• Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Stewart vs Krugman and the Religion of Austerity

    Bill Black: Obama has options, including the trillion dollar coin, to refuse to negotiate under the gun but he's taken them off the table; both sides subscribe to the dogma of austerity -   January 18, 2013
    Members don't see ads. If you are a member, and you're seeing this appeal, click here


      Share to Twitter
    Share to Facebook

    I support The Real News Network because it is one of the few remaining political voices of the people. - David Pear
    Log in and tell us why you support TRNN


    William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.


    Stewart vs Krugman and the Religion of AusterityPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this week's edition of The Black Financial and Fraud Report with Bill Black, who now joins us from Kansas City.

    Bill is an associate professor of economics and law at the University of Missouri–Kansas City. He's a white-collar criminologist, a former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One.

    Thanks for joining us, Bill.


    JAY: So you've been talking in many of our interviews and you've been writing about what you thought was the likelihood of a coming grand betrayal, in other words, President Obama making deals for cuts to the social safety net and various other kinds of austerity measures, as part of a deal dealing to get the fiscal cliff done, and then to get the debt ceiling deal done. But President Obama recently has been saying he's not going to, he says, negotiate under the gun of the debt ceiling. So isn't that what you want to hear?

    BLACK: Well, it may be. I certainly agree that you certainly shouldn't make concessions to people who engage in extortion, 'cause if you do, they'll simply extend the debt limit for only a very short time period, and they'll keep coming back, and it'll be the death of 1,000 cuts. So Obama, if he has any competence as a negotiator, should be refusing to give in to the extortion.

    Problem is that he's been engaged in unilateral disarmament as a negotiator leading up to these talks. He had a couple of ways, clear ways, that he could have completely defused what Donald Trump called his "nuclear weapon" of threatening to use the debt limit to extort concessions from Obama. One is the requirement under the Fourteenth Amendment to pay U.S. debt, and the second was the idea of minting this $1 trillion platinum coin.

    JAY: Okay. Let me just ask you about the coin thing, 'cause John Stewart on The Daily Show went after Paul Krugman—


    JOHN STEWART, HOST, THE DAILY SHOW: If somebody's ruining their brand with a $1 trillion coin idea, I don't think it's the non-economist. [snip] So I stand by our research on the topic, the due diligence, and my ignorant conclusion that a $1 trillion coin minted to allow the president to circumvent the debt ceiling, however arbitrary that may be, is a stupid [bleep] idea.


    JAY: —'cause Krugman apparently in one of his articles took this as a serious idea that he could do this, and Stewart was kind of ridiculing him about it. I mean, this is a serious thing he could do. I mean, do you think it's a legitimate policy alternative? And let's explain to everybody this is the idea the Treasury mints a $1 trillion coin, deposit it—the Fed mints it, is that it? Who mints this coin, anyway?

    BLACK: The Mint mints the coin.

    JAY: The Mint mints the coin. Under whose direction? Treasury Department.

    BLACK: Under the Treasury, and which is to say the president's direction. And they could—and the law expressly says you can make it in whatever denomination you want. So if people are trying to extort you using the debt limit, make it a $1 trillion coin, or $2 trillion, $4 trillion. It doesn't matter. And then you deposit it at the Federal reserve, and, poof!, all of the leverage goes away by the House Republicans and the Tea Party in particular that's trying to use this nuclear weapon of extortion where they hold hostage the U.S. economy.

    So it was actually a very good idea. And, you know, it would have required all of about $0.80 worth of platinum—that's literally how much platinum would have been required, because you just make it a clad, you know, coin.

    And for reasons that, you know, make perfect sense as a humorist, you know, John Stewart's had a lot of fun with this. And then Paul Krugman, I think, made the tactical mistake of playing in John Stewart's garden by saying, hey, this is, you know, a serious idea, and you didn't research it at all; it just sounded funny to you, so you made fun of it. And, you know, John Stewart says, yes, that's what we do; we make fun of ideas.

    But then Stewart added: and obviously it's a stupid idea. Well, no, obviously it isn't a stupid idea. And if Stewart knew more about economics, he wouldn't think it was a silly idea. But, you know, he is a humorist.

    JAY: But that being said, President Obama, I think, has said he won't do it.

    BLACK: Well, Obama has said he won't do either of these things that would remove the leverage of the Tea Party to extort America and threaten to destroy our economy. So that's really completely imprudent on Obama's part. When you have somebody like the Tea Party threatening the U.S. economy and you have the ready ability to defuse that nuclear weapon, you should use that authority. And so this is at best an irresponsible action.

    JAY: Now, is this partly because Obama knows that the corporate backers of the Tea Party, for example, the Koch brothers, don't want this to happen, in the sense they don't want another paralyzed economy, they don't want the debt ceiling legislation not to be enacted, and so that Obama's kind of calling their bluff?

    BLACK: I wish that were true. I mean, you can certainly see a much harder politician saying this is just going to hurt the Republican brand, that they're going to threaten to ruin the U.S. economy, and if they ever did it, in fact it would cause such economic devastation that it might destroy the Republican Party. So that, of course, is a possibility, that Obama is that, you know, strategic and trying to bait the Republicans into doing their worst, with the idea that it will hurt the Republican brand.

