Tuesday, May 18, 2010

Political economy

Nouriel Roubini, BusinessWeek:

[I]nterest rates in all of the advanced economies are near zero. In the U.K., Europe, Japan, everybody can borrow at zero rates. And because of that, it's back to business as usual on Wall Street. Most financial institutions are making huge amounts of profits in proprietary trading -- borrowing at zero rates and making investments. It was just announced that in the first quarter, Goldman Sachs did not have a single day in which it lost money on trading. I worry that zero interest rates are leading to an asset bubble globally. I don't think it's going to burst for the time being, but give it two or three years.

Just one of the irrational features of our privately managed economy: we go without schools and infrastructure so that "financial institutions can make huge amounts of profits borrowing at zero rates and making investments" that bear no relation to our needs.

Wouldn't it be cool if your community could borrow from its government at zero percent and "make investments" in itself? Why is that something that only those who contribute to global asset bubbles are allowed to do?

The short answer comes from an acknowledgment of where power lies in the society: with the capacity to produce things people need. This prerogative, being private, explains the insistence of the Federal Reserve on its "independence" from "politics"; bankers run the economy.


Jack Crow said...

And they do not run it as a service.

Enron said...

Also, Goldman Sachs not having a negative trading day in a quarter means the economy is a ponzi scheme.

almostinfamous said...

Enron should know...