"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Thursday, August 28, 2014

Wednesday, August 27, 2014

the Senate

Could an Independent in Kansas Swing the Senate? by Sam Wang

Jon Stewart and priorities

Jon Stewart's Daily Show is back on and he started it off with a bang doing the "Ferguson Challenge" on YouTube which involved him getting pepper sprayed, etc instead of having having an ice bucket dumped on him to raise money for her charity.

Yes celebrities doing stuff for charity is good if it gets rich folks to give money they might not otherwise or might consume ostentatiously. It's good if it gets middle class folks to give instead of say, going to the movies or out to a restaurant or whatever.

But think about the trillion a year output gap. If the authorities were doing their demand management job, the economy would be producing a trillion more a year. Hypothically speaking that could be devoted to cancer research or whatever. That's a trillion a year that's being wasted while people are doing the ice bucket challenge. A trillion a year could be spent on improving the economy so place like Ferguson aren't so bad.

The Fed could be doing more. The government could be spending more. The trade deficit could be erased by lowering the value of the dollar.

French government collapses

Objecting to Austerity, French Style by John Cassidy

Dan Davies on the Swiss

The World Is Squared: Episode 1 – “Switzerland, Country of Joyce” by Daniel Davies

DeLong on Rowe and QE, monetary policy


Tuesday, August 26, 2014


Emmy Awards winners: Breaking Bad, Colbert Report, Julia-Louis Dreyfus for Veep, The Normal Heart, Sarah Silverman and Louis CK.

I also loved Game of Thrones, Orphan Black, The Americans, Person of Interest, The Knick so far, etc.

Coming in 2015: Wolf Hall

pressures on the currency

Austerity, France and Memories by Simon Wren-Lewis
Writing for the Washington Post recently, Matt O’Brien asks didn’t you guys learn anything from the 1930s? That the left in particular appears to ignore these lessons seems strange. In the UK part of the folklore of the left is the fate of Ramsay MacDonald. He led the Labour government from 1929, which eventually fell apart in 1931 over the issue of whether unemployment benefits should be cut in an effort to get loans to stay on the Gold Standard. The UK abandoned the Gold Standard immediately afterwards, but Ramsay MacDonald continued as Prime Minister of a national government, and has been tagged a ‘traitor’ by many on the left ever since.

Not that France needs to look to the UK to see the disastrous and futile attempts to use austerity to stabilise the economy in a depression. By at least one account, the villain in the French case was the Banque de France, which in the 1920s used every means at its disposal to argue the case for deflation in order to return to the Gold Standard at its pre-war parity, and it was instrumental in helping to bring down the left wing Cartel government. When it did rejoin the Gold Standard in 1928, the subsequent imports of gold helped exert a powerful deflationary force on the global economy.
So why has the European left in general, and the French left in particular, not learnt the lessons of the 1920s and 1930s? Why do most mainstream left parties in Europe appear to accept the need to follow the SGP straightjacket as unemployment continues to climb? Perhaps part of the answer lies in more recent memories. After many years in the political wilderness, Fran├žois Mitterrand was elected President in 1981, and his government became the first left-wing government in 23 years. In the UK and US high inflation was being met with tight monetary policy, but he and his government took a different course, using fiscal measures to support demand, and hoping that productivity improvements that followed would tame inflation. Although the demand stimulus did help France avoid the sharp recession suffered by its neighbours, inflation remained high in 1981 (not helped by increases in minimum wages and other measures that raised costs) and rose in 1982, at a time when inflation elsewhere was falling. The sharp deterioration in the trade balance that followed led to pressure on the Franc, and the government’s fiscal measures were reversed. Economic policy changed course.
International traders dump the currency for other currencies as they see inflation ahead? It's where demand management policies meets exchange rate policy. There was a deterioration in the trade balance.

