By Michael Hoexter
Congratulations on your recent electoral victory and the hard work that you and your team put into that effort. You defeated an opponent, formidable not so much from the point of view of his political skills but more in the masses of “dark money” that were thrown against you and other Democratic candidates. You and your advisors ran a sophisticated tactical campaign that will be emulated by many in the years to come. Still, from my point of view, these tactical skills will only get the American people so far in our pursuit of happiness.
You very much deserve the title of “President of the United States” after this decisive election but I am addressing you as “Barack” and “Mr. Obama” because I want this communication to reach you, if it ever would, with some immediacy and not filtered through the insulating layers of bureaucracy and advisors with which you are surrounded as President.
Barack, you seem over the past several years to have taken as an ultimate political goal for yourself the fashioning of a “Grand Bargain” between you and the Democratic Party on one side and the Republicans on the other. This goal has the insistent quality of an idée fixe in your biography and it may very well have some interesting psychological roots about which you may write at some point in your post-Presidency. The pursuit of this idea or plan, however takes you away from your duties as President, as the head of the executive branch of the US government.
While the political power you have achieved enables you to, within limits, impose your individual psychology or its effects on the American people, the intricacies of your individual make-up are of secondary importance to the service you are supposed to provide, and have claimed you want to provide, for the American people. Your drive to put “bipartisanship” above other values has, to date, created for the American people problems which ironically bipartisanship is supposed to avoid.
For starters, let me quickly review what the Grand Bargain is supposed to entail: We are according to you and your current set of close advisors in a major crisis in terms of the size of the public debt and yearly federal budget deficits. After an era of low taxes, tax breaks and rising federal budget deficits, tax rates are supposed to go up, in particular on wealthier individuals. In “exchange” for raising taxes, supposedly a goal of Democrats, the Republicans will “get” three times the amount of cuts in social spending as the increase in taxation, in particular Medicare and Social Security as well as other government spending programs. The idea is that government must balance its budget by taking in “revenue” via taxes (this is not actually how the federal government finances itself in our era as you may or may not know) and cutting spending. The idea is that “shared sacrifice” is required to solve what is viewed to be the problem of the public debt and budget deficits.
In keeping with the title of this open letter to you, I want to discuss on the one hand the motivational side of the drive towards the “Grand Bargain” and on the other the reality side, which is ultimately more important.
It Isn’t “Grand”
I realize that you have ambitions to be a great President and that furthermore you have oratorical gifts that might enable you to achieve Presidential greatness, though I believe you have not yet achieved that goal. In pursuing the Presidency or high political office at all, one expects great ambition: it comes with the territory. The largeness of the hopes of politicians is partly functional, as politicos as individuals hope to represent a constituency and sometimes even a nation as a whole.
While I understand that you don’t seem to want to be viewed personally as “grand”, you want to do “grand” or great things and make a mark, that’s pretty clear. Besides meaning “big”, grandeur and greatness both capture the feeling of expansiveness, of boundlessness that Freud called “the oceanic feeling”. When people view the Grand Canyon or another great vista, one of the feelings that visitors experience besides the pleasure of seeing beautiful colors and shapes is the sense of having of become temporarily one with the landscape. Similarly in religion, people seek or experience “the oceanic feeling” in worship to a divinity or with a congregation that is larger than themselves. Also in political rallies and listening to great political speeches, people can also feel a similar sense of boundlessness and of one-ness with a group or the nation as a whole. Political speechmaking is in part the art of evoking the oceanic feeling in people, the sense of being swept up in a grand common mission by just listening to a politician speak. There is a feeling of transcending the self, of individual and collective “bigness” which political participation and spectatorship calls forth.
While, Barack, because of your individual make-up, the Grand Bargain may evoke in you a feeling of “grandness” and of being part of a great mission, I would submit that it is not at all a “grand” mission for a number of reasons. For one, its “grandness” does not draw from the collective “bigness” of the American people or of the best of American government, the government that instituted Social Security and Medicare, had a critical role in winning World War II, etc. The concerns that motivate the “Grand Bargain” are, to put it bluntly, narrow, tiny and also utterly mistaken in terms of the reality of money, the economy and the welfare of the American people.
The Grand Bargain that you seek serves the interests of only a few special interests, the financial services industry, by enlarging the “market” for less stable and more speculative private-sourced retirement and health insurance products, sold now and in the future by Wall Street. Both political parties, including yourself, have being acting largely in the interests of Wall Street and not of Main Street, despite your calling Wall Street bigwigs at one point “fat cats”. A little extra taxation is not going to hurt the wealthy very much but cuts in social spending and overall cuts in government expenditure (as well as the lapse of the payroll tax cut) is going to hurt ordinary Americans a great deal as well as represent a significant drag on the overall economy (explained below). Again, the extra taxation on the wealthy is a distraction and a triviality compared to your apparent commitment to cutting Social Security and Medicare, a huge boon to the financial services industry and no one else.
Without an ennobling and constructive set of tasks and a reality-based discourse, the political goal of bipartisanship in Washington is not “grand” at all. A critical problem with the reflexive impulse to bipartisanship is that the two political parties currently are better representatives of two or more segments of economically-privileged opinion rather than of the American people as a whole. It is true that people pull the lever, for the most part, for one or the other major party but real, effective choice is very limited in a “first past the post” electoral system. And, you know as well as anyone, that once you and other lawmakers reach office, the relative power of the voter diminishes even further and the power of wealthy special interests increases exponentially. The current Democratic and Republican Parties are able to compete with each other for attention and “stir up enough dust” to temporarily distract many voters from the essential distance between the concerns of official Washington and Main Street. The mainstream media outlets have been collaborating in creating the appearance of differences between the two Parties but as you have admitted on more than one occasion you share a lot of common positions with your now vanquished opponent, Mitt Romney.
Also, apparently, you are very much attracted to the notion of sacrifice and “shared sacrifice” which also might be meaningfully linked to the notion of national grandeur and greatness: one sacrifices for others to make the nation, the group or the team greater and better. You know, you are probably right that in some areas more public-spiritedness and sacrifice of individual wants and needs may be desirable. Yet you have chosen to praise and seek to impose sacrifice on others in an area where, for ordinary people, for the most part, sacrifice is gratuitous and damaging.
You and your advisors are diverting people’s natural impulses to help other people to a false and actually a counter-productive goal, reducing the budget deficit. It would be far better that Americans would, for instance, sacrifice trips in fuel inefficient vehicles, until such time that they have workable low- and zero-emissions options, than to pay more income taxes to reduce a budget deficit. Or that some Americans choose careers that are not the most remunerative but serve public needs, like teaching school, social work and sustainable agriculture, and yet can get adequately rewarded for their work. These are real individual and group sacrifices for the good of the country not phantom sacrifices for a false ideal.
The notion that it is awe-inspiring or grand to unite the two major political parties around the narrow interests of Wall Street is to make a mockery of the idea of a grand sweep or arc of American history. Or to invoke individual sacrifice and people’s desire to help to address the phantom issue of the public debt is, as you will see below, an outrageous misappropriation of people’s desire to help others. It’s a travesty of grandeur and of greatness, the grandeur and greatness you aspire to as President.
