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Foreword

The Declining Power of US Monetary Policy

Gerald Epstein

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Gerald Epstein

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Gerald Epstein

Multinational corporations (MNCs) have become an increasingly important force in the dynamics of the global economy. For example, according to the United Nations, during the last 30 years, the gross product of the foreign affiliates of multinational corporations increased faster than global GDP while foreign affiliate sales increased faster than global exports. Despite the fact that there has been a great deal of research during the last several decades on MNCs, there is no consensus on their effects. This chapter discusses that what is needed, instead of more deregulation and ‘free’ capital mobility, is a more democratic framework of multinational investment regulation to help countries and their citizens reap the benefits that can be associated with international investment.

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Gerald Epstein

‘Capital controls’ are regulations implemented by governments in order to manage international financial transactions. Recently these have been referred to as ‘capital flow management’ techniques (CFMs) or capital account regulations (CARs). There has been a sea change in recent years in the ‘official’ perception by economists and policy makers with respect to the desirability and viability of capital controls (CARs, CFMs). Whereas previously, capital controls were seen as a costly and inefficient intrusion into the free market allocation of global finance, now, capital flows are perceived to be highly variable – even ‘fickle’ – and capital account regulations are seen as a potentially useful tool to manage these flows. Empirical evidence on the efficacy, benefits and costs of capital account regulations is growing.

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Gerald Epstein

The Great Financial Crisis of 2007–2008, like the Great Depression of the 1930s, focused the American public’s attention – and ire – not just on Wall Street, but also on the Federal Reserve (the Fed) – the US central bank. In normal times, the Fed operates under the radar, generating intense interest from investors, and mostly yawns from everyone else. But at times of financial crisis, like 1929, or 2007–2008, or even 1979 when the Fed raised interest rates sky high, piercing scrutiny and conflict breaks out regarding the Fed’s policy. Indeed, at times like that, more than just this or that policy is up for grabs. The Fed’s whole institutional structure and its very raison d’être comes under attack. Why did the Fed let the economy crash? Why did it raise interest rates so high? Why did it bail out Wall Street while leaving ‘main street’ high and dry? Who benefits from the Fed’s policies? Who really pulls the strings there? Do we even need a Federal Reserve?

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Gerald Epstein

As Jerry Ford left the White House he handed Jimmy Carter three envelopes, instructing him to open them one at a time as problems became overwhelming. After a year, Carter opened the first envelope. It said, "attack Jerry Ford." He did. A year later, Carter opened the second envelope. It said, "attack the Federal Reserve." He did. Three years into his term, and even more overwhelmed by the economy, Iran, Afghanistan and so forth, Carter opened the third envelope. It said: "prepare three envelopes." Paul Volcker, January 1981

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Gerald Epstein

In August 1979, virtually everyone with wealth and in the know were trying to get out of dollars. They were buying gold. They were buying anything "real" they could get their hands on. The dollar was in a free fall. And after presiding over three years of rapid, but inflationary economic growth, so was Jimmy Carter.

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Gerald Epstein

Trumponomics, argues this economist, may look like Reaganomics, but it is more about political power than optimal economics strategies. Economists should be aware of this, but many, even progressives, are not. The author provides a way of looking at and criticizing Trumponomics for the popular, power-aggrandizing strategy and ultimately deeply dangerous set of policies he thinks it is.

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Gerald Epstein

The crucial significance of the Federal Reserve System in the making of U.S. macroeconomic policy has once again been made painfully apparent. The stagnation experienced by the U.S. economy since 1979 has, as its proximate cause, the restrictive monetary policies implemented by the U.S. central bank.