Bretton Woods

(via Thoma, via Cecchetti and Schoenholtz)

The New York Sun longs for the days of Bretton Woods:
We hope they get around to the pattern of unemployment that has come ever more clearly into focus with each passing season of the age of fiat money. Between 1947 and 1971 — that is, in the first generation of the Bretton Woods agreements, under which America defined the dollar as a 35th of an ounce of gold —the unemployment rate in America averaged but 4.7%. Since 1971 —that is, since America’s abandoned Bretton Woods and opened the age of fiat money — unemployment has averaged 6.4%. 
Now we understand that the above-described coincidence does not establish causality. But what a job for all the Ph.D.s among those who manage what James Grant likes to call the Ph.D.-backed dollar. Let them look, too, to whether the Humphrey Hawkins Full Employment Act of 1978 turns out to have been a good idea. It was the law that gave the Fed its jobs mandate. When President Carter signed that dog’s breakfast, unemployment was 5.8%. It hasn’t been that low in the entire Obama presidency.
 Why did Nixon give up on the Gold Standard? It was too deflationary given the rest of the demand the economy was supplying?

In order to maintain the price of gold, the Treasury had to say it would pay a certain price of gold, but Nixon no longer wanted to do that because things would have been too volatile.

Piketty's argument is that inequality increased a politics moved to the right with Reagan and vice versa.

The social democratic state of 1947-1971 had high taxes and government spending and strong unions. That slowly went away as we entered the neoliberal era. Fiat money lessened the volatility.

Monday, August 25, 2014

Fed and poverty reduction

NYT on the Mark on the Fed and Interest Rates by Dean Baker
First, the Fed's actions on interest rates swamp the importance of almost every government spending program designed to help low and moderate income people. There were big battles in Washington in the last couple of years over Republican proposals to cut food stamps by $4 billion a year. If the Fed keeps the unemployment rate one percentage point higher than a level it could reach without triggering an inflationary spiral then it would be preventing close to 3 million people from working. (A rule of thumb is that for the number of people not currently in the labor force who find a job is roughly equal to the number of unemployed people who find a job.)
We have been here before. Back in the mid-1990s the absolute consensus in the economics profession was that the unemployment rate could not get much below 6.0 percent without triggering inflationary pressures. This was a view held not only by conservative economists, but by liberals like Janet Yellen, Alan Blinder, and Paul Krugman. Fortunately, Federal Reserve Board Chair Alan Greenspan was not a mainstream economist. He argued there was no evidence of inflationary pressures, therefore he saw no reason to keep the unemployment rate from falling below the 6.0 percent threshold.

The unemployment rate fell below 5.0 percent in 1997 and was at 4.0 percent as a year-round average in 2000. Not only were millions of people to get jobs who would not have otherwise been able to work, workers at the middle and bottom of the wage ladder saw sustained real wage growth for the first time since the early 1970s. And, there was a huge swing from budget deficits to budget surpluses, giving the country the budget surpluses that the Clintonites always celebrate.

welfare reform

DeLong quotes Kevin Drum against his own instance that blue states did well with welfare reform while only red states didn't.
Kevin Drum: Welfare Reform and the Great Recession “CBPP…. Welfare reform… in its first few years… 
…seemed like a great success… but it was a bubbly economy that made the biggest difference. So how would welfare reform fare when it got hit with a real test? Answer: not so well. In late 2007 the Great Recession started, creating an extra 1.5 million families with children in poverty. TANF, however, barely responded at all. There was no room in strapped state budgets for more TANF funds…. This is why conservatives are so enamored of block grants. It’s not because they truly believe that states are better able to manage programs for the poor than the federal government. That’s frankly laughable. The reason they like block grants is because they know perfectly well that they’ll erode over time. That’s how you eventually drown the federal government in a bathtub. If Paul Ryan ever seriously proposes—and wins Republican support for—a welfare reform plan that includes block grants which (a) grow with inflation and (b) adjust automatically when recessions hit, I’ll pay attention. Until then, they’re just a Trojan Horse…. After all, those tax cuts for the rich won’t fund themselves, will they?

Sunday, August 24, 2014

safe assets

After Clinton, Greenspan and the tech stock boom/bubble balanced the budget there was a shortage of safe assets, to the private market in collusion with the ratings agencies created the shadow banking system with mortgage-backed securities and sold them as safe.

Bernanke has said he might have been wrong to call this a "global savings glut." There's something else going on on the flip side, a dearth of investment and asset prices move higher. Interest rates move lower. But Beckworth says interest rates remain the same, it's just the risk premium goes up.

monetary policy

NYT on the Mark on the Fed and Interest Rates by Dean Baker
We have been here before. Back in the mid-1990s the absolute consensus in the economics profession was that the unemployment rate could not get much below 6.0 percent without triggering inflationary pressures. This was a view held not only by conservative economists, but by liberals like Janet Yellen, Alan Blinder, and Paul Krugman. Fortunately, Federal Reserve Board Chair Alan Greenspan was not a mainstream economist. He argued there was no evidence of inflationary pressures, therefore he saw no reason to keep the unemployment rate from falling below the 6.0 percent threshold.