It’s No Bargain
Barack, you have said that you would ordinarily not want to cut social programs or for that matter necessarily raise taxes but you feel, as you have said in the past, that the government is “running out of money”. Therefore you are saying that you are saving the American people money by reducing government spending and/or funding that spending by increasing taxes. You are emphasizing, like almost every politician, that you are cutting “waste and inefficiency” within the government budget. Therefore, the effect of “the Grand Bargain” is supposedly to save what you believe to be a limited resource, i.e. money.
In fact, you and your advisors in this campaign for the Grand Bargain are stirring hysteria and citing outdated views on money, originating during the time of the gold standard more than 40 years ago, to create, in effect, a false crisis. In the past, you have distinguished yourself from your Republican opponents in certain matters as having a somewhat more realistic and truthful view of the world but in this matter you are either deluded and/or spreading malignant falsehoods about how government finances itself. You and your current group of advisors will not be able to substantiate these contentions about the limited supply of spending because, as a government that issues its own currency and that owes its public debt in its own currency, the US federal government cannot run out of the US dollar. There is no doubt about it; it is a fact of life.
Because of the US government’s control of the US dollar there is, as Alan Greenspan and others have pointed out, zero risk of default on the US dollar denominated bond obligations of government. If it were ever to become onerous to have a certain amount of bond interest due, the US government could instantaneously pay off all its bond obligations at near zero cost. Furthermore, the obligation to sell bonds in the amount of our country’s budget deficits is a relic of the gold standard, where governments would need to “borrow” the rights to buy gold bullion from the private sector or abroad, if government did not possess enough bullion. We can maintain this relic if we like or we can chose to alter it via a political decision-making process.
It turns out that attempting to build policy around the belief that the US federal government lacks funds is in fact “no bargain” for the American people, the American government, or the American economy. The “Grand Bargain” saves none of these groups or entities money and in fact drains it away from those that need it most when then they need it most. Spending money to the federal government is just the opposite, a virtually unlimited capacity that must be used prudently but also generously in the cause of the betterment of the American people. The whole paradigm of “saving money” or “running out of money” when applied to the US federal government is entirely misplaced and furthermore extremely damaging to the real economy and the private sector. The government spends at virtually zero cost to itself and with great latitude to control the often distant future downsides of that spending, control that is unrelated to the opinions of bond market participants about US spending policy.
Under some circumstances that are very distant from our current situation or economic trajectory, a future US federal government that spent a lot of money, far more than we currently do in relative terms, could generate some negative effects in the US economy. One risk would be inflation in the real prices of goods of which that US government would buy too much, i.e. too many dollars from both the public and the private sector chasing after scarce real goods and services. As it stands, the most important service we can offer others, our labor, is currently in reduced demand and is underpaid, so increased demand for it from the side of government will have net positive social effects. Another negative effect of too many dollars spent by this future US government might be depreciation of the US dollar below some political-economically determined level, making imported goods and foreign vacations more expensive. Depreciation of the US currency will have a stimulative effect on US industries though will “hurt” high end consumers like Wall Street financiers as well as other elites who are inordinately powerful in Washington. Finally, a government that spent a lot more than we now spend might at some point crowd out the private sector in those areas where the latter is more effective in serving the public good. As it currently stands, powerful political actors have over the past 30 years been attempting to diminish the role of government below levels that are probably optimal or effective for the well-being of our society. In summary, a much higher level of government spending might have negative effects but as it stands the positive effects of that spending outweigh the distant negatives by a long shot.
Mr. Obama, the Grand Bargain is no bargain because it attempts to suppress the deficit spending of government which is a largely unacknowledged engine of the economy in good times and, especially in bad times. The federal government is the spender of last resort in bad times but also a critical provider, in good times and bad, of public goods like education and infrastructure, the demand for which continues to go up. The currency-issuing federal government is the only spender that will not go bankrupt, so the net growth of the private sector, businesses plus households, is only possible if either a country has a massive trade surplus and/or government runs budget deficits. There are some progressives who praise budget deficit cutting at some future date and they are as misinformed as you are with regard to the aforementioned “sectoral balances” between the private sector, the public sector and what economists call “the rest of the world”. Contrary to the current “wisdom” that has no basis in the economic data, budget deficits are a part of the mechanics of the modern economy and are not a sign of moral depravity or careless spending by government.
Taxing the rich more does not provide more funds for the federal government and the offer of this by you as the focus for progressives is in no way a substitute for the cuts in spending programs for which you are pushing. There is often some confusion in this area because state and local governments do fund themselves via tax receipts and a bad economy means a fiscal disaster for these non-federal government entities. Because the federal government has the ability to create spending and money at near-zero cost, as compared to state and local governments, its deficit spending is a critical support for the economy. Federal programs like Social Security and Medicare can be funded as long as the United States exists at the same levels or at higher levels because Medicare and payroll taxes do not in actuality “fund” it; payroll taxes simply reduce demand in the amount of taxes collected.
Cutting Social Security and Medicare in whatever form you choose to package it is bad for the economy because it means seniors will have less disposable income to spend on real goods and services and will spend more on financial services with the profits going to the financial sector. Currently public supports for their retirement are administered at extremely low cost, only the real cost of the labor of officials who manage these very efficient program and not some other program or other private employment and the computer resources required to process payments and issue checks.
Taxation does drain demand from sectors of the economy and higher levels of taxation, or progressive taxation might make it possible for certain government programs to have more “room” in an economy at full capacity and full employment to offer benefits while suppressing inflation. We are not currently in an economy at anywhere near full capacity or full employment. An escalating carbon tax and a financial transactions tax are good ideas because they specifically suppress demand for harmful activities in the economy, though increases in government social spending and government spending on (zero-carbon) infrastructure would be desirable to compensate for the overall reduction in spending in the economy due to instituting these taxes. A more highly progressive income tax structure enforces greater effective income equality though it does so in an “after the fact” manner, but, federal taxes of any type do not put money into federal government spending programs. Without pairing higher taxes on the wealthy with boosting federal spending substantially, your focus on taxation of the rich as the “progressive” side of the Grand Bargain is a cruel joke upon the American people and upon the progressives who support higher taxes on the rich in itself. It is a thin gruel in compensation for cutting Social Security and Medicare.
The Grand Bargain appears to be entirely innocent of the consequences of the increasing demands on government spending in the face of disasters and mitigation efforts related to climate change. As we see from climate disasters like Superstorm Sandy, localities and states will be unable to adequately address the massive challenges ahead. We will need to build an entire new post-carbon infrastructure to combat climate change both in its causes and its effects; it is inconceivable that this could be “funded” via taxation or via user fees alone. Government expenditures of trillions of dollars in the next decades, are required to ensure that future generations will enjoy the same conducive environment, food supply, mobility, and commercial possibilities of the current generation.
