Mark Blyth (5): Sovereigns, Citizens and Suckers

Click to listen to Chris’ conversation with Mark Blyth (28 minutes, 14 mb mp3)

Mark Blyth is back in the pub, just in time, talking trash again and taking some credit. He’s the political economist who doesn’t mince words, even when he’s writing for fellow professionals. At Triple Crisis, for example, the other day: “The European sovereign debt crisis is little more than a huge ‘bait and switch,’ perpetrated on the publics of Europe, by their governments, on behalf of their banks…”

In the Scots vernacular, he is reminding us (and the Tea Party) not just that our humongous public debt is a gift of the private sector and the bailed-out banks, since 2008, but also that much the bigger piece of the general debt crisis today is the household debt that’s nearly doubled in the US in the last decade: i.e. underwater mortgages and credit card debt. So are we looking at a “Japan decade” of de-leveraging (paying down debt) and very slow growth?

Hold on. Have you been to Japan lately? It’s a pretty nice place. That decade of ‘helpless stagnation’ is actually okay: Japan’s got more modern infrastructure than we have by a factor of twelve. It’s got better educational outcomes, people live longer. So let’s put this into perspective: it means that you don’t have absurd growth and a housing bubble, it means that you don’t go back to people betting their entire fortune on an internet stock. We stop the casino, we chill out for a while, we pay back some debt. It’s probably a good idea. But we’re not going to do that if we slash the government budgets at the same time that we’re all trying to save the private. You can’t do both.

Mark Blyth with Chris Lydon at the Watson Institute, Brown University

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  • Sgt Slaughter

    Love your work Chris, but you’re wrong on Ireland. The people here didn’t say ‘we’re too smart for this’ con. They voted in a new government that essentially kept the country on the same track chosen by the previous lot who were swindled by the banks. We knew about the con and sucked it up.

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  • Potter

    Rebuild America! I love it. Let’s have some bullet trains here! Shame on us.

    I have to listen to this one again. He talks so fast. And then that thick Scottish accent gets worse when he imitates Sean Connery. And then the subject : macro economics. I think I understand little bit better each time I listen and the brain stretches.

    For years I have wondered how people can keep on spending and spending beyond their means. How can our country ( and the world by inference) be built on this assumption? This was George W Bush’s advice to the American people right after 9/11. Then he took us into two wars. War is good for the economy and jobs right? Not saving the planet.

    But Sean says, it’s not government debt- it’s consumer debt that is the problem. People, rightfully, want to pay down their debts and they cannot do that and spend at the same time. And anyway what more do the more comfortable need? It’s amazing to see the latest luxury goods out there and to hear that they are flying out of the stores while the politicians talk about cutting back on entitlements and getting rid of “Obamacare” after having banished single payer and the public option from the language.

    I will take a Japan decade and be happy about it .

    (I don’t think Paul Krugman is saying that the debt is not a problem; he does not think it’s our immediate problem.)

    Thank you again.

  • Potter

    I just read this on Paul Krugman’s NYTimes blog (Conscience of a Liberal) and I thought this is not true of Mark Blyth, thank goodness.

    The amazing thing now is not that we’re having a crisis, it’s the fact that we’re having the same crisis, and making the same mistakes.

    A lot of the blame goes to the economists, by the way, who abandoned what they used to know — and many of whom are giving bad advice now, I firmly believe, based more on ego and political affiliation than on analysis. That is, I believe that we’re looking at a moral failure as well as an intellectual failure.

  • gis

    Highly recommend this essay in n+1 arguing that under the global economic crisis is the question of full employment.

    http://nplusonemag.com/full-employment

  • Wow – when you listen to Mark talk, you have ask yourself – how do
    these banks stay in business with all these crazy schemes?

    His answer is that IN A BANKING CRISIS they socialize the debt.
    There is reason for that process REGULATIONS.
    Regulations force the banks to compress time and what the banks are
    saying is, “if you don’t have the time,
    here, you take it.”

    Once again Mark doesn’t tell the whole story. If he did it would not be
    as interesting.

    Having worked on both sides of a banking debt crisis I could do that, but tl;dr.

    Nonetheless, I can cut to the quick by directing you to a bank’s annual
    report. Look first at their asset classes and note the % of where they are
    invested. Then look at the income each class produces.

    If Greek sovereign debt goes bad, do US credit card holders stop paying?
    what about commercial loans? Do private banking fees collapse?

    No.

    A lot of what is happening in Europe is political, not financial. Even
    if Merkle knows how banks work, she still has to get elected.

    So she is trapped by the media fanning the flames, which includes people like Mark not telling the whole story.

    Basically we are all trapped by “tl;dr”.