I wonder if Yellen, Blinder and Krugman preferred more government spending in comensation for rising rates, i.e. they wanted more government.

Better late than never but early is better still by Scott Sumner

Monetary and Fiscal Policy

Basically the Fed prints money and gives it to the banks. It borrows from the private sector rather than taxing them outright. With the interest the private sector earns from government debt, it allocates new demand.

Lately the private sector hasn't been investing enough to maintain full employment and the jobs it creates are not as high paying as they once were, damaging aggregate demand further. The main focus of the corporate sector is profits and rent extraction.

The private sector doesn't allocate demand very well at all. Exhibit A is the housing bubble and financial crisis. Exhibit B is the low quality of jobs being created. Much better to tax and spend instead of borrow.

In the meantime, however conservatives need to be beaten into obscurity as they were in the 40s, 50s and 60s and the Rubinite neoliberals need to be purged from the Democrats.

In the meantime Fed policy can promote wage inflation. Government can borrow cheaply and invest as the euthanasia of the rentiers continues apace. The capitalists and liquidity specialists are their own gravediggers(TM).

In the meantime ultimately a social movement is needed. International and based on the labor movement and OWS, incorporating those "interest groups."


"Asked about potentially more aggressive approaches to monetary easing, such as targeting a price level or a rate of growth for nominal gross domestic product, Mr. Kuroda said he thought they were reasonable steps to consider but that the Bank of Japan would stick to its current policy for now. "

Japan Escaping Deflation Trap, Central Bank Chief Says
JACKSON HOLE, Wyo.–Japan is gradually escaping a prolonged period of deflation that has impeded economic growth, stifled investment and put downward pressure on wages, Bank of Japan Gov. Haruhiko Kuroda said Saturday. 
Speaking at the Kansas City Federal Reserve’s Jackson Hole, Wyo., conference, Mr. Kuroda said that, unlike the U.S. and Europe, Japan isn’t struggling with unemployment, which currently stands at 3.7%. 
However, he said deflation had led to other forms of economic malaise that continue to plague the Japanese economy, but which Mr. Kuroda said is gradually healing as aggressive economic policies take hold. 
“Wage-setting practices have changed during the prolonged period of deflation. Wages of regular employees tend to reflect labor market conditions only quite slowly,” he said. “Some kind of mechanism, a ‘visible’ hand, is necessary for wages to rise.” 
Part of such a mechanism is the central bank’s aggressive monetary easing, which includes an indication that it will take all steps necessary to return Japan’s inflation rate back up to 2% after two decades of falling prices and wages. 
“The Bank of Japan’s price stability target can serve as a benchmark for firms’ wage setting,” Mr. Kuroda said. 
He added the policies were having a tangible impact on economic conditions, with labor market conditions improving and firms showing a greater propensity to invest. 
Still, Mr. Kuroda acknowledged that it could change some time to push up Japanese consumers’ inflation expectations after so many years of deflation. 
Asked about potentially more aggressive approaches to monetary easing, such as targeting a price level or a rate of growth for nominal gross domestic product, Mr. Kuroda said he thought they were reasonable steps to consider but that the Bank of Japan would stick to its current policy for now. 
“Maybe in the future. But at this stage I don’t think we should change our plan,” Mr. Kuroda said. 
Under price-level targeting, a central bank would promise to overshoot its inflation target to make up for any period of undershooting. Under nominal GDP targeting, the central bank would target a constant growth rate in noninflation adjusted GDP. 
Mr. Kuroda vowed to maintain Japan’s aggressive monetary-policy easing until the country reaches its 2% inflation target, which he said could happen as early as this fiscal year. 
Mr. Kuroda said that once inflation starts moving higher, 10-year government bond rates around 0.5% will not be sustainable.

Saturday, August 23, 2014

You're The Best

Aya Cash played an unusually articulate Occupy Wall Streeter - in a Sorkin way - on The Newsroom. I don't know which episode, HBO was rerunning it but the menu said it was Veep.

