Sadomonetarism -- my new favorite term

[Arkady]

The columnist William Keegan invented a brilliant term --sadomonetarism-- to describe the monetary policy mindset that favors economic pain for pain's sake. Sadomonetarists are people who favor restricted money supply even when all standard economic theory suggests that inflation is too low and unemployment is too high. Krugman expounds on the sadistic aspect of it, here:

http://www.nytimes.com/2014/04/21/o...80BE80AEE6CBC&gwt=regi&assetType=nyt_now&_r=0

In short, this goes beyond merely wanting ultra-low inflation for the sake of favoring the interests of wealthy creditors over poor debtors. Instead, it's a desire to demonstrate "toughness" by championing policies that make people suffer, even if there's no actual point for the suffering other than the suffering itself.

It strikes me as an almost medieval mindset -- in the middle ages, there was a strong undercurrent of asceticism, which treated hardship as a good unto itself -- a way that monks and other god-fearing people could mortify the flesh and distance themselves from the sinfulness of the material world, in order to focus on the afterlife. Only, when it comes to sadomontetarism, the high priests of the cult aren't flagellating themselves, they're flagellating the rest of us.

 

[fairsheet]

The columnist William Keegan invented a brilliant term --sadomonetarism-- to describe the monetary policy mindset that favors economic pain for pain's sake. Sadomonetarists are people who favor restricted money supply even when all standard economic theory suggests that inflation is too low and unemployment is too high. Krugman expounds on the sadistic aspect of it, here:

http://www.nytimes.com/2014/04/21/o...80BE80AEE6CBC&gwt=regi&assetType=nyt_now&_r=0

In short, this goes beyond merely wanting ultra-low inflation for the sake of favoring the interests of wealthy creditors over poor debtors. Instead, it's a desire to demonstrate "toughness" by championing policies that make people suffer, even if there's no actual point for the suffering other than the suffering itself.

It strikes me as an almost medieval mindset -- in the middle ages, there was a strong undercurrent of asceticism, which treated hardship as a good unto itself -- a way that monks and other god-fearing people could mortify the flesh and distance themselves from the sinfulness of the material world, in order to focus on the afterlife. Only, when it comes to sadomontetarism, the high priests of the cult aren't flagellating themselves, they're flagellating the rest of us.

3-4-5 years ago, the Austerians insisted that we HAD to endure the pain because if we didn't we'd face hyperinflation and be closed out of the world's capital markets, like nothing we've ever seen.

It didn't work out that way and you'd be hardpressed to find any serious economist suggesting it will. So now....we're left with the Austerian theme, with absolutely NO rational explanation of HOW it would help and WHY we need it.

Beyond ODS which enables the Austerians to continue yammering their nonsense, it would be interesting to know why the GOP continues spewing it. I've become convinced that the GOP establishment doesn't want Austerianism any more than anyone else, but they feel safe shoveling it, because they know our democracy will never let it come to pass.

So...what's their point? It's easy. Millions of (almost exclusively white) Americans dream of stickin' it those grasping "others". Yet, they remain convinced that IF Austerianism comes to pass, all the hurt will fall on the "other", not them.

Funny....all those red-staters who cheered their Governors on to rejecting expanded Medicaid?.......Well, that doesn't exempt poor white people, does it?

 

[Arkady]

3-4-5 years ago, the Austerians insisted that we HAD to endure the pain because if we didn't we'd face hyperinflation and be closed out of the world's capital markets, like nothing we've ever seen.

It didn't work out that way and you'd be hardpressed to find any serious economist suggesting it will. So now....we're left with the Austerian theme, with absolutely NO rational explanation of HOW it would help and WHY we need it.

Beyond ODS which enables the Austerians to continue yammering their nonsense, it would be interesting to know why the GOP continues spewing it. I've become convinced that the GOP establishment doesn't want Austerianism any more than anyone else, but they feel safe shoveling it, because they know our democracy will never let it come to pass.

So...what's their point? It's easy. Millions of (almost exclusively white) Americans dream of stickin' it those grasping "others". Yet, they remain convinced that IF Austerianism comes to pass, all the hurt will fall on the "other", not them.

Funny....all those red-staters who cheered their Governors on to rejecting expanded Medicaid?.......Well, that doesn't exempt poor white people, does it?

Yet, you could argue that we do have austerity. Look at the number of people employed by the government today, versus in 2007. We've had a fairly dramatic shrinking of government payrolls. We've also had one of the lowest periods of government spending growth in history, and rather dramatic decreases in deficits. We haven't had such brutally counterproductive austerity measures as seen in parts of Europe, and we haven't had austerity monetary policies yet, but we have had austerity in terms of fiscal policy. And, even our monetary policy has overtones of austerity, if not yet actual restriction of money supply. The Fed is constantly very ostentatiously worrying about future inflation, and reducing quantitative easing, to placate the austerity crowd, even at a time when inflation is well below their own target, and unemployment is extremely high. Even if they don't restrict money supply, all that very public worrying about inflation makes expectations for inflation lower, and thus reduces the kinds of behavior that people would engage and if they were expecting more inflation, which would actually be very positive in this situation. For example, people would be more willing to invest the large piles of cash they've been sitting on, if they thought the Fed was going to allow a fair amount of future inflation, such that investing was the only real guard against wealth erosion. But, instead, the Fed has made it clear that their appetite for future inflation is almost nonexistent, and that expectation alone holds back the economy.

