A reader emailed making the following point; I would like to point out that in the pledge to never let Obama to serve a second term, a lot of corporations, sitting on piles of cash, are refusing to hire workers and start new projects, which would help the economy. The Republican Right Wing Conspiracy isn't so far-fetched.
My response is:
That's half the story, i.e. internal sources of financing. But, the other half, where on average the majority of financing is done, i.e. external sources of financing, is where the problem lies. That is the banking system which is sitting on an excess reserves to total deposits ratio of 18%. The historical average for this ratio is 1-2%. It was never higher than 7% even in the Great Depression. As late as Sept. 2008, the ratio was still about 2%. Then Lehman went down and the bank hoarding began. So while the Fed which since Sept. 2008 has driven up the monetary base via QE1 and QE2 by 90+%, the money supply (which drives the economy, i.e. GDP=f M courtesy of Milton Friedman) has risen only 3% in the same period. That is a liquidity trap of 96.7%. Not the least of which, the Financial Emergency Act -2008 (TARP, largely) started for the first time in
Following the RRWC reasoning, banksters can join corporations to screw Obama by preventing M from driving GDP and, in turn, preventing GDP from driving employment. And, the GOP majority of Congress who are in the hip pockets of banksters and corporations cower at the prospect of stopping them. Hence, if the voters who are losing their jobs because of this don't countervail by tossing the rascals out, the economy will continue to stall. Notice, not a single bankster CEO or member of the board of directors has lost his job over the financial meltdown caused by the fraudulent derivatives wave (see Frank Rich's just out article in NY Magazine). It is just as if it never happened. During the S&L scandal involving a fraction of the money in the 2008-9 meltdown, Dick Thornburg, then Attny Gen, put 1000 banksters in the slammer. As one of my Scatablog colleagues put it when recently asked for a donation by the Dems, "when you fax me an x-ray showing Dems in Congress have a spine, I will donate."