Presidential Greatness in the Balance
Barack, I don’t envy you the situation into which you have gotten yourself. You have achieved the Presidency at a time when greatness is required rather than being a “nice to have” option of being President; the multiple crises breaking at the same time demand great rather than only good or mediocre leadership. Furthermore in this area of government spending and budgets, you have spoken so often using the false categories of the deficit hysterics and co-created a situation where it now makes it appear like you would be a failure to actually do the right things for the American people. You have been strapping your Presidency to an economic “bomb” as you have been striving for what appears to you to be a “grand” goal.
The “Grand Bargain” will actually weaken the overall American economy and also the public sector, the government, in which you have served for the last 8 years. You have listened too much to the Washington echo chamber and the advice of holdovers from the Clinton Administration. The Grand Bargain will via political means weaken the fiscal position of the US government and more importantly of the US household sector and real business sector. You will be repeating the mistakes of the Euro-Zone which have now induced a recession via the austerity written into the Maastricht Treaty. You and the Republican Congressional leadership will together undermine the foundation of American prosperity, knowingly or unknowingly. You have somewhere in your political career, signed on to a view of government’s role that directly undermines your role as you strive to create a legacy for yourself. You have surrounded yourself with people who do not have your best interests at heart, if among those interests you include being a great and effective President, of the stature of Roosevelt and Lincoln.
In your views on the role of government in the economy, a complete reversal is called for, where you shed these misconceptions and face the challenges of real America, of the real climate, of the real economy. Without turning away from the premises of the Grand Bargain you seem to cherish, you will in all probability not achieve the stature and positive lasting impact you might wish to achieve as President.
Michael Hoexter, Ph.D.
What a good blog piece !
In the UK we are threatened with the bogey of a interest rate hike forced by more expensive government borrowing imposed by the markets. The Eurozone sinners are doing the politicians work of persuasion. The risk, we are led to believe, is colossal damage to household spending with many thousands of defaulting mortgagees. Blood on the streets, no less. I am completely unsure if this threat is valid. I can see, as the issuer of sterling, that the State has limitless liquidity. But who knows if our debt is all borrowed as sterling ?
Government spending has to be constructive. There’s a challenge.
Future billing ” The President to cause economic collapse” or “The modern Abraham Lincoln”
How would history judge him if he left office today?
Who ultimately benefits from the “Grand Bargain”? Market movers who are short up to their eyeballs? Who else? Brainwashed ideologues?
I just don’t get it. Is this some collective sadomasochistic condition that infects both Democrats and Republicans? We are committing a Greece on ourselves, yet it is an unnecessary action. I can’t believe no one can see this outside of MMT’ers. This is the economic equivalent of cutting off one’s nose to spite one’s face. Higher taxes and spending cuts, into an already very fragile economy, will tip the scales to, perhaps, another great depression. It’s suicidal.
People are stupid. Period.
I just don’t get it. Is this some collective sadomasochistic condition that infects both Democrats and Republicans?
I think that is as close as anything. Look at the obsessions of that minister’s daughter Merkel in Europe. The West is in the grip of a puritanical wave of of penitential self-flagellation, redemptive pain and denial as we punish ourselves for the black plague of excess consumption we have been taught to believe caused our economic woes.
Also, the people who benefit are those political opportunists who are ever seeking for an opening for shock treatment to dismantle democratic power and government, and unravel social insurance programs and egalitarian institutions.
Well, the Bible commands against theft and usury from one’s fellow countrymen. Yet our banking system is based on both. The Bible also commands restition for theft and debt forgiveness, either of which would help a lot.
So the fault isn’t the Bible but ignorance of it.
Is there even a remnant of the left wing left in the Democratic party? Where are they? Haven’t heard a peep out them.
The West is in the grip of a puritanical wave of of penitential self-flagellation, redemptive pain and denial as we punish ourselves for the black plague of excess consumption we have been taught to believe caused our economic woes.
Indeed. Ironically, the excess consumption was by the 10% who now believe that redemptive pain and denial is appropriate for the 90%.
Malmo: “People are stupid. Period.”
Yes. Most people are not happy unless they are miserable. They would rather be “right” than be prosperous. They defend their own poverty and slavery. Thus the 1% think (perhaps correctly), “If God did not want them sheared, he would not have made them sheep.”
Tom, you write, “In the UK we are threatened with the bogey of a interest rate hike forced by more expensive government borrowing imposed by the markets.”
This is a lie on the part of U.K. politicians, just as U.S. politicians lie in claiming that the U.S. government has a “debt and deficit crisis.” Since the U.S. and U.K. are both monetarily sovereign (unlike the 17 euro-zone nations), their governments and central banks choose what interest rates they want to pay on the bonds they issue. Indeed, they choose to issue bonds in the first place. Neither government must issue bonds to finance its operations. Thus, neither government is at the mercy of bond vigilantes or “the market.”
The current global depression is the product of an interest rate cycle, caused by politicians giving private banks too much power to issue money as loans. Politicians around the world are exploiting this depression to impose austerity (i.e. raise taxes and cut social programs) even in monetarily sovereign nations where the opposite is needed. Even in Israel and Iran the politicians are imposing austerity. Ahmadinejad (in obedience to IMF dictates) started doing it on 10 Jan 2010, thereby launching Iran’s currency problems, which continue to compound, especially in conjunction with the Western blockade. (Japanese politicians have so far avoided the austerity kool-aid.)
In monetarily sovereign nations (the U.S., U.K. Iran, Israel, etc) there is only one reason for austerity, namely to increase the power of politicians, and widen the gap between rich and poor. In the U.K., politicians tell the electorate that they too must have austerity like the 17 euro-zone nations. (“The bond vigilantes are coming!”) This is totally gratuitous. England does not need austerity. England needs the reverse, i.e. more deficit spending. Interest rates on U.K. bonds are irrelevant. The bond market itself is irrelevant (unlike in the euro-zone.)
You write, “I can see, as the issuer of sterling, that the State has limitless liquidity. But who knows if our debt is all borrowed as sterling?”
The Australian dollar, U.S. dollar, and British pound are non-convertible, which means their governments make no commitment to exchange their currency for gold or any other currency at a fixed exchange-rate. In other words they will only accept taxes, and will only pay off their bonds in their own respective currencies. “Non-convertibility” does not mean that private interests (e.g. banks and ordinary people) cannot trade their currency for other currencies. For example, the Australian dollar can be readily traded for US dollars at an exchange rate that moves up and down with market supply and demand, and with the FOREX market. But U.K. government operations are denominated in sterling. That includes “borrowing” (i.e. the sale of bonds).
Meanwhile the British “debt,” like the American “debt” is simply the amount of money that has been invested in government bonds. This is as much a government asset as it is a government “debt,” just as bank deposits are both an asset and a debt. Paying the interest on U.K. government bonds is no problem whatever. The government creates the interest payments from nothing, simply by changing numbers on computer spread sheets.
Viewed another way, the national “debt” is the total amount of money in circulation, since all money is debt. That is, all money is a claim of ownership on a digital value in the monetary system.
Some people yearn for a “debt free” money system. This is not possible. They are confusing money issued as bank loans (which carries an interest burden) with money issued by government spending (which does not). In the USA, about 24% of the GDP occurs as government spending. The rest occurs as bank lending, with interest. The result is a crippling debt load on the public. I would like to see the ratio reversed, so that 76% of the U.S. GDP occurs as government spending (i.e. money issued without an interest rate). However this would constitute a kind of “socialism,” which is anathema for most Westerners, since most are brainwashed.
This should be posted, reposted millions of times and millions of places.
One comment,please challenge or add to your post:
Quote,”You have somewhere in your political career, signed on to a view of government’s role that directly undermines your role as you strive to create a legacy for yourself. You have surrounded yourself with people who do not have your best interests at heart, if among those interests you include being a great and effective President, of the stature of Roosevelt and Lincoln.”
Justaluckyfool has just one foolish question, WHY don’t you do what you KNOW may be the solution.
“QE4 the people.”
Perhaps, it won’t be the same for most of us, but it can be better for all of us.
Renew the American Dream. Invest in America
***** “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha[Gautama Siddharta] (563 – 483 BC),
“Yes, You Can Lower Taxes, Pay Off The Debt, And At The Same Time Increase Revenue.”(Justaluckyfool)
And why not then as Einstein said, “Make it simple”?
Reduce federal income taxes to zero while at the same time raise TWICE as much revenue
using a fair system of taxation that is ; collecting interest on our own money instead of income taxes!
How ? As stated on ” 60 minutes” (12/11/11)”
President Obama said,”You can’t raise revenues by lowering taxes unless you get the money from somewhere else.”
You got it right !
So why not do just that? As Einstein said, “Keep It Simple”.
Cut federal income taxes to zero. Pay off the budget deficit at $1 trillion per year and have an additional $4.5 trillion to spend each year for the next 36 years.
All this can be done without any new legislation.
The Federal Reserve Bank already has the ways and means. Almost all economist agree that the Feds can purchase an unlimited amount of assets it needs , and at no increase in deficit spending.
The Federal Reserve Bank can mandate a change in reserve requirements for all private for-profit banks, that is from the present 10% to 100%.
To prevent a collaspe of the financial system it would make $100 trillion available as Loans to the industry with a rate of 2% for 36 years.
As law ,”All profits from the Federal Reserve Bank must go to the US Treasury”.
That means a REVENUE STREAM OF $5.5 TRILLION OVER THE NEXT 36 YEARS.
OMG if $200 trillion is needed-THAT WOULD PRODUCE REVENUE of $11 trillion per annum for 36 years.
Money that is freely given to “Privet For Profit” banks for their own selfish use.
President Obama, Do for all the people what Lincoln did for the slaves- Set us all free from servitude !
Take back our governing, by the people,for the people, and of the people.
Stop using “Private For Profit Banks”.
I may be misinterpreting but you seem to be promoting a monetary policy solution and downplaying fiscal policy. I see monetary policy as a tool to insure the efficient flow of the exchange of available resources but fiscal policy is “us”. It is the how the people want resources to be distributed and developed for the good of humanity. Giving “loans to industry” ignores the needs of the “commons” and “public resources” that the free market is not set up to address on its own.
Paul Lebow,Let’s take an example of what would happen IF the Fed Res. were to QE $100 trillion
to stabilize and produce job growth in the real estate and housing sector.
Most important of all, create 2-3 million jobs with increase wages, price stability within the 2% inflation range.Reduce federal income taxes to zero while at the same time raise revenue of $5.5 trillion per annum. Would that qualify as a path to prosperity for ALL, 100% of the people, in a fair and just manner ?
So , What is this “keep it simple” magic bullet ?
The Federal Reserve needs only to be made to STOP being the PROFIT maker for the “private for profit” banks and STATE to be the SOCIAL BANK for the American people.
“QE 4 the people ” $100 trillion is to be used to purchase ALL residential mortgages, and All commercial mortgages and they are to be modified with a new assumable mortgage with a rate of 2% for 36 years. 85% of present troubled homeowners would stay in their homes and have an opportunity to regain “The Dream”. Even new homes become affordable.
Now for the commercial sector; there is an immediate increase in profit because there is an immediate decrease in “production cost”, and there is an immediate increase in demand.
And all of this PRODUCES A REVENUE STREAM OF $5.5 trillion a year for 36 years.
OMG- Could you imagine if $200 trillion is needed ? $11 trillion per annum for 36 years ?
Had would a wage increase and a profit increase for all while maintaining the same price work for you? Simply because No Federal Income Taxes or FICA !
All of this is possible, with ONLY ONE MAGIC BULLET.
TAKE AWAY FROM THE PRIVATE FOR PROFIT BANKS THE RIGHT TO RAISE TAXES (REVENUE) ON OUR OWN CURRENCY AND GIVE IT BACK TO THE PEOPLE.
A nice piece of advice from Michael Hoexter PhD. to a Noble Laureate. However excessive spending by the government would mean reducing the role of the private sector and eventually leading to corruption by the bureaucrats and reduced role of the government will cause fattening of the one percent. A strange dilemma!
I’d like to point out that you immediately jumped to an assumption in your comment…you used the word “excessive” as your interpretation of the word “more”. I’ve laid out some of the conditions in my letter in which “more” would become “excessive”. I did mention potential inefficiencies in the public sector becoming too large (right now this is not such an issue in the US, contra the right wing campaign against government). One of the dangers in that is (more) corruption. “Prudence” does not necessarily always mean spending less.
Indeed, even Paul Volcker, (the Volcker Rule) has drunk the “deficit kool-aid” and “foreign debt” mantras, in his piece “What the New President Should Consider,” (http://www.nybooks.com/articles/archives/2012/dec/06/what-new-president-should-consider/🙂
“We need to rebalance the economy—to achieve more productive domestic investment and more personal savings—and to turn around the enormous federal deficits. That’s all the more difficult with high unemployment and dependence on stimulus programs.
Here and there, a few hopeful signs emerge, including some spending cuts. But as with financial reform, the effort is incomplete. In fact, it has barely started. And the whole world knows it.”
And then, Volcker echoes the “efficiencies metrics” mantras: (As described in the film “The Trap” by Adam Curtis under the Resources tab to the right side of this blog, this was think-tank policy-wonk at The Rand Corporation in the 60s, disseminated into various US/UK policy-circles, from Defense Secretary MacNamara during Vietnam (kill metrics,) to Bill Clinton and Tony Blair during their reigns.)
“I have spent most of my adult life in and around public service. I know there are government agencies that are well managed, responsive to their vital public responsibilities, and effective. We all know some that have not been: think back to New Orleans and Katrina or more recently to the Gulf oil spill. Then, federal agencies with the specific responsibility of anticipating and dealing with such emergencies were effectively AWOL. Happily that was not true in the case of the recent Hurricane Sandy. But there have been continuing failures in local planning and preparations for such large hurricanes. At the other end of the spectrum, we have some huge bureaucracies—the enormous defense establishment for one—that both amaze and reassure us in time of need but also have too many pockets of weak performance and even corruption.