Edit: Via IMDB she was in three episodes as Shelly Wexler during the second season.

soft oppression

commenter Darryl:
Maybe, but expecting that inflation can rise and keep up with Fed rate hikes that starting from the ZLB late in 2015 will reach 4% in eight years placing 30-year conforming fixed interest loans at roughly 5.75% to 6% with full but likely somewhat under-employment along with proportionate nominal wages gains plus a tiny little for real is not radical. It may violate neoliberal tenets of rent collection, but not neoliberal instincts for self-preservation and survival.  
Actually, I hope that I am wrong because if I am correct then the establishment survives with barely more than a scratch. If I am wrong then the deck gets reshuffled and there will be a whole new deal. 
This doesn't make sense to me. Seem teleological.
THe old bulls can have their run of the pasture for now because the young bulls of tomorrow are still calves. Some of them may become steers fattened for the slaughter, but there will still be plenty of millenial BS to spread around when the old bulls get slow and soft. There is a side to the generational conflict that the establishment is stewing up over boomer retirement and supporting their social security and Medicare that may backfire. Nothing lasts forever.

Steampunk - The Knick

AV Club reviews The Knick: “The Busy Flea”


trying to get people on record

Friday, August 22, 2014

safe asset shortage / competitive devaluations

Talking About the Past Five Years by David Beckworth

Triffin Dilemma for US treasuries:
Why the Global Shortage of Safe Assets Matters by David Beckworth
The structural dimension is that global economic growth over the past few decades has outpaced the capacity of the world economy to produce truly safe assets. Ricardo Caballero, the author of this view, argues that it probably started with the collapse of Japaneses assets in the early 1990s, was exacerbated by emerging market crises throughout the 1990s, and got heightened by the rapid economic growth of the Asia in the early-to-mid 2000s. These developments along with the fact that most of the fast growing countries have lacked the capability to produce safe assets made the assets shortage a structural problem.
Misunderstanding (Totally!) Competitive Currency Devaluations by David Glasner

misc links

It's Hard to Find Good Help, Chicago Cubs Edition by Dean Baker

Inflation Erodes Assets: That’s Why Some People Fear It by Jared Bernstein

Hegel Meets Reagan by Andrew Hartman

The many hands of Fed Chair Janet Yellen by Jared Bernstein
What are the long-term factors suppressing wage growth? In fact, Yellen cites a recent paper on the decline in labor’s share of national income, attributing that decline — though she omits this point — to “the offshoring of the labor-intensive component of the U.S. supply chain,” i.e., the loss of jobs due to imbalanced trade.
Yellen links to The Decline of the U.S. Labor Share by  Elsby, Hobijn, and Sahin


Helicopter Drop and the SecStags

William Buiter:
A permanent/irreversible increase in the nominal stock of fiat base money rate which respects the intertemporal budget constraint of the consolidated Central Bank and Treasury.... Three conditions must be satisfied for helicopter money always to boost aggregate demand. First, there must be benefits from holding fiat base money other than its pecuniary rate of return. Second, fiat base money is irredeemable – viewed as an asset by the holder but not as a liability by the issuer. Third, the price of money is positive. Given these three conditions, there always exists – even in a permanent liquidity trap – a combined monetary and fiscal policy action that boosts private demand – in principle without limit. Deflation, ‘lowflation’ and secular stagnation are therefore unnecessary. They are policy choices."
(via DeLong)

Depression is a choice as Steve Randy Waldman wrote.

Why don't the elites like helicopter drops or universal basic income? Because they don't want to provide economic and even political rights (campaign cash outweighs voting). Legal rights are okay but even there, there's two different system. 

