Tag Archives: deficit finance

2016 Theme #5: The Systemic Failure of High Finance, by Charles Hugh Smith

From Charles Hugh Smith at oftwominds.com:

This week I am addressing themes I see playing out in 2016.

A number of systemic, structural forces are intersecting in 2016. One is the failure of high finance to fix the global economy’s systemic problems.

The operative conceit of the past 7 years has been that high finance can fix whatever’s broken in the world’s economies. According to this narrative, all the world needed to boost “growth,” employment and profits was lower interest rates, more liquidity, reverse repos and some other fancy financial footwork.

Once all this high finance generated more borrowing by debt-serfs, property developers, students, corporations buying back their shares and financiers skimming billions from asset bubbles, systemic problems would be dissolved or mitigated.

Cheap credit, asset bubbles and immense profiteering by financiers would heal all wounds and make everything better for everyone, even those at the bottom layer of the economy.

Unfortunately, this isn’t true. High finance and cheap credit have intensified structural problems such as rising inequality, not resolved them.

The implicit promise of the neoliberal project is that liberalizing private-sector markets and credit will magically grease the processes of growth and widespread prosperity.

When economies have the right systems in place–decentralized, somewhat free markets, an entrepreneurial spirit, many unmet needs, idle productive capacity and a credit-starved real economy–freeing up static markets and credit can unleash the productive capacity of the bottom level of the economy.

But in economies dominated by state/private monopolies and cartels, neoliberalism simply funnels the profits of financialization to the few at the expense of the many, and at the cost of heightened instability and insecurity.

To continue reading: The Systemic Failure of High Finance

He Said That? 12/14/14

From Thomas Jefferson, among many noteworthy accomplishments, he was the third president of the United States and chief author of the Declaration of Independence:

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

Letter from Thomas Jefferson to John Taylor, May 28, 1816.


Brevity is indeed the soul of brilliance. Jefferson managed to warn of the two biggest financial dangers now facing America 198 years ahead of time: banking establishments (i.e. the Fed and the banking cartel) and “spending money to be paid by posterity,” or deficit financing, in one sentence. That one sentence is more insightful and valuable than 99 percent of the economics theses published since.