To my mind, our universities with prestigious schools of “Public Affairs” and “Public Policy” have concentrated far too much on high-level policy debates—i.e., what should be done—and far too little on what in practice can be done. Grand policy and great strategy can’t count for much without the resources and skills needed for implementation and management.
I also sense that it is the instances of ineffective administration—high costs, absence of clear goals and measurement of results, poor incentives—that contribute to the lack of trust that is so evident and now so deep-seated.”
And then, Volcker cites the Gold-Standard-Era “budget constraints” to support his “entitlement cuts:”
“It is questions of budget policy—spending and taxation—that bring the abstract concern to the realm of decision-making. Hard as it is to contemplate, federal revenue today covers little more than 60 percent of expenditures. That’s something that historically has happened only during a big war, never in relative peace, or even in limited wars. Spending has climbed well above past levels—at one point rising from the previous 20 percent or so of GDP to around 25 percent. In the midst of recession, revenues fell to 15 percent of GDP. Even with economic recovery, the remaining deficits will be far larger than we can finance from our own savings.
Experience strongly suggests that the present system of personal and corporate income taxes—shot full of special credits, exemptions, loopholes, and evasion—has reached practical limits. We have come to rely on payroll taxes to finance mandated expenditures, and they too may be approaching economic and political limits.
That’s all widely known and understood. We have had commissions, official and unofficial, to assess the outlook with broadly consistent conclusions. Their reports confirm that it will take very strong measures—encompassing savings in entitlements, and in defense as well as civilian expenditures—to get spending as low as 21 percent of GDP. Given the demands of an aging population and rising health care costs, it will take years to attain that level and even more effort to sustain it.
On the revenue side, there isn’t much to support confidence that a creaking and contentious revenue system heavily dependent on income taxation can maintain its contribution to revenues, much less support a significant increase. So even if expenditures could be reduced to 21 percent (as the official National Commission on Fiscal Responsibility and Reform thought eventually possible by 2035!), some significant revenue increase will be necessary to eliminate the deficit.”
Volcker MUST know what he is actually carefully disseminating to his readers, although clearly not being honest about it — a late stage Clinton Admin Boom redux (which directly contributed to the CFTA and the nix to Glass-Steagal, CAUSING the worldwide 2008 CRASH-fire-sales-power-grab crisis we’re in today, and IT WILL AGAIN BTW.)
Why would the former Reagan-era Fed Chairman do that? Maybe this is the reason:
“Given the widespread problems confronting pensions outside the embrace of the federal government, the past decade would seem an odd time for the administration to campaign to privatize Social Security. Why would anyone want to invest America’s last line of pension defense in such perilous a market? Are Bush, Obama and their Wall Street-nominated advisors and lobbyists aware of the odds?
Probably not. So they must have a particular aim in mind–a new money grab. Presumably they believe that some kind of market recovery is needed to rescue not only the PBGC (Pension Benefit Guarantee Corporation) but also the pension funds, stock market, and for that matter the political fortunes of the ruling party–that what is needed, in fact, was a Bush boom (which collapsed in 2008) and prospectively an Obama boom. This would allow the US to “grow our way out of trouble,” as we have done so many times before.
But where will the funds come from to bid up stock prices? The national savings rate is nearly zero, because most personal discretionary income–like that of most companies–is absorbed in paying debt service. Previously the Fed could have flooded the capital markets with credit to lower interest rates and thereby spur a bond and stock-market bubble. But interest rates are at their lowest since the 1950s. They can go no lower.
There is only one other place to turn. The new flow of funds into the stock market will have to come from labor itself, just as it did in the 1950s. Social Security is the greatest plum, so large as to virtually guarantee a boom.” (“The Bubble and Beyond,” Dr. Michael Hudson, 2012, p. 293-294.)
I’m just a physicist. Its difficult for me to understand the world without first stripping it down to first principles, basic fundamental laws and then, only then can I work my way up to the complexities of the real world. I very much enjoyed Michael Hoexter’s essay and the responses. But, after a 2-hour discussion with a very conservative fellow last night at a dinner party, the point was again driven home – there is a war on semantics that needs to be won before any of Dr. Hoexter’s wisdom will ever have a chance of “going viral”.
In the “discussion” I was repeatedly hit with the tired arsenal of the stock rocket-propelled canards – “over-regulation”, “big government”, “leave it to the states”, “we need to cut entitlements”, “we are going bankrupt”….. The conversation left me deflated. Yes I could counter each false mantra, but eventually came to the sinking realization that its not about the logic, its the language, stupid.
Why use the word “deficit” when we know this technical accounting term does not apply? Why use “entitlements” when we know it is such a loaded word that triggers deep-seated resentments in the right-wing mind? Why use the term “print money” when it conjures up images of wheelbarrows of worthless bills dumped for a loaf of bread? Even subtle terms like ” “the Federal government” has been used as a rhetorical bludgeon – as if it were some monolithic self-serving machine when, in reality, it is “our” only constitutional means of effecting the will of the people.
I don’t have the language skills required to take back control of the way the economy is discussed, but I do know that until we do, the best we can hope for is clever new choral arrangements of the same old songs that we in the choir sing to each other in an empty church.
Yes, Paul Lebow, you got it right.
This is how our language is used against us so as to hide the truth.
Perhaps you, and ALL who have any interest (pun?), should read what a Noble Prize physicist wrote, “The Role Of Money” by Frederick Soddy.
ROLE OF MONEY
WHAT IT SHOULD BE, CONTRASTED WITH WHAT IT HAS BECOME By
M.A. (Oxon) ; LL.D. (Glasgow) ; F.R.S. ; Nobel Laureate in Chemistry, 1921 ; Author of ” Science and Life ” ; ” Wealth, Virtual Wealth , and Debt ” ; ” Money versus Man ” ; etc.
This book attempts to clear up the mystery of money in its social aspect. With the monetary
system of the whole world in chaos, this mystery has never been so carefully fostered as it is to-day.
And this is all the more curious inasmuch as there is not the slightest reason for this mystery.
This book will show what money now is, what it does, and what it should do. From this will
emerge the recognition of what has always been the true role of money. The standpoint from
which most books on modern money are written has been reversed. In this book the subject is not
treated from the point of view of the bankers as those are called who create by far the greater
proportion of money but from that of the PUBLIC, who at present have to give up valuable
goods and services to the bankers in return for the money that they have so cleverly created
and create. This, surely, is what the public really wants to know about money.
It was recognized in Athens and Sparta ten centuries before the birth of Christ that one
of the most vital prerogatives of the State was the sole right to issue money. How curious that
the unique quality of this prerogative is only now being re-discovered. The” money-power ” which
has been able to overshadow ostensibly responsible government, is not the power of the merely ultra-
rich, but is nothing more nor less than a new technique designed to create and destroy money
by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of
the community or the real role that money ought to perform therein.
… It is concerned less with the details of particular schemes of monetary reform that have been advocated than with the general principles to which, in the author’s opinion, every monetary system must at long last conform, if it is to fulfil its proper role as the distributive mechanism of society. To allow it to become a source of revenue to private issuers is to create, first, a secret and illicit arm of the
government and, last, a rival power strong enough ultimately to overthrow all other forms of
****And for a little fun, read what a fool has to say:
“The Wealth of a Nation Is In How That Nation Redistributes Its Wealth”
READ- CHALLENGE-IMPROVE-USE IT AS YOUR GUIDE!
Thanks for the lead – I will check it out. I have been following some of the money blogs. Came to the conclusion that money is neither “wealth” nor “value” – not even a measure – rather, like electrons, just a vehicle to exchange value at a given point in time. Unlike electrons however, that possess one unchanging unit of charge, money can be manipulated to transfer more or less value. Not a perfect analogy, and maybe not very practical, but for me, helps to conceptualize the impact of monetary policy such as “printing money”. If corporations are just sitting on money, its because there is nothing of value to the corporation to invest in in order to thrive. No clients or customers with the means to purchase products of value. In effect these hoarding corporations are poor – so much money but of no present benefit to the company.
I think some strong points are that serious Conservatives have agreed with MMT.
Entitlements? What about automatic payments for people of lower income to bring up their living standards, and also of course they SPEND this money on retail and whatnot. Is that “Socialism”? Hmmm?
Milton Friedman suggested that, the Negative Income Tax or Basic Income Supplement. It was almost put into effect by Richard M. Nixon.
Paul Ryan asked an expert about privatizing Soc Security to save it and make it more stable. The expert told him that Soc Security did not need saving or privatizing because THE GOVERNMENT CAN ALWAYS PAY ANY BILLS THAT COME DUE OR THAT IT WANTS TO PAY, not by “printing money”, but just increasing the bank account balance of designated recipients of Pentagon contracts, Soc Security, or any other federal spending, the only question is whether there would be sufficient goods and services for Soc Sec recipients to buy.
What Socialist said this? Alan Greenspan told that to Paul Ryan.
There’s another famous Washington politician who says, contrary to Greenspan and Friedman, that federal govt spending is “out of control” that the fed govt is “broke”, that we need to cut back and rein in “entitlements”. A Tea Party guy? Nope, that’s Barack Obama. Boehner too. Paul Krugman also believes this, he just thinks now is not the right time. Heck, the one actual Socialist Senator Bernie Sanders agrees with the Tea Party viewpoint that the Deficit is a terrible crisis, contrary to Greenspan and Friedman.
Way back in 1946, over sixty years ago, the chief of the Fed named Ruml said there was not any reason why the govt had to collect Corporate Taxes, or any other taxes, because it’s a drag on the economy. That was during the Cold War, and right after WW2. It’s been understood way back then that the fed govt does not need taxes and does not use taxes for fiscal spending.
FDR understood that there was no fiscal reason to collect taxes for Social Security, for the “Trust Fund”. It was just a “useful fiction” to appease political opponents on the Right. By seizing money out of people’s paychecks, for no useful purpose other than destroying that money (and “crediting” an account at the Fed designated for SS), FDR could play make-believe that workers were financing their own retirements and that of future generations, and that ruse was necessary to push it past the gate-keepers, even though we know it was a LIE.
The model is this: in order to have a life after working yourself to old age and sickness, everyone must “sacrifice” their happiness now, and also reduce consumption of what American companies produce and sell, creating a kind of low-grade constant “fever” of recession, compared to the prosperity and vibrant economy that could otherwise be unleashed.
The other model is this: in order to supposedly keep prices lower, the govt and Fed must be actively engaged in gaming the system to force wages down, and CAUSE higher levels of unemployment (given the saving and spending patterns of Americans and companies, including the foreign trade deficit) even though low-wage people are incapable of buying the goods that American companies produce. Can people on minimum wage buy new cars? Other durable goods? Only on credit, if at all. This is a recipe for a state of a kind of permanent recession (or “jobless recovery”) such that the economy is always “sick”, and we now consider that “normal” for a large percentage of people to live in poverty and destitution, including sick veterans, for no useful reason at all.
Even with that, companies don’t conspire to keep prices lower. They work and conspire to increase prices, by financing mergers and acquisitions such that a few major conglomerates control entire market sectors, and can afford to sucker people into “brand name” goods. Sometimes better quality, often not. Sure, we get electronics cheaper, but a Laptop (all the name brands made in the same Shanghai factory) only costs $50. Everything above $50 is shipping, marketing, foreign tech support from India, and profits for executives and for passive shareholders. So much for lower wages leading to lower prices.
The Fed Gov *can* just increase account balances of Americans or any foreigner for the same reason the Fed Gov can purchase, own, test, manage, and use nuclear missiles. Because it’s a sovereign govt with these powers. It’s how things work.
EVERYONE is a recipient of Govt Handouts, indirectly if not directly. Poor people don’t put their govt money in a bong and smoke it. They SPEND it, at the stores of their choosing. Even if they sell food stamps for crack (a common slur), then the crack dealers or *someone* spends that at retail stores, at corporations, buying corporate production, and employing everyone from farmers to drivers to clerks and stock people, advertisers, radio & TV, refrigeration companies, etc. The poor people, who MAY have full-time or part-time jobs too, are just a PASS-THRU for federal spending.
Some people don’t want to rely on the Govt’s money. What other kind is there? Martian money? Albanian? Chinese? All Dollars are produced by Uncle Sam. Banks are licensed and authorized as agents of Uncle Sam to produce and distribute Dollars too, but only in the form of credit where people must pay monthly fees to use it, until it’s all given back plus all interest charges, AND every user must “qualify” for that loan. Other than Uncle Sam’s “private” banks, the only Dollars anyone is using is Uncle Sam’s Dollars.
Unlike poor people who get a few hundred a month, Mitt Romney is a representative sample of a handful of oligarchs who got Tens of Millions in Govt handouts, in the 80s for Bain and also in Obama’s bailout of GM. I’m sure Mitt was not fretting about relying on “Socialism” when he demanded that the Fed Govt pay him millions of dollars.
Frankly, I don’t like and am wary of centralized power, but that’s what we have. The entire economy is not centralized —- many corporate conglomerates DO have the same handful of people on their interlocking Boards of Directors and the same gang of executives circulates, and often their relatives —- but the FINANCIAL money system IS centralized and managed by the Fed Govt. The top capitalists over 100 years ago lobbied to have the Fed Govt not only charter ALL corporations —- states were sometimes too democratic and too socialistic, that is, they sometimes listened to their voters and protesters and competing small business —- but the top capitalists especially insisted on a Central Bank. There was one secret meeting people know about on Jekyll Island, but prior to that there was 10 years of discussions and open meetings in NY and Chicago, and the proposals by Sen Vanderlip and Sen Glass (later of the Glass-Stegal Act) were shopped around to capitalists all over America, from the Tobacco lobby and farmers in the South, to various businesses in the west, and of course the industrial Midwest and financial East. EVERYONE of financial and political significance agreed on a Central Bank.
Now, not only is the Central Bank considered “Socialism”, now the ideas of Milton Friedman and the Reagan economists and much of the core of capitalism is rapidly being re-labeled “Socialism”.
OBVIOUSLY, they have moved the goalposts, in our minds and discourse and in the media. The plans are actually aimed at destroying actual Capitalism, in the name of an ultra-austere bizarre Capitalism that has never existed, but since it’s “globalization”, it actually RESEMBLES the planned Soviet economy and the ideas of International Communism, except privatized by corporate leaders.
Pentagon spokesman Thomas Barnett openly flashes a photo of Karl Marx in his presentation about the Pentagon’s plans and that of the US military, NATO, etc. for a global multi-national multi-cultural armed force of “peacekeepers”.
No, I don’t like the Fed Gov. I know that members of private “think tanks” closely associated with the Fed Gov and holding positions inside the Govt (esp during Bush) had openly stated in various wording that an attack on America was vital and necessary for this new global military system of “counter-terrorism”. They wrote and testified to the Senate on this point in years PRIOR to Sept 11. In other words, in order to have a “War on Terrorism” we first need to have a major terrorist attack on American soil, otherwise it will be hard to convince Congress and the American people.
Not a single question in the media about these people, both Neocons and Establishment Liberals. Like the Bankster Fraud described by Bill Black, not a single investigation or prosecution by the Govt of these people who obviously openly stated their PLANS for Sept 11, if not in specific details. Instead, the people who WANTED Sept 11 became the de facto leaders of the “War on Terrorism”.
This is now old history. People have died and are gone. The only important point is the propaganda remains active, and still needs to be challenged.
That does not change the fact that our monetary system IS centralized by the Fed and Treasury together, and the Fed System private banks on those federal charters. (I never said “everyone” in the Govt was involved, even though these “think tanks” are very prominent and not-secret.) This is how the system works, NOW. Barring some kind of radical grassroots violent revolution, this is how it will continue to operate. The only relevant question here is the degree to which the financial system and govt can be made to work FOR the average American or AGAINST the average American. “Austerity” is AGAINST.
Thanks very much for your refreshing and comprehensive perspective.
How many ways does one have to say “The King has no clothes”? Despite your common sense description of economics that even (only?) a first grader would “get”, the prevailing “ideology”, the Big Lies, are so powerful – logic doesn’t seem to matter much.
I see money as a medium – a medium susceptible to intense and damaging manipulation. The “more dollars chasing too few goods” red herring begs the question. “why are there too few goods?” not “why is this there too much money?” There is a huge latent demand among the unemployed that can only be freed up, as you suggest, by “we the people” allowing underutilized human resources to reach their potential, to work for the good of mankind. Yes, there could eventually be a competition between production for the public good verses private production for consumer items of aesthetic value – but until we get to that point, the incredible increase in quality of life of the average American may just be the powerful force needed to change our priorities and what we value. Having the choice between the latest big screen TV technology versus affordable government-coordinated in-home care for an elderly parent with Alzheimer’s would be a no-brainer. “I love my big government! ” may become a proud bumper stick rather than a right-wing sneer.
As a government worker I often pull my hair out at the insane and self-defeating aspects of the bureaucracy; but my gut reaction is not to want to dismantle the system but to fix it. The Tea Party mind-set is so much like that of two-year old who, unsatisfied with with his tower of blocks, angrily lashes out, scattering them with a perverse sense of satisfaction.
Thanks, Paul. Agreed on the point that the public sector exists to provide and coordinate services and benefits that the private sector can’t or won’t, typically because there’s no way to get enough profits. Old sick people often don’t have enough money, and can’t afford great insurance, by definition.
In my diatribes, I’m usually preparing arguments for Tea Party types. I’m starting to see that maybe some of them don’t get it because it’s counter-intuitive and maybe incomprehensible from where they stand, but some just because it angers them to consider that their world-view (religion) may be wrong. Bill Black nailed it with his articles on Theo-Classical Economics they push, not empirical, all faith based.
I appreciate that Mosler was attracted to the Tea Party ethic about being against “meddlesome” govt interference, but he grew aghast that the Tea Party types kept taking a public stance FOR unnecessary suffering, for no good reason other than the enjoyment of watching people suffer, that is, those people who DESERVE to suffer for whatever reason, deserve to be dammed to poverty.
Or like that cop who said he wanted to kill millions in the Northeast Blue States because they voted for Obama, and he would volunteer to kill Obama too.
Gr8, gr8 reply, Gary Goodman simply Ggr8.
Quote, “That does not change the fact that our monetary system IS centralized by the Fed and Treasury together, and the Fed System private banks on those federal charters. (I never said “everyone” in the Govt was involved, even though these “think tanks” are very prominent and not-secret.) This is how the system works, NOW. Barring some kind of radical grassroots violent revolution, this is how it will continue to operate. The only relevant question here is the degree to which the financial system and govt can be made to work FOR the average American or AGAINST the average American. “Austerity” is AGAINST.”
But there is no need for a “violent revolution”
There is a simple “silver bullet solution”.
“FACT… Our monetary system IS centralized by the Fed and Treasury together…”
SOLUTION: We need only to change their MO from making profits for the “private for profit banks”
to a new path of making profits for “the general welfare and the pursuit of happiness”.
No new legislation is needed. NONE.
The Fed has proven that QE may be in any amount and for infinity.
WHAT IF…”QE 4 THE PEOPLE” were to be $200 trillion used to purchase assets paying 2% for 36 years.?
WOULD IT..Create a revenue stream (income) of $11 trillion per year for 36 years ?
Lower federal income taxes to Zero, reduce the national debt over 10 years to Zero, increase spending, and promote the general welfare of all the people ?”
Where did we go wrong ?
The Fed now has a MO that directs that $11 trillion per year to “private for profit banks that in turn give that profit to the 1%.
Please, stop denying your right to prosperity and that right for your childen.
Please, after due examination post whatever you believe to be true and beneficial.
I have a longer reply in mind, but I want to point to two different concepts about the phrase “money is debt” or “money as debt”, the video.
One, money IS debt because money is a UNIT OF ACCOUNT, or accounting, in which every entry for each party must be either a liability or asset to that party and an asset or liability to some other party. This is normal. The Fed + Treasury has “liabilities” because it “borrows” (in accounting terms) from the banks, but it does not NEED to borrow U.S. Dollars on credit from the banks. It does so as a service, and because it’s part of the function of managing banking. This is normal too.
Two, “money is debt” because 97% of money in circulation is created by banks under special license from the Fed Gov. The Fed Gov can ISSUE money. Banks can only ISSUE credit, which is a “debt obligation” or liability that it purchases from the debtor, offset by the cash “asset” that it deposits in the debtor’s account, or the designee (car dealer, etc.).
In the 2nd point, this is not “counterfeiting” but it is “usury” to charge high interest charges for credit-money that costs the bank practically nothing to create, and when risk is nearly 100% insured by the Govt.