    Another possibility, though, of course, is that he wants the excuse to give in. And remember, we just had him propose to make concessions to the Republicans in which he was going to make very sharp cuts in social spending, and sharp cuts in the safety net as well. And we were saved only by Harry Reid, who took the Obama instrument of surrender and literally threw it in the fireplace and burned it up rather than to make that proposal. And before that, in the broader discussions in the fiscal cliff, Obama was very much in favor of an austerity package—back in July 2011 and November 2011, Obama was very much in terms of an austerity package. And even now, Obama is saying, once we get past this extension of the debt limit, we're open to doing the grand betrayal. So I think all he's saying is, I'm going to fight you on the debt extension, but then I'll give you the deal anyway. The Republicans, of course, are saying that they are going to demand austerity as the price of doing anything on the debt limit.

    And so the column I just did today looked at what were the—you know, how did we get here? How did this austerity idea that has repeatedly caused recessions and depressions, where did it come from in recent times? And it turns out it's the Pete Peterson Institute. And Pete Peterson, of course, is the Republican billionaire who's said that he's going to spend his fortune trying to unwind the safety net in America, that he wants a combination of lower taxes and dramatically reduced social spending, and then, you know, to really go after—his ultimately goal, he has said, is to privatize Social Security. And, of course, this is the great dream of Wall Street in terms of their fees.

    So I look back, and the Pete Peterson Institute is the place—and it still employs the senior fellow, an economist named John Williamson, a Brit, at least originally, who proposed the Washington consensus. So I went and looked at the original document, which he published in 1990—it was a speech he actually gave in 1989—in which he coined the phrase Washington consensus, 'cause, of course, there'd been a lot of reinventing history in his writing since. The original piece is entirely in the context of the Latin American debt crisis, and it starts out right at the first paragraph and says, hey, here's the deal: we're going to give some delay in the South American debt, Latin American debt, and in return we're going to require them to agree to strong conditionality, which is code for whatever we tell them to do, right? And the very first thing on his list—and he called it central to the whole idea of the Washington consensus was austerity.

    So austerity, deregulation, privatization, the whole neoliberal agenda—although he objects to that term—is there in the first document as a way of forcing Latin American nations to agree to a completely new governance structure imposed by Washington, D.C., for the benefit of American banks and the IMF to collect debts from Latin America.

    Now, that of course was a terrible experience in much of Latin America and accounts for why we have so many Latin American leaders elected over the last ten years on a platform of rejecting the Washington consensus—in other words, elect me 'cause I am going to fight against the Washington consensus. Go forward in time and this is the same mindset that caused Europe to adopt austerity.

    And I have another recent column about, you know, Germany has just announced that in the fourth quarter, growth went sharply negative, probably by 0.5 percent, which is a lot. That would be, like, the equivalent, if you straight-lined it out, of -2 percent growth for a year. And the Eurozone has been as a whole forced into recession.

    This news on Germany means that that recession is getting far worse in the Eurozone. And as I've stressed before, places like Spain, Italy, and Greece have Great Depression levels of unemployment.

    And so we have an idea, a terrible idea, austerity, that makes recessions worse, that creates Great Depression levels of unemployment in many countries, that will not die, no matter how much damage it causes to the world. And, of course, when really bad ideas refuse to die, even though they're proven to be bad ideas time after time, then you know you're dealing with dogma, not with science.

    So that which is called neoliberal economics is one of the only areas that I know of that purports to be a science in which we have gone dramatically downhill in the science content over the last 50 years, such that it isn't a science at all anymore, it's a weird religion of austerity that actually takes pleasure in causing suffering in other nations.

    JAY: Alright. Thanks a lot for joining us, Bill.

    BLACK: Thank you.

    JAY: And thank you for joining us on The Real News Network.


    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at


    Latest Stories

    Affirmative Action Ruling Will Further Racial Inequality
    Evidence for Russian Involvement in East Ukraine Based on Shoddy Journalism
    Ivy League Study: The General Public Has Virtually No Influence on Policy
    The Modern History of Venezuela and Popular Democracy - Edgardo Lander on RAI (9/9)
    An Asia "Pivot" Should Mean Cooperating with China to Solve the Global Environmental Crisis
    Assessing the U.S. Environmental Movement
    Intimidation and Political Interference Goes Unpunished in UAW Case
    Exclusive Investigation Uncovers How BP Uses Bribes To Do Business
    The Modern History of Venezuela, The Protests and Democracy - Edgardo Lander on RAI (8/9)
    Greek Politics 4 Years After The Financial Crisis
    CBO Report Confirms U.S. Deficit Back to Normal Level
    Israel Uses Refugees as "Currency" in Arms Trade with Africa
    Who Will Pay for Climate Change Disaster?
    Canada Shifts to Right Under Harper, Mimicking the United States
    The Savings and Loan Crisis Demonstrates the Importance of Glass-Steagall
    South African Platinum Miner's Struggle Challenges ANC Leadership
    TRNN Original Report: Manning Determined to Fight Back After Army Upholds 35- Year Sentence
    Hundredth Anniversary of the Ludlow Massacre
    The Bundy Ranch Standoff Demonstrates Values Shared by Corporations and the Far Right
    The Resegregation of American Schools
    The Modern History of Venezuela, Why Still So Much Crime? - Edgardo Lander on Reality Asserts Itself (7/9)
    What Role Has Russia Played in Eastern Ukraine?
    Can Johns Hopkins Afford to Pay A Living Wage? (2/2)
    University Sit-In Targets World's Largest Private Coal Company
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    One Percent of Environmentalists Killings Lead to Convictions
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7), Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting