look like a substantive policy – it just looks like a bunch of rich people propping up "their" financial system. In fact, that's exactly right. This elaborate charade was presented with some level of dignity in the 20th Century but collapsed utterly in the 21st Century when the Internet exposed it. In a single decade, central banks have gone from possessing an almost religious aura to being a laughingstock. The elite still doesn't "get it." What's been lost is the moral justification. People see the central banking system as a scam now, even when they can't quite explain it. And that's what's going to kill it eventually.'

Die langfristig bedeutendste finanzpolitische Forderung nach einer Erhöhung des Eigenkapitals der Banken wird vor allem von deutscher Seite abgelehnt.

"Here's what he's saying: We need to get the whole world ready for an alien invasion – that's not actually going to happen, that's all a mistake – but we should spend all of our resources building weapons to combat aliens... This is his economic stimulus?! Prepare for an alien invasion?! I mean, people look up to this guy! This is off-the-charts lunacy!" -- CNN: http://youtu.be/E1Fzzs7oVaA

'The Keynesian assumption has always been that lenders should invest money in government bonds. Government bond markets are the foundation of all Keynesian theories of counter-cyclical spending by governments. We never hear a unified cry from Keynesians in boom times that it is time to cut government spending and start paying off the government's debt. We are told that Keynes called for counter-cyclical policy in boom times, not just bust times. That meant running surpluses to reduce the debt. But we never see quotations from Keynes to this effect. We never see signed statements from Keynesian economists calling for debt reduction. There is a reason for this. Keynesian economics is welfare state economics. It has always been a cover for wealth-redistribution. Officially, this wealth redistribution has been justified in the name of helping the poor. Operationally, it has always been wealth transfers to very large banks.'

An overview of the Hicks ISLM curve.

'"The al-Qaeda network is fully prepared to continue the jihad against the American infidels by launching deadly attacks, but your outdated and rusting transportation infrastructure needs to be completely overhauled for those strikes even to be noticed," al-Zawahiri said. "We want to turn your bridges into rubble, but if we claimed credit for making them collapse, nobody would ever believe us." "We'd really just be doing you a favor because then you'd actually have to rebuild them," al-Zawahiri added. Throughout the threatening video, the terrorist leader questioned the priorities of American politicians, asking why they would refuse to fund engineering projects that would create jobs, bombing opportunities, and new ways for the U.S. compete globally.'

"Annie’s character in Bridesmaids feels like the timing and progression of her life has gone into a ditch. That the next step in her baking career happened to coincide with the collapse of the mass securitization of bad debt and an over-the-counter credit derivative protection market is really bad luck. But it shouldn’t mean that her ability to launch a new business, to exercise and refine her talents and skills and have her employment give her a proper sense of self and purpose, should be ruined indefinitely. Full employment is the friend of new business owners. It would be great if either of our political parties would emphasize that in a time of 9% unemployment."

'There is no escaping the arithmetic.' -- Left + Right = Collapse