They'd rather that campaign spending equal free speech and the banks distribute the Fed's digital money.

the rich and exclusiveness

Daniel Davies: No Riff-Raff: "Entering into the Brad DeLong Eat The Rich Controversy...
...I offer this observation: 
If it is not the case "that the rich are spiteful--that they enjoy the envy of the poor", then why is the word "exclusive" so popular in the marketing material for hotels, nightclubs, holiday resorts and residential property developments. "Exclusive" is probably these days an advertising man's synonym for "nice", but it also has a clear and specific literal meaning. It means that the hotel, nightclub, resort etc is providing a bundled service; partly, the provision of a normal hotel or nightclub, and partly the service of excluding a segment of the population from that service. One pays extra to go to a health club whose swimming pool is not polluted by the greasy, hairy polloi. 
The reason that this service is valuable is that those who consume it get utility from a) dividing society into two groups, rich and poor, b) creating institutions which physically and socially segregate these two groups and c) them being in the "rich" group. Nobody would apply for membership of Bouji's or the Bucks if it was just a matter of waiting your turn and paying your fee. This would completely defeat the point of the exercise and destroy the value proposition. The point is that in order to attract a better class of customer, you have to keep the riff-raff out. Basil Fawlty understood this; why doesn't the blogosphere?

(See the Dorothy Parker quote at the top of the blog.)

Thursday, August 21, 2014

Plosser and the rentiers

A Note on Understanding the Debate Inside the Federal Reserve: Afternoon Comment by DeLong

euthanasia of the rentier

The Euthanasia of the Rentier by Krugman
A commenter quotes John Maynard Keynes: 
The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.
It is, of course, a perfect quote for our times, too. It comes from the last chapter of the General Theory — a chapter that definitely bears rereading in the light of current debates. 
For what Keynes describes in this chapter is, pretty much, a condition of secular stagnation — of persistently low returns on investment, in which there is a chronic oversupply of saving. He believed, in 1936, that this would be the state of affairs in the decades ahead, and was of course wrong in that belief. But he wasn’t wrong about the possibility of such a state of affairs, and since Larry Summers came out as a secular stagnationist, the view that we may well be there now has gone mainstream. 
What struck me, looking at what Keynes wrote, were his remarks on interest rates and the return to capital: low rates of interest, he suggested,
Actually, for now at least profits remain high — but bond yields are very low.
The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.
would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. 
What Keynes didn’t say, but now seems obvious, is that the rentiers are unlikely to accept their euthanasia gracefully. And therein, I’d argue, lies the ultimate explanation of the persistent clamor for monetary tightening despite weak economies and low inflation. I’ve described on a number of occasions how tight-money advocates are constantly shifting their arguments — it’s about inflation; no, it’s about sound market functioning; no, it’s about financial stability — but always with the same bottom line: rates must rise now now now.

Well, what I think we’re hearing is the sound of rentiers and those who, explicitly or implicitly, work for them, demanding their natural right to earn good returns even if the resource they control isn’t actually scarce anymore. They are not willing to go gently into their euthanasia.
 From Chapter 24:
Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest to-day rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital. An intrinsic reason for such scarcity, in the sense of a genuine sacrifice which could only be called forth by the offer of a reward in the shape of interest, would not exist, in the long run, except in the event of the individual propensity to consume proving to be of such a character that net saving in conditions of full employment comes to an end before capital has become sufficiently abundant. But even so, it will still be possible for communal saving through the agency of the State to be maintained at a level which will allow the growth of capital up to the point where it ceases to be scarce. 
I see, therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work. And with the disappearance of its rentier aspect much else in it besides will suffer a sea-change. It will be, moreover, a great advantage of the order of events which I am advocating, that the euthanasia of the rentier, of the functionless investor, will be nothing sudden, merely a gradual but prolonged continuance of what we have seen recently in Great Britain, and will need no revolution.

trolling commenters

Matt Young:

"A bunch of idiotic American economists who believed John Keynes, the man with no math skills."

You can usually tell where someone is coming from by their attitude towards Keynesianism.


While thinking about public choice theory, Daniel Kuehn links to Krugman and Noah Smith about the push for austerity. Krugman links to Naomi Klein and Mike Konczal.

Wednesday, August 20, 2014


DeLong retweets Harless
Conventional def'n of monetary policy (OMOs) imparts fiscalist bias by defining mon. pol. as something that inherently works against itself


As a kid I was more of Yes man than a Rush man. A neighborhood friend had a much older stoner brother who had a large, eclectic album collection. I was drawn by Yes's imaginative album covers and grew to like music.

