James Galbraith Joins the Obamanomics Team

More on Obamanomincs:

It was recently announced Professor James Galbraith is now on the new list of economic advisers.

• Galbraith knows that government spending is not revenue constrained.

• He knows solvency is not an issue for the government.

• He knows the 'pay-go' notion is flawed and works against our standard of living.

• He knows the criticism of Bush leaving the debt to our children is absurd.

• He knows there is no operational risk of social security 'running out of money.'

• He knows social security payments are not 'paid for' per se by taxes or the trust fund accounting.

• He knows the Fed is about price, and not quantity.

• He knows imports are a real benefit, exports a real cost.

• He knows our policy of blocking central banks and monetary authorities from accumulating $US financial assets is killing the goose that's been laying the golden eggs.

• He knows that unemployment is the evidence that the deficit is too small.

• He knows that loans create deposits and reserves.

• He knows that savings is not needed to have funding for investment.

• He knows that our taxed advantage pension and retirement systems and programs reduce demand and cause the need for the government to run deficits to add that demand back.

• He knows the price level is a function of prices paid by govt. and not a function of interest rates set by the Fed.

• He knows the Saudis (and maybe Russians) are setting the price of crude.

• He knows this is causing a cost push 'inflation' that is punishing working people disproportionately.

• He knows biofuel policy is converting the world's food supply to fuel and starving millions to death.
  

• And he knows the others on the Obama economic adviser list either don't know, pretend to not know, or have long forgotten all the above.

• And he knows Obama's vision can only accidentally be achieved with his current economic rhetoric.

• And I know he has a fighting chance to be heard.

Comments

[cook503]

Regarding Saudi Arabia and Russia "setting oil prices", I honestly think that they could not lower them at this point even if they wanted to--which they don't, but that is irrelevant at this point. Increased global demand has far outpaced supply.

Now about yet another prestigious economist joining Obama's camp, I am a little surprised at the mix that he has put together. Volker's joining was surprising enough for me, since Volker always seemed rather centrist politically instead of Obama's hard left. I just don't get it. This is a candidate who is talking about "windfall" taxes on energy companies, "patriot" incentives for companies that do not outsource, and repealing NAFTA.

I just don't get it.

[icandoitdon]

i get it. 8 years of incompetent rule from the hard right has disgusted everyone but those on the hard right. it's time to try something else.

[cook503]

Repealing NAFTA is an improvement though?

[Whidbey]

Will it is time to try something else. Maybe Bush was the worst fiscal manager in recent times, and was never accountable for what he did spend. A gutless whore in many respects. But Obama? Is this not cutting off the nose to spite the face? He is a fresh face, but he has nothing else to offer,save five years of service as a street politician . Congress, already out of control, will finish us off like dessert. No, give me crazy McCain, he at least hates more debt. We been had, no reason to hope for much with either man.

[Things Come Undone]

McCain hates debt? Ask him how he will pay for the war? What government programs will McCain cut to balance the budget Social Security the third rail of politics, Military funding what programs are big enough to cut in whole or in part to cover McCain's budget if he keeps the Iraq war going?
We have to do something soon about the national debt interest rates will go up soon.

[John Galt]

The pronlem is that Obama has no clue of economics so he is trying a "see what sticks" approach to getting elected. And teh real probelm with two party politics is the all or nothingness of it. A third party could take the best of both, ignore the worst of both (yes there are third possibilities for some of our problems) and wipe the slate clean.

[warren mosler]

For sure it's a list of econs with conflicting opinions.

Regarding NAFTA, Prof Galbraith knows imports are real benefits, exports real costs, and that domestic full employment can be suststained by domestic demand management policies.

This puts him above the rhetoric of both parties, but both also have a lot of political capital invested in their current positions.

moslereconomics.com

[Jack Yetiv]

The reason Obama is surrounding himself with these respected economists is because he does not intend to do what he says he will do. He knows that economically, he simply cannot pull off all his programs as advertised.

Once he gets elected, these economists will "tell him" it cannot all be done, and he will come up with more middle-of-the-road program. This is his only chance to get reelected to a second term.

A fair bit of the likely election of the Demo's this time is due to dislike of what the Repub's have (and haven't) done. That won't work in 4 years.

Jack

[freddie]

"He knows the Saudis (and maybe Russians) are setting the price of crude."

Then he knows little about oil and either do you. All Saudi oil is sold by contract and none goes into the spot or futures markets whose prices are broadcast daily as the "real" price of a barrel of oil, and about 5% is ever delivered. Mexico does not sell into the spot or futures markets either - it comes here under a contract price, and itsure ain't $135 a barrel or the oil companies couldn't post record profits.

If you mean the Russians and Saudis control the price by limiting production, then explain why the Saudis announcement to produce 200,000 more barrels per day resulted in increased oil prices. The speculative paper futures price is being taken advantage of to gouge the world economy. Joseph Pogue, head of Standard in 1928 stated, "it matters little who owns the oil, what matters is who extracts, transports it, refines it, and markets it." Nothing has changed.

[Johnc]

I take issue with the statement that savings are not required for investment (not that the good Prof doesn't know it but the fact that I don't like the idea). I assume that soundbite means American savings are not required for US investment. That has been true in the past. The US has been very good at recycling the rest of the world's savings. However, I would be very nervous of any economist who assumes that the "gravy train" has not been disturbed by recent events. I am all for free trade and free capital flows but a slightly higher savings rate in the US might actually be a decent idea. Perhaps the next administration can take some of the disincentives for savings out of the tax code. Not as sexy or quick as a rebate check but it might put the country on a firmer footing.

