[bigfishjuan]

I am enjoying HBO’s new series ‘Newsroom’, but every time they bring up an economic issue, my instincts tell me they’re wrong… I just don’t know exactly why. Although my BA is in Economics & Business, it’s been 12 years since I graduated and I’ve been focusing my subsequent studies elsewhere. I plan to watch all the Economics lectures on the website, but I want to finish the Western Civ and US History courses first.

So anyway, here’s my question. Are you watching the show? Would you be able to briefly respond to economic issues raised in the show each week? And perhaps you could do the same for any other shows you already follow. I think this would be a great practical way to facilitate economic discussions. Armed with your insights, we could speak more intelligently with our friends about issues that are being covered on popular television!

Thank you.

[bigfishjuan]

By the way, the big topics I’ve noticed so far have been Glass-Steagall and the debt ceiling “crisis.”

[jmherbener]

I’m afraid I don’t watch TV. Maybe you or other members could post about claims or analyses being made and the rest of us could make some criticisms.

[bigfishjuan]

The series is about a fictitious national cable news show, and the purpose is to show through fictitious characters how the biggest news events of the past few years should have been covered by the media. In one episode, a sexy female economist/anchor is trying to teach the producer of the show everything she needs to know about the economic crisis, and she does so by making the claim that Glass-Steagall ushered in the greatest economic advances the world had ever seen. Then, when it was repealed, the deregulation caused the crisis.

The past few episodes take place during the debate about whether the debt ceiling should have been raised. This same economist continually comes to the producer saying that she should be given the top story every night because this is the most important issue facing the US: if the US were to “default”, or even appear that they were considering not raising the debt ceiling, the value of the dollar would collapse and our whole economy with it. (At that time, all the news networks were leading with the unimportant Casey Anthony trial for its entertainment value.)

If you could briefly speak to those claims, I would really appreciate it, because both seem short-sighted to me.

[jmherbener]

The claim about Glass-Steagall is a red herring. The part of Glass-Steagall (the Banking Act of 1933) that was repealed in 1999 under the Bill Clinton administration was the separation between commercial and investment banking. That commercial banks were free to underwrite securities had little to do with the financial crisis. Without Fed driven monetary inflation and credit expansion, banks would not have been able to extend credit into less and less credit worthy lines of investment.

Here’s our own Tom Woods on Glass-Steagall (and note his reference to his book, _Rollback_):

http://www.tomwoods.com/blog/repeal-of-glass-steagall-had-nothing-to-do-with-the-crisis/

The debt-default claim is scaremongering. If the federal government hit the debt limited, it could still service all of its debt up to the limit. For example, if the limit is $15 trillion and the federal debt rises to $15.1 trillion, then $100 billion of debt would need to be retired to stay within the limit. This could be done by not issuing additional debt to replace the debt that is maturing. Even if the federal government defaulted on the $100 billion, it would not disrupt the entire federal debt market let alone broader financial markets. Even if the federal government defaulted on all its debt, it would help, not hurt, broader financial markets. It would free up capital funding for entrepreneurs. It would have no particular effect on the dollar unless it was a harbinger of a change in monetary policy or money demand.

Here’s Peter Klein on debt default:

http://mises.org/daily/5476/There-Is-Life-after-Default

[woods]

There was a very good piece on Glass-Steagall in (of all places) the Washington Post not long ago: http://www.washingtonpost.com/lets-shatter-the-myth-on-glass-steagall/2012/07/27/gJQASaOAGX_story.html

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