 

[fairsheet]

For the last 5+ years, we've avoided austerianism just enough to enjoy steady growth, however slow. In '12, Mitt tried making the case that austerianism (severe conservatism) would actually improve upon that moribund growth. But, he never made any sort of case for how and why. And...we know how that worked out for Mitt.

I believe that by the time Hillary starts campaigning for president in '16, she'll be able to sell the case for increased spending, growth, and expansion.

 

[NightSwimmer]

Some folks will support the idea of meting out punishment, even when they, themselves are the intended targets of said punishment.

If humans always behaved rationally, then we probably could exist without the need for governance.

 

[Arkady]

For the last 5+ years, we've avoided austerianism just enough to enjoy steady growth, however slow. In '12, Mitt tried making the case that austerianism (severe conservatism) would actually improve upon that moribund growth. But, he never made any sort of case for how and why. And...we know how that worked out for Mitt.

I believe that by the time Hillary starts campaigning for president in '16, she'll be able to sell the case for increased spending, growth, and expansion.

I hope you're right about Clinton. However, the problem is the "very serious people" installed in places like the Washington Post, Wall Street Journal, and NYT editorial pages, the business desks at most news channels, etc., have an irrational conviction that what's needed right now is for government spending to be reeled in. Except for a small handful of influential people (Krugman, Stiglitz), there's this monolithic establishment opinion that regards even the hint of brief, future levels of inflation above 5% as the most horrible thing that can happen to a nation, and Clinton will be tempted to aim her sales pitch at them, rather than at the masses who will have been slogging through almost a decade of desperately anemic growth. After all, her husband got elected by co-opting deficit-hawk rhetoric, and was re-elected with lies about the era of big government being over. There was a very different economic situation in 1992 and 1996 than today, but there will still be the temptation to repeat that once-winning formula.

 

[Arkady]

Some folks will support the idea of meting out punishment, even when they, themselves are the intended targets of said punishment.

If humans always behaved rationally, then we probably could exist without the need for governance.

The other historical analogy that occurs to me is to the puritans. Puritans had this perverse need to punish themselves. I don't think it's a coincidence that, for all the hype about the devoutly puritanical Plymouth colony, it was the Massachusetts Bay Colony, which wasn't as dominated by Puritans, that was the big success story.

 

[GordonGecko]

We KNOW that if McCain had won in 2008 or even Romney in 2012...

all the "fiscal conservatives" would be in favor of the Fed pumping more money into the economy.

 

[as seen on tv]

The columnist William Keegan invented a brilliant term --sadomonetarism-- to describe the monetary policy mindset that favors economic pain for pain's sake. Sadomonetarists are people who favor restricted money supply even when all standard economic theory suggests that inflation is too low and unemployment is too high. Krugman expounds on the sadistic aspect of it, here:

http://www.nytimes.com/2014/04/21/o...80BE80AEE6CBC&gwt=regi&assetType=nyt_now&_r=0

In short, this goes beyond merely wanting ultra-low inflation for the sake of favoring the interests of wealthy creditors over poor debtors. Instead, it's a desire to demonstrate "toughness" by championing policies that make people suffer, even if there's no actual point for the suffering other than the suffering itself.

It strikes me as an almost medieval mindset -- in the middle ages, there was a strong undercurrent of asceticism, which treated hardship as a good unto itself -- a way that monks and other god-fearing people could mortify the flesh and distance themselves from the sinfulness of the material world, in order to focus on the afterlife. Only, when it comes to sadomontetarism, the high priests of the cult aren't flagellating themselves, they're flagellating the rest of us.

your post is hilarious - i've never seen anyone get it so "wrong".

the federal government is keeping interest rates ultra low in order to benefit ITSELF, as the worlds largest DEBTOR ($17 trillion and rising rapidly)

if interest rates rise, the amount of money devoted to "debt service" on the treasury bills and other obligations the federal government has issued will rise massively as well, and either accelerate the national debt or force an increase in taxes.

your anti-free market biases have led you to simply exposing your ignorance of basic economics.

thanks for the laugh

 

[Addy]

That must have been where the adage comes from in exercise/fitness circles -- no pain no gain. JKidding Neat read..Arkady.. and we know who feels the pain the most!!

 

[ITALIA]

your post is hilarious - i've never seen anyone get it so "wrong".

the federal government is keeping interest rates ultra low in order to benefit ITSELF, as the worlds largest DEBTOR ($17 trillion and rising rapidly)

if interest rates rise, the amount of money devoted to "debt service" on the treasury bills and other obligations the federal government has issued will rise massively as well, and either accelerate the national debt or force an increase in taxes.

your anti-free market biases have led you to simply exposing your ignorance of basic economics.

thanks for the laugh

Along with higher interest rates would be higher inflation. Now what would higher inflation, much higher inflation, do to any debt? It makes it less and less in value compared to the economy.

