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The Washington Post's Ezra Klein interviewed Wisconsin Republican Paul Ryan.
Ryan is fast becoming the GOP's new Newt Gingrich. The "idea" man. President Obama appointed Ryan to his Deficit Commission.
Ryan is asked about what he would do right now, if Republicans were in charge, to deal with the Great Recession. Ryan responds in typical supply side fashion arguing for cutting taxes even further, which he says, "keeps the money in the private sector...so they have money to invest."
Ezra Klein, unlike the Fox-bots Ryan is used to, is nobody's dummy....
Ezra Klein: But part of the problem right now is that even when you put that money in private coffers, they’re not spending it. They’ve got a lot of capital on hand now, but they’re sitting on it. What gives you confidence that your path will work, when pretty good profits and stock prices right now aren’t working?
Ryan: We need to do things to free up credit. We need regulatory forbearance there. Right now, the policymakers and regulators are doing opposite things. So you’re right that there’s a lot of capital parked out there, and we need to coax it out into the markets. I think literally that if we raised the federal funds rate by a point, it would help push money into the economy, as right now, the safest play is to stay with the federal money and federal paper.
Ryan's answer convinced the Nobel winning economist, Paul Krugman, that Ryan, far from being a smart guy....is "cold-stone ignorant."
What does Ryan think the fed funds rate is? (It’s the rate at which banks lend each other money overnight, usually to help meet reserve requirements.) He obviously doesn’t know that the Fed funds rate basically equals the return on federal paper, so that raising that rate would make banks more, not less, likely to stay with that federal paper. I’m sure someone will try to come up with a reason why Ryan is being smart here, but the truth is that he’s stone-cold ignorant.
In other words, Ryan's proposal to raise the Fed rate is just the opposite of what economic leaders would advise if the goal was to "coax" banks into lending more to the private sector. Ryan's big new idea to "coax" flush banks into lending out the over $1.5 trillion in cash they're carrying right now....is to discourage those banks from lending more to the private sector by incentivizing them to loan their cash to the Fed, instead......for a better and safer return.
Sure, it's an idea.....but it's an ignorant one. And that's from the GOP's leading fresh idea man.
This is the guy who has created a supply side wetdream called the "roadmap". In Ryan's roadmap, SS and Medicare are privatized and tax cuts for big business and the wealthy are slashed further.
There's not enough room in a blog post.....so, here's the rebuttal of Ryan's roadmap.
Here's how Paul Ryan responded to criticism by Krugman and others, that his idea of raising the Fed rate to "coax" banks to loan is counterintuitive and, in fact, "stone-cold ignorant"....
"Also – I’m not convinced – but intrigued – with the debate over the carry trade that is going on right now. What I mean by that is banks can borrow at essentially no cost from the Fed, plow the money back into no-risk Treasury securities, and earn that modest spread. This dynamic, while obviously helping banks recapitalize, could be curbing capital deployment in the private sector.
I'm intrigued – but not convinced – by this argument. I appreciate the opportunity to fully explain my point.”
Albino monkeys, you know, COULD BE amassing on the Canadian border in preparation for some devastating attack on the U.S........COULD BE.
Ryan, obviously, is making it up as he goes along. His "new ideas" are old GOP boilerplate. His answers are uninformed, even though wordy, much like Newt Gingrich's style. When challenged, Ryan resorts to the same old circular logic we've heard from voodoo economists for decades.
Banks aren't lending because people are not buying. Business don't need to expand if customers aren't buying. The reason customers are not buying is because they don't have any money to spend. "Coaxing" banks into lending to businesses who don't want or need to expand right now is foolish and entirely off the mark.
Short some spontaneous-combustion national shopping spree, which is very unlikely, more government stimulus is what is needed. The government....the demand agent of last resort....should pour another trillion into the hands of American workers and the middle class.....so they will go out and SPEND THE MONEY.....helping to fill the demand which evaporated when the banksters drained multiple trillions out of the economy with their Great Games of Chance.
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