Loaning out money that one HAS is like borrowing from your dad or a loan shark. This is not “banking” by definition.
Though Warren Mosler is critical of banking, neither he nor others like Zarlenga believe that all instances of local business and consumer credit analysis and allocation functions in our economy should be done by a central govt power, a branch of the Treasury, and that banking should be illegal. Reformed in numerous ways, but not outlawed.
On the other hand, the MORE Deficit Spending occurs (up to some point of saturation) where money is issued to consumers or business by the Govt with NO OBLIGATION to pay back or pay interest, the LESS control and profits (out of desperation) exist for the banking system to provide money as credit.
I think it’s incorrect, but a useful analogy, to describe the banking system as RENTING our money to us, even though banks do not literally RENT money they HAVE, the way a hardware store RENTS the carpet scrubber that it has in stock. Banks “rent” money because they charge a varying monthly fee to use it. The more a party needs that money the less likely they can get it, and the higher the rental costs will be. Wouldn’t a company rather get a Pentagon or DoT contract than a loan? Wouldn’t a consumer be better off with a welfare check or a Govt-sponsored job than a Quick Cash Payday Loan?
Then this has to be extrapolated to Macro terms, without falling into what Bill Black brings up a lot, the “fallacy of composition”.
So it makes no sense to try to eliminate the FACT that “money is debt” because that’s how accounting works. The fact that a “national debt” exists because banks choose to and the system works by banks depositing their surplus funds into a Treasury Securities account, this is not some crisis, and it makes NO SENSE to eliminate this “national debt” that exists because private sector “net assets” MUST be counted as public sector “debts”.
It does make sense to increase the amt of money that is issued by the Issuer NOT as credit or a debt obligation, and therefore to reduce the amt of money that is issued as a loan, aka is “rented” to us.
This does not require any major changes other than recognizing that deficit spending is not “evil” and “national debt” is not a function of the Govt “borrowing” from it’s own banking system because the Govt is “out of money” and the banks must provide it to the Govt as “credit”, when the banks themselves depend on the Govt to back stop their operations (and banking does not function well without that).
The question was, “What if…The Fed were to “QE 4 the people” ?
The Fed has proven it can QE for infinity,e.g., QE3 for $90 billion per month “until it feels like it no longer wishes to “.
What if …The Fed were to purchase assets (loans outstanding, instead of the counterfeit MBS’s)
then modify those loans (residential and commercial) so that they become
“solid investments, actual AAA) so that they would produce a profit-now get this- a profit for the people, yes the people instead of a profit for the private for profit banks.
When will all the people understand that the bottom line evil is that “private for profit banks are using our own money to make profits for their shareholders. That’s what they are supposed to do. When will all the people understand that making a profit “for the common bettering of man” is a better deal. ■Michael Hudson-What if Impish interest said, “I will now serve a new Master, One that is for the bettering of all mankind.”
I ask all,
■3Spoken ■Angry Bear ■Bill Mitchell – billy blog ■Corrente ■Counterpunch: Tells the Facts, Names the Names ■Credit Writedowns ■Dollar Monopoly ■Econbrowser ■Economix
■Felix Salmon ■heteconomist.com ■interfluidity
■Michael Hudson-What if Impish interest said, “I will now serve a new Master, One that is for the bettering of all mankind.”
■Mike Norman Economics ■Mish’s Global Economic Trend Analysis
■Modern Money Mechanics ■Naked Capitalism ■Nouriel Roubini’s Global EconoMonitor
■Paul Kedrosky’s Infectious Greed ■Paul Krugman ■The Big Picture ■The Center of the Universe ■Un Cafelito a las Once ■Winterspeak
One question, “WHAT IF ?
“Justaluckyfool”, “QE4 The People”, “QE 4 WAR” (GOOGLE)
When you’re debating your conservative friends, don’t forget that the very conservative David Brooks advocated that the Govt put people to work, by any means necessary, including federal govt spending to directly create jobs. That is one of MMT’s most radical proposals, a federally-funded jobs program as a TRANSITION to a private job.
Business can reduce the size of this program any time, with no lobbying or legislation at all. All they need to do is HIRE the people. In the meantime, those people who have been discarded by the private sector are not left to stay idle and go “rotten”, by watching daytime TV and sending out resume after resume online, falling into despair and/or homelessness and destitution. Instead, they can GET UP in the morning and do something useful, as many of them WANT to do. They can get experience and training, at very least at SHOWING UP. Everyone knows, SHOWING UP is 90% of success.
What’s stopping us? For one, ideology. The Soviet Union and Marxists are famous for putting ideology over practical action, despite their purported “scientific” bent. Now it’s Tea Party conservatives (and liberals) and Austrian economists who are more in love with their “ideology” than reality. Their ideology says that Govt programs and “Entitlements” are bad, unless these are Govt programs that directly assist corporations and hand out “Entitlements” to Elites.
The other thing that’s stopping us, which is more ideology, is the belief that the Govt which is has the sole global monopoly on creating the Dollar is flat busted and incapable of creating Dollars. It’s bizarre. We have to pretend that FDR never ended the “Fixed Exchange” with gold in 1933, and that Nixon never ended the foreign “Fixed Exchange” in 1971.
(When we had a “fixed exchange” money system, which was also “fiat” at the same time, WHO was responsible for the “fix”? US Govt, by edict. Govt declared that each $1.00 was redeemable in 1/35 oz of gold, whether that was the real price of gold or not. Today, under “fiat money”, a non-fixed floating exchange, the Market sets the relative prices every minute and every hour, if not faster.)
Another part of the ideology is the belief that “printing money” must cause inflation, on a straight-line curve where each new Govt dollar devalues all the remaining dollars. This is despite the fact that private commercial banks create 97% of the money in circulation, as credit, and no one is claiming banks are devaluing the Dollar. This means banks would be 32 times more powerful than the Treasury in “causing inflation”, if it were true that every new Dollar devalued all other Dollars.
In reality, this belief relies on the apparent belief that capitalism is a FIXED economic system which (maybe by quotas of max production???) is incapable of ramping up production and hiring people to meet increased demand, therefore increased demand by federal spending MUST drive up prices. The actual economist who wrote about this stated that GIVEN that all other factors remain static, then adding to the money supply must reduce it’s value or debase it and drive up prices, but since WHEN do we consider a market economy to be a static stagnant system? Like the USSR? Of course it’s not. Capitalism is KNOWN as a dynamic system of creation and destruction. The antithesis of static. (Per Steve Keen, capitalism is also the antithesis of the neoclassical Equilibrium model, especially private finance.)
The economist wrote this, and he stated that his theorem should NEVER be applied to real world economics, it was just an intellectual exercise. Actually, he was just stating arithmetic, if X = Y, then X + d = Y +d. Yet despite all that, we all pretend that it DOES apply to real world economics.
Next they will be telling us that the Easter Bunny is real, and so are Demons and Evil Ghosts. Well, many of us already believe those things are real too, despite evidence to the contrary.
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