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  1. #176
    dangerous floater Winehole23's Avatar
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    In the United States, financial deregulation and its attendant deflationary political coalition were embedded in the politics of housing. Housing policy has been integrated with welfare provision since the New Deal, when the Federal Government intervened in credit markets to create a thirty-year fixed mortgage and allow for widespread homeownership. But as Greta Krippner has shown, the stability of this system depended on strict financial regulations that limited the interest rates that banks could charge on deposits. The “savings and loans” bank industry was specifically dedicated to issuing government-backstopped, thirty-year fixed loans. The inflation of the 1970s threatened this system of housing provision, as savers searching for higher returns pulled their money out of savings and loans, and invested it in new, unregulated products like Certificates of Deposit (CDs). Re-regulating these new instruments would carry a high political cost, but neglecting them would risk destroying the housing market.

    In response, American policy makers reacted by deregulating lending while maintaining government protection for housing relative to other consumer borrowing. Thus, housing became a special kind of asset that could both be widely held and appreciate relative to other forms of personal wealth. This avoided explicit “hard choices” about distribution and the rationing of credit by offsetting the losses to wages which followed the Volcker shock. In practice, targeting inflation means that the Federal Reserve and other central banks restrict credit at the point where labor markets begin to tighten. Until recently, central bankers assumed that inflation was at least in part triggered by an increase in employment beyond the Non-Accelerating Inflation Rate of Unemployment (NAIRU). This means that as an economy moves to full employment and workers can bargain for higher wages, central banks will restrict credit to engineer a pullback in the labor market.


    As a result of these policies, a generation of homeowners found themselves with an appreciating capital asset, insured by the government, that could be used as a subs ute for falling wages. New Deal housing policy was repurposed from the provision of long-term, stable shelter to a support for asset price inflation. This deal has been very good for a politically powerful cohort of homeowners who purchased their first house in the 1970s and 1980s. Coalitions of older homeowners have defended low taxes on housing relative to other assets and economic activities, such as California’s infamous Proposition 13—itself a reaction to the 1970s inflation. These same voters have made it impossible to build new housing units in high demand areas, jacking up prices on real estate. Housing wealth has become increasingly held by the old, white, and wealthy, while cohorts born after the 1970s have found housing a drag on their net worth. (Lisa Adkins and Martijn Konings argue that the political economy of the United States is now a machine for stealing the opportunity of the young to preserve the livelihoods of the elderly.) The deflationary coalition has been held together by a cohort of powerful voters whose financial position depends on the continual appreciation of capital assets at the expense of wages.

  2. #177
    dangerous floater Winehole23's Avatar
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    The creation of deflationary coalitions around the world supported the shift from wages to capital gains.

  3. #178
    dangerous floater Winehole23's Avatar
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    For some observers, a shocking result of the 2008 financial crisis was the “strange non-death of neoliberalism.” Why have neoliberal ideas persisted despite their apparent failures? The question seems less perplexing when we conceive of neoliberalism as a set of economic practices performed by ins utions designed to protect the interests of the deflationary coalition.


    Examining the current political landscape through the politics of inflation is illuminating: members of right wing populist movements, for example, are unified by a desire to preserve capital gains on asset ownership, whether they are CEOs of major banks or suburban homeowners needing to compensate for falling wages. The slogans of the Tea Party and the populist right in the United States against new spending clearly demonstrate this fear of inflation.

  4. #179
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    "there can be no demonstration that unemployment can be reduced without reestablishing inflation. "

    US has had "full" employment and under 2% inflation for several years.

  5. #180
    dangerous floater Winehole23's Avatar
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    "there can be no demonstration that unemployment can be reduced without reestablishing inflation. "

    US has had "full" employment and under 2% inflation for several years.
    You seem to have lost the context of the Hyman Minsky quote.

    The article argues against Hyman Minsky's gloss in favor of "the deflationary coalition." You're underscoring the main point, not refuting it.

  6. #181
    dangerous floater Winehole23's Avatar
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    you're also leaving out the millions who left the workforce last year and never returned.

  7. #182
    dangerous floater Winehole23's Avatar
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    lol simple, sloppy boutons

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