Three things all serious people know are true
This post was written by Kevin O’Rourke
A holy trinity — or perhaps a troika? — of beliefs has guided policy since 2010. These are that austerity is expansionary; that the sky will fall in if ever the debt to GDP ratio exceeds 90%; and that the way to do austerity is to cut expenditure rather than raise taxes.
All of which is very convenient if what you really want to do is shrink the state.
We know how well the first two nostrums have performed when confronted with empirical evidence, so you might think that people would be just a wee bit cautious about stating the third as gospel truth. But no, here is Mario Draghi:
First, fiscal consolidation should be based on reductions in current expenditure rather than increases in taxes. Unfortunately, many of the fiscal consolidation measures were implemented in an emergency situation, with most governments choosing the simplest route, which was to raise taxes. And here we are talking about raising taxes in an area of the world where taxes are already very high, so it is no wonder that this had a contractionary effect.
Paul Krugman helpfully reminds us where this belief came from, and what happened next. The ECB is constantly telling us that it has a narrowly restricted mandate, with its primary concern being inflation. In that case, then surely the least that we are entitled to expect is that it keeps its views about the composition of fiscal adjustments to itself?
Originally, regulators in April 2011 had asked Goldman Sachs to find errors and mistakes in their foreclosure process for years 2009-2010 using an independent consulting firm. The consultants were not so independent but that no longer matters. The investigative process proved to be too time consuming and too expensive. (Really, the search for justice for homeowners must be stopped when it is too expensive and too slow-moving!)
So the independent review process was stopped and new rules are being applied. Rather than investigate individual homeowners improperly treated in foreclosure, the new rule just puts a monetary value on the process and Goldman Sachs will pay $135 million to borrowers and offer $195 million worth of relief. Thus is fraud and illegal activity interpreted as being solved by means of a cash payment. Goldman does not have to admit or deny wrongdoing or worry about a civil monetary penalty.
That is how fraud and corruption is papered over by the Federal Reserve and the Federal Reserve Bank of New York and no one is investigated or prosecuted for control fraud. Individuals who caused the crisis continue in their roles. The bank becomes the “person” responsible by paying a token fine decided upon by the regulators. The individual homeowners who were mistreated are not given their day in court.
Justice is now construed as throwing money at the problems caused by the control fraud committed by the banks. Only Injustice is Being Served!