[warren mosler]

I take issue with the statement that savings are not required for investment (not that the good Prof doesn't know it but the fact that I don't like the idea). I assume that soundbite means American savings are not required for US investment.

RIGHT. IN FACT, IT'S BETTER STATED THAT SAVINGS IS THE ACCOUNTING RECORD OF INVESTMENT.

INVESTMENT IS ACCOUNTED FOR AS SAVINGS

INVESTMENT IN THAT SENSE 'CREATES' SAVINGS

THIS ISN'T THEORY BUT 'ACCOUNTING FACT.'

That has been true in the past. The US has been very good at recycling the rest of the world's savings.

IT'S NOT ABOUT RECYCLING.

THE SAME HOLDS FOR BANK DEPOSITS- BANK LOANS 'CREATE' BANK DEPOSITS.

However, I would be very nervous of any economist who assumes that the "gravy train" has not been disturbed by recent events. I am all for free trade and free capital flows but a slightly higher savings rate in the US might actually be a decent idea.

THE ENTIRE POINT OF ECONOMICS IS TO MAXIMIZE CONSUMPTION
OVER SOME TIME HORIZON.

UNLIKE RELIGION, IN ECONOMICS ITS BETTER TO RECEIVE THAN TO GIVE.


Perhaps the next administration can take some of the disincentives for savings out of the tax code.

THAT WOULD CUT SPENDING (DEMAND) WHICH WOULD REDUCE SALES AND THEREFORE REDUCE EMPLOYMENT AND OUTPUT. IT'S CALLED 'THE PARADOX OF THRIFT' IN THE TEXT BOOKS AND A FALLACY OF COMPOSITION.

INVESTMENT IS MORE A FUNCTION OF CONSUMPTION THAN ANYTHING ELSE. (AND THERE IS NO SUCH THING AS CONSUMPTION CROWDING OUT INVESTMENT- THE PRICE SYSTEM DOESN'T LET THAT HAPPEN.)

THE PROBLEM FROM TOO MUCH DEMAND IS INFLATION, NOT TOO MUCH CONSUMPTION.

UNLESS YOU ARE WORRIED ABOUT USING UP SCARCE RESOURCES, BUT THAT'S ANOTHER ISSUE ENTIRELY.

IF THE CONSUMPTION IS DOWNLOADING SONGS OR HAIRCUTS AND OTHER SERVICES THE LIMIT IS SOME NOTION OF TIME LIMITATIONS, VALUATIONS, AND FULL EMPLOYMENT.

Not as sexy or quick as a rebate check but it might put the country on a firmer footing.

WITH OUR FLOATING FX POLICY WE CAN SUSTAIN FULL EMPLOYMENT WITH DOMESTIC DEMAND MANAGEMENT INDEFINATELY.

INFLATION IS ANOTHER STORY, FOR ANOTHER POST

[warren mosler]

All Saudi oil is sold by contract and none goes into the spot or futures markets whose prices are broadcast daily as the "real" price of a barrel of oil, and about 5% is ever delivered.

EXACTLY MY POINT. THE SAUDIS POST THEIR PRICES AND LET THEIR BUYERS BUY AS MUCH AS THEY WANT AT THEIR POSTED PRICES. THAT'S HOW A MONOPOLIST WITH EXCESS CAPACITY HAS TO INTERACT AS A BASIC POINT OF MICRO.

Mexico does not sell into the spot or futures markets either - it comes here under a contract price, and it sure ain't $135 a barrel or the oil companies couldn't post record profits.

THEY MAY WELL BE SETTING PRICES AS WELL, BUT I DOUBT IT AS THEY DON'T SEEM TO HAVE EXCESS CAPACITY AS THE SAUDIS DO. SO THEY SELL A QUANTITY AT THE BEST PRICE THEY CAN GET.

If you mean the Russians and Saudis control the price by limiting production, then explain why the Saudis announcement to produce 200,000 more barrels per day resulted in increased oil prices.

THEY DON'T LIMIT PRODUCTION, AS ABOVE. THE SAUDIS POST THEIR PRICES AND THEN LET THE MARKETS DECIDE QUANTITY.

MY TAKE IS THEY MUST HAVE INCREASED PRODUCTION BECAUSE DEMAND INCREASED BY THAT AMOUNT AT THEIR POSTED PRICES.

THIS INCREASE IN DEMAND TELLS ME PRICES ARE MORE LIKELY TO GO UP THAN DOWN.

The speculative paper futures price is being taken advantage of to gouge the world economy. Joseph Pogue, head of Standard in 1928 stated, "it matters little who owns the oil, what matters is who extracts, transports it, refines it, and markets it." Nothing has changed.

APART FROM THE SAUDIS BEING THE ONLY ONES WITH EXCESS CAPACITY WHICH MEANS THEY ARE PRICE SETTER AS A POINT OF LOGIC.

[icandoitdon]

"The pronlem is that Obama has no clue of economics"

there is only one person more ignorant about economics than barak obama. his name is john mc cain. dumb as a stump. but i'd bet obama is a quick study....mc cain wouldn't even know what questions to ask.

[Jade]

It is great news that Galbraith in on board, not only is he exceptionally intelligent, he is sensitive and aware of the global issues. No one is going to correct the mistakes of the past, but change and knowledge is a beginning. Obama has 7 months to fine tune his policies.