misc. links from Baker, Bernstein, Kaminska, Sumner, Williamson, and Wren-Lewis

The Federal Reserve Board Responds to Bankers by Dean Baker

The symmetry test by Simon Wren-Lewis

Elsa the Ice Princess on Monetary Policy by Jared Bernstein

What is not a Ponzi? by Isabella Kaminska

Tuesday, August 19, 2014

DeLong review of Keynes biography

From a Decade Ago: My Review of the First Two Volumes of Robert Skidelsky’s Superb Biography of John Maynard Keynes by DeLong

new normal, secstags and euthanasia of the rentier


In practice the zero lower bound has huge adverse effects on policy effectiveness… [and] drastically changes the rules… [as] virtue becomes vice and prudence is folly. We want less saving, higher expected inflation, and more…. Liquidity-trap analysis has been overwhelmingly successful in its predictions: massive deficits didn’t drive up interest rates, enormous increases in the monetary base didn’t cause inflation, and fiscal austerity was associated with large declines in output and employment…. 

Secular stagnation adds… the strong possibility that this Alice-through-the-looking-glass world is the new normal….

As is the euthanasia of the rentier. As J.W. Mason put it, If credit is so cheap why do we need liquidity specialists? Mason has a new post up.

Reviewing Lawrence Summers’s et al.’s VoxEU Ebook on “Secular Stagnation”: The Honest Broker for the Week of August 23, 2014 by DeLong
Instead, I see the root causes as the confluence of an unreasonably high premium return on equities and other risky assets with a deflation or a very low inflation price trend. And where Summers sees this as operating since the mid-1990s and the start of the dot-com boom, I see it as operating since 1895, if not 1865.


Someone tweets:
Excuse me, but I was promised a corporate cyberpunk dystopia and not this rerun-of-1960s-Bull-Connor-America dystopia


Over at Equitable Growth: Comment on: Ayako Saiki and Jon Frost: "How Does Unconventional Monetary Policy Affect Inequality? Evidence from Japan" 
I want to make three big points: READ MOAR 
Figuring out what we expect QE to mean for income and wealth inequality is difficult because we are not sure what QE is supposed to do for the macroeconomy. Is it a way of credibly committing to lower nominal interest and higher inflation rates in the long run by goosing the monetary base at the zero lower bound? Is it a way of reducing the supply of assets subject to risk and thus reducing the risk premium? If the first, it is the government imposing--relative to the baseline--a transfer from those who are going to save, who are going to cut their spending below their income and shift purchasing power into the further future, and to those who are going to borrow and to those who have saved in the past. If the second, it is the government imposing--relative to the baseline--a transfer from those who are going to supply risk-bearing services to those who will lay off risks into the future and those who have already committed to bearing risk in the past. In either case, it is bound to be the rich today who have born risk in the past (and been lucky) or who have saved in the past. So today's inequality should, we think, rise. It is nice to see that it is true--and it is interesting that the effects look to be so large...

Looking forward, however, QE seems to be a piece of what Keynes called the euthanasia of the rentier--or of the risk-bearer. Wealthholders who are going to stay influential wealthholders must reinvest at rate n+g, so their true free cash is only r-n-g. What if they spend more? Keynes thought that there was a social compact: if the rich do not accumulate--if they spend more than r-n-g--then the political process will soon take their wealth away. Thus a world of QE is a world in which the rich have extremely high wealth levels, yet surprisingly little weight, given their wealth, on consumption patterns. There is high wealth inequality. And there is very high income inequality along the transition path as asset prices attain their new equilibrium levels. But less spending inequality.

The Geithner view of the world: monetary policy is unreliable witchcraft, fiscal policy is "sugar" that makes you feel really good for four hours before you drop into a diabetic coma, the only source of durable prosperity is to reinforce business and financial prosperity by giving them the returns they think they deserve--and then a little more. I parody. But this is the dominant view in the North Atlantic, at least. Basically, the bankers and investors and CEOs have us by the plums. If QE reinforces business confidence, it is worth doing in spite of its inequality effects. If, on the other hand, QE scares our upper class by (a) making them fear that asset prices are unsustainably high and will crash, and (b) making them fear that their future deals will have to squeeze returns out of an eyedropper, then the inequality effects are yet another reason to exit as fast as possible. Now I am not a believer in Geithnerism. But many people are. And it is certainly a live analytical position...
I think it's helpful to distinguis DeLong as a "soft" neoliberal from Geithner who is a "strong" neoliberal. He even had the Treasury working at cross purposes with the Fed over QE. Was this in his book? I hope Bernanke will discuss it.