In this video after the dressing down of Alan Greenspan, there is a video of Alan Greenspan that says what I have been saying since the Mid 80's.
Using the revised view of Economics it is easy to explain the stagflation that was dominant in the late 70's largely because economists responded to high inflation with increased interest rates causing the stagnation of an economy that was not over heated with inflation because the models did not differentiate between domestic origins of inflation and external origins of inflation.
This error gave rise to the highly flawed "Supply Side" economics of the Reagan Administration that we still are using with the absurdity of Austerity and Focus on trying to fuel the economy by putting money in the hands of the rich rather than the consumer class, which used to exist in the US.
One of the principles of Computer Sciences is "GIGO" which simply put is Garbage In, Garbage Out. That is true in Economics as well. It has been the failure of Economists to realize that their craft that was shaped in the US Centric Post War Era which saw the US emerge finally from the Great Depression due to a false economy that was based in Huge Government Spending on Wasteful spending on unneeded Defense Spending.
The decline of the US economy and Standard of Living is based in ideas that were forged in the heat of that atypical era. The US Economy grew and there was great income created on the backs of nations that were struggling to emerge from under the Dominance of the US Economic Empire that used the rest of the world for their back yard garden. By the 1970's the foundations of that empire were beginning to show, and those struggling emerging nations began to fight back.
When Bernie is talking about the decline of the US he was exactly right as Greenspan later acknowledged. The problem is we are aware there is a problem but there is no sound economic theory that can be used to forge a progressive model for a functioning Global Economic Model.
This is clearly evident in the current Fiasco in the Euro Zone where Germany is stubbornly clinging to old ideas of how economies work.
The solutions are pretty clear as soon as one divests their adherence to the old aberrant theories based in an artificial environment that was highly imbalanced.
The beginning is a very good place to start. And that beginning is to accept that economics is not a natural science, but a made up science that can be remade up at anytime by adjusting the economic models to reflect ever changing conditions. One constant in life is change and change is the factor that a rigid fixed view must integrate to make a broadly functioning economy.
Value can not be a constant in our models but a variable. This is a tough nut to crack. but it is reality. Different economies develop differently due to the variations in how countries are able to interact economically due to the differences in innate Wealth and Economic needs. An agrarian nation assigns value based upon different factors than an industrialized nation and as nations move back and forth between those models of economies there must be allowances for that variation which is ever changing.
Over time the change will begin to decline and a more predictable model of local and world economies can be developed but for now we are on a roller coaster and we can not be reactionary about the fast downturns and slow assent back up to the top. We need to look at these changes as being part of the system and allow for a wide variation of economic conditions.
At the core must be an awareness that money is a tool and has not real fixed value. The real value of money is in its ability to allow any given economy to make wealth liquid for the purpose of creating and exchanging goods and services. That is the base line. If money is not doing that in a given economy then money has not value at all and all attempts to give it value are wasted.
So if austerity caused an economy to not be able to use their wealth to provide goods and services, austerity is a heresy that must be gotten rid of.
If we do not create a set of rules that meets the very basics of Capitalism, Production Capitalism, then we are just whistling in the wind.