 

[as seen on tv]

Along with higher interest rates would be higher inflation. Now what would higher inflation, much higher inflation, do to any debt? It makes it less and less in value compared to the economy.

you're wrong too, LOL - higher interest rates lead to LESS borrowing for mortgages, and a commensurate decline in sales prices for houses as the pool of potential buyers shrinks due to unaffordability.

two for one. I'm on a roll.

read books sometimes, why don't you?

 

[Arkady]

your post is hilarious - i've never seen anyone get it so "wrong".

the federal government is keeping interest rates ultra low in order to benefit ITSELF, as the worlds largest DEBTOR ($17 trillion and rising rapidly)

if interest rates rise, the amount of money devoted to "debt service" on the treasury bills and other obligations the federal government has issued will rise massively as well, and either accelerate the national debt or force an increase in taxes.

your anti-free market biases have led you to simply exposing your ignorance of basic economics.

thanks for the laugh

I'm not sure what you think quotation marks are for, but I assure you: you're doing it wrong.

Anyway, it's true that a side benefit of low interest rates is cheaper debt service. But I don't know how you think this changes the discussion.

 

[ITALIA]

you're wrong too, LOL - higher interest rates lead to LESS borrowing for mortgages, and a commensurate decline in sales prices for houses as the pool of potential buyers shrinks due to unaffordability.

two for one. I'm on a roll.

read books sometimes, why don't you?

We were talking about the government debt. The inflation would over time reduce the effect of that debt as long as the deficit is kept under reasonable control.

 

[Arkady]

That must have been where the adage comes from in exercise/fitness circles -- no pain no gain. JKidding Neat read..Arkady

Actually, that's a really good analogy. Some people do take that "no pain, no gain" idea about exercise seriously, and hurt themselves relative to people who take a more measured approach. Sometimes the pain is a sign that you're causing injury, and you should listen to your body.

An example would be old-school football coaches who refused to let their players drink water while doing practice on hot days, with the misguided idea that this would make them tougher. Instead, even if the players are lucky enough not to get heat stroke, the dehydration makes their muscles contract less forcefully, so their bodies get less benefit from the training, and the mind doesn't record new memories as well when dehydrated, so they're developing skills more slowly, too. A dehydrated body also recovers more slowly, making the players weaker come game-time. It's counter-productive sadism.... tough guy posturing by the coach that actually makes the team less tough than if he understood the real mechanics of the training process. The Sadomonetarists are similar. They want to act as tough-guy coaches that deny the economy the money supply it needs to function better, and they actually just end up making the economy much weaker than it needs to be.

 

[as seen on tv]

We were talking about the government debt. The inflation would over time reduce the effect of that debt as long as the deficit is kept under reasonable control.

that is entirely true - inflation erodes debt. this is why mortgage payments become more affordable over time.

and why people making "an average wage" can no longer afford "an average house"

its a double edged sword. and no, jacking up the minimum wage for everyone doesn't fix this - it simply accelerates inflation.

real earnings are increased when you produce more for the same inputs (labor, energy, and raw materials) or create a new product with high demand.

 

[ITALIA]

that is entirely true - inflation erodes debt. this is why mortgage payments become more affordable over time.

and why people making "an average wage" can no longer afford "an average house"

its a double edged sword. and no, jacking up the minimum wage for everyone doesn't fix this - it simply accelerates inflation.

real earnings are increased when you produce more for the same inputs (labor, energy, and raw materials) or create a new product with high demand.

In response to your last sentence that is exactly what has happened over the last several decades, increased productivity, and the average worker has gotten less and less of that gain. As far as the minimum wage debate it hasn't kept up with inflation either. So if it hasn't kept up with inflation how did it or will it contribute to inflation or be less benefit rather than more benefit?

 

[Arkady]

that is entirely true - inflation erodes debt. this is why mortgage payments become more affordable over time.

and why people making "an average wage" can no longer afford "an average house"

its a double edged sword. and no, jacking up the minimum wage for everyone doesn't fix this - it simply accelerates inflation.

real earnings are increased when you produce more for the same inputs (labor, energy, and raw materials) or create a new product with high demand.

Average wages tend to more or less keep pace with inflation. Inflation isn't a big concern for wage-earners. In fact, they often come out ahead in periods of higher inflation. For example, in the Clinton years, median real weekly earnings rose 6.3%, after inflation. In the first five Obama years, they've fallen by about half a percentage point. Yet in those Clinton years the inflation rate was 2.6%, versus just 1.6% in the Obama years.

The real threat of inflation is to creditors -- those holding onto a lot of fixed-rate debt, like banks and mortgage companies, as well as old-money types who have a bunch of capital stashed in bonds. When inflation happens, it helps people climb out of debt, but the flip side of that is that letting the debtors partly off the hook cuts into the profits of their creditors. That's part of why the government and the pundits tend to be so hostile to inflation: their sympathies tend to be with rich creditors, not poor debtors. Thus, when there's a trade off between inflation and unemployment, they'd rather have very low inflation, even if it means fairly high unemployment (the situation we've had for the last five years).