So I was listening to National Commie Radio in the car Tuesday morning. I guess I wasn't irate enough, or maybe it was the "know your enemy" thing.
They ran a story in which an economist (Richard Koo) was analyzing our economy. He said that because the economy did not respond to low interest rates, the private sector is sick, so the government needs to borrow and spend the private sector's un-lent money. Let that sink in a little bit.
People who saved their money were unwilling to risk loaning their money at low interest rates (high risk, low reward), so the government should do it for them. Yup. Sick.
The interviewer acknowledges that this policy is necessary (no surprise there), but the neither of them seem to recognize that the government is entirely funded by the private sector! So a sick private sector is supposed to fund the government's "fix".
Then the interviewer brings up the threat of a downgrade in the government's credit rating. The economist responds that the credit rating agencies:
"do not understand this type of recession, where private sector is minimizing debt instead of maximizing profits. All of their models are based on the assumption that private sector is maximizing profits, and if that world is the world we are in now, of course, downgrades are justified. But when we are in this type of recession... government borrowing and spending is actually good, not bad."
And, of course, the interview ends there. The take away is that Moody's and Standard & Poor's don't know what they're talking about. Government borrowing is necessary. If only we had Mr. Koo's knowledge and experience. Did you read his bio? Did you see a real job in there?