KRUGMAN WAKING UP TO THE .01%
Student Krugman is learning economics, or what one ought to call meta-economics, ever better. We will give him a gentleman’s D. Said he in “Who Wants A Depression?”:
“One unhappy lesson we’ve learned in recent years is that economics is a far more political subject than we liked to imagine. Well, duh, you may say. But, before the financial crisis, many economists – even, to some extent, yours truly – believed that there was a fairly broad professional consensus on some important issues.”
Yes, we know all too much: on so many issues, the economists’ consensus was both very injurious to society in general, profitable to economists, and thoroughly idiotic counterfactual. For example, a master idea was that hedge funds and the future markets, in spite of their leveraged size dwarfing the real economy, had neither impact nor even any connection with the real economy.
This monstrosity of a lie was long fostered by Krugman and his self-admiring society of friends and estimable Nobelized or Nobelizable colleagues.
That sort of fairly broad professional consensus on some important issues allowed all these creatures to live a grand life of importance and influence, as it pleased the Masters of the Universe to no end (what the Masters do then, is that they bring some money or chairs, or buildings to some Pluto universities such as Princeton, and everybody is happy: Meg Whitman get her sons in Princeton, where they can do whatever, etc.)
They can call it whatever, I call it corruption.
Krugman agrees that there is corruption:
“Who are these always-wrong, never-in-doubt critics? With no exceptions I can think of, they come from the right side of the political spectrum. But why should right-wing sentiments go hand in hand with inflation paranoia? One answer is that using monetary policy to fight slumps is a form of government activism. And conservatives don’t want to legitimize the notion that government action can ever have positive effects, because once you start down that path you might end up endorsing things like government-guaranteed health insurance.”
But it does not stop there. Krugman and colleagues have discovered the obvious:
“The really big losers from low interest rates are the truly wealthy – not even the 1 percent, but the 0.1 percent or even the 0.01 percent. Back in 2007, before the slump, the average member of the 0.01 percent received $3 million (in 2012 dollars) in interest. By 2011, that had fallen to $1.3 million – a loss equivalent to almost 9 percent of the group’s 2007 income.”
That low interest rates punish the “rentiers”, there is no doubt. Wealthy people in the Nineteenth Century were called by the French word “rentiers” precisely because they could live off rents. Being wealthy means to be able to live off interest, without touching the inflation adjusted principal.
So this is a reason to dislike low interest rates if one is very wealthy. But those with an aversion to risk, inflation or wild market fluctuations also detest very low interest rates, and rightly so.
Thus the question: are there other aspects of a policy of low interest rates that the wealthy do not like? In other words, can we go further than pointing out the obvious as our little Krugman does?
Well, first of all, THE WEALTHY LOVE DEPRESSIONS. During those, everything is so cheap that the wealthy, especially financiers, buy things for pennies on the dollar.
Nowadays, hedge funds allow the hyper rich to profit handsomely from financial and economic shocks. That’s why vultures funds are out to get countries that restructure their debt, with help from USA courts. They dearly regret not to have forced Greece, Portugal, Spain, Italy into bankruptcy. So Argentina makes an excellent target.
A successful economy is, by itself of little value for the hyper rich. Quite the opposite. As said above, they tend to be rentiers. They are lions who made a killing, and want to keep what they got for themselves. Empowering, with a more economic clout the Populus is to be feared: if the poor is empowered, it can shake things up, and made demands to the rich, force them to share. The Revolution of 1789 was driven by the small bourgeoisie: newly empowered poor people.
Fundamentally, wealth, power, are relative. Nearly everybody lives so much better than Louis XIV, that, after due consideration, they would never exchange their lives for his. To be wealthy means to have things others do not have. Depriving the poor some more works as well as enriching the rich.
So our plutocratic leaders pursue both now.