Saturday, March 23, 2019

Ruh Roh. The Yield Curve Just Inverted

Yesterday, on March 22, 2019, the yield curve inverted for the first time since 2007.  Specifically, the spread between the 3-month Treasury and the 10-year Treasury has flattened and then flipped:  short-term yields are now higher than long-term yields, the reverse of what is normally the case.  It is a leading indicator of a coming recession, since it basically means that investors are becoming so bearish that they would rather lock in current interest rates as they expect rates to drop significantly in the near future rather than continue rising further.  And since it typically precedes the onset of a recession by 6 to 18 months on average, it means that the odds of a 2019 or 2020 recession are looking very, very likely.

And while the stock market seemed to be rebounding from the December mini-crash of 2018, it now seems to be once again teetering on the edge of the Big One, the coming Crash of 2019.  And with Trump's tariffs and resulting trade war really starting to bite hard recently, leading to GM and Ford both announcing layoffs, and American soybean farmers getting creamed, things really don't look so hot right now.

In Bernie we TRUST, in Trump we RUST.  Tired of "winning" yet?  Hey, American Brexit, now do you finally Regrexit?

Monday, March 18, 2019

What MMT Gets Wrong, And Monetary Sovereignty Gets Right (Part Deux)

Recently, we wrote an article discussing the theoretical and practical differences between Modern Monetary Theory (MMT) and Monetary Sovereignty (MS).  But still, some may wonder why there is essentially no correlation between deficit spending and inflation, at least not in the post-gold standard era and not even during WWII.

Surely there must be some connection, right?  Well, there technically is, but essentially only at the extremes.  Why?  Because of the "velocity of money", spending (sources of dollars) need NOT be symmetrical with taxes (sinks of excess dollars), only that enough dollars are clawed back in the long run (with the definiton of "enough" being quite elastic).  And as the velocity of money increases along with actual or potential inflation, so too does the tax take, narrowing the gap between sources and sinks.

For example, if the velocity of money factor is 7 (i.e. newly created dollars changing hands seven times on average, before being destroyed), spending can theoretically exceed tax revenues at any given time by up to a whopping factor of seven (!) before the excesses begin to accumulate year after year to the point where inflation increases when demand for goods and services grows much faster than supply, all else being equal.  Of course, the velocity will vary, and all else may not be equal, but that only makes it even more of an automatic stabilizer overall.

(Of course, it sure didn't hurt that during WWII, taxes were collected in real time (i.e. withholding) and the tax base was greatly broadened as well, despite record-high yawning deficits.)

And of course, another major sink is the FERAL Reserve draining excess bank reserves, while raising interest rates increases the demand for dollars and thus the relative value of dollars.  And paying down debts of any kind is another major sink as well.  And of course, a growing economy requires a growing supply of money, just to prevent recession and/or deflation, so the sources can still exceed sinks of all kinds by quite a large margin before inflation begins to bite, and we are currently nowhere near that point.

And of course, banks create money out of "thin air" all the time every time they make loans.  The difference is they don't create the interest that is owed, which must come from somewhere when it is paid back.  And if this were the only method of money creation (which it would be, if federal "deficit" spending money into existence interest-free were zero or negative, that is, a so-called "balanced budget" or "surplus"), then there would NEVER be enough money to pay it back, leading to net destruction and artificial scarcity of money.  And that would be VERY harmful for any economy--it was, after all what turned the mild-at-first 1929 recession into the full-blown Great Depression by the time 1930 had come and gone.

So it's no wonder we don't see any robust correlation between deficit spending  (i.e. money creation) and inflation in either the short or long run.  Thus, another myth bites the dust.

Saturday, March 16, 2019

We Wholeheartedly Condemn The New Zealand Shooting

"On March 15, 2019, a horrific racist, xenophobic, and Islamophobic hate crime and act of terrorism shook New Zealand as well as the world.  A white supremacist hatemongering terrorist launched a deadly attack on two mosques in Christchurch, New Zealand, killing 49 people and injuring countless others, including children, who were worshipping in those mosques.  Horrible as this unprecedentedly deadly mass shooting was, it would likely have been far worse still had the terrorist been able to set off his many bombs as well.  And we wholeheartedly condemn this horrific and cowardly act of hate and terrorism, and all other such acts as well as the virulent ideologies, including white nationalism, racism, xenophobia, and Islamophobia, that inspire and lead to such senseless violence."

This was literally all that Trump and his sycophantic lackeys would need to have said to avoid being unnecessarily tainted (as much) by having somehow inspired such horrific and hateful violence with his own virulently hateful rhetoric against (non-white) immigrants, refugees, and especially Muslims.  (Which, by the way, his rhetoric apparently DID inspire in part, according to the killer's own rambling manifesto.)  But apparently the Donald can't even do that, preferring instead to just punt on the issue altogether and give the usual pat answers.  And that, ladies and gentlemen is, in a word, "Sad!".

Tuesday, February 26, 2019

What MMT Gets Wrong, and Monetary Sovereignty Gets Right

Modern Monetary Theory, or MMT, is just starting to break into the edges of the mainstream now.  Progressives from the new rising star Alexandria Ocasio-Cortez to the venerable Bernie Sanders are now (correctly) starting to endorse, whether subtly or not-so-subtly, the core tenet of MMT, namely, that federal deficits don't really matter since the federal government can just print the money.  While few are bold enough to say out loud the corollary that federal taxes do not actually pay for federal spending (and that the "national debt" is literally nothing more than deposits in Treasury security accounts), it is nonetheless implied since it follows logically from the premise that the federal government has infinite money.  And Rodger Malcolm Mitchell's related offshoot theory, Monetary Sovereignty (MS), also contains these same truths as well.

But MMT is also seriously flawed in a way that MS is not, and that is how they deal with the inflation question.  MMT prefers to keep interest rates permanently at zero or close to zero, regardless of how much inflation there is, preferring instead to adjust tax rates in response to inflation.  MS, on the other hand, prefers to use interest rates as a way to prevent and cure inflation, as taxes are too crude, too political, and not quick enough to use for inflation control as it happens.  (Note that even modest federal taxes can still work for automatic inflation control in the background without changing the tax rates, as the tax take automatically increases with the velocity of money.)  MMT, in other words, paints itself into a corner, while MS retains the flexibility to deal with inflation as it happens.  Of course, raising interest rates only works to fight demand-pull inflation as opposed to cost-push inflation, but the former is much more sailent than the latter in regards to the (generally overblown) fear of "what if we print too much money?"  The FERAL Reserve can also drain excess bank reserves (i.e. where all excess liquidity eventually shows up sooner or later) and "sterilize" them, as yet another means of inflation control.

In other words, following MMT to the letter will ultimately take us back to where we started at square one in the same box, while MS represents a genuine way out of the box without the pitfalls of MMT.

Thus, while it is probably good to keep interest rates low or even zero as a rule, the flexibility to raise them as needed still needs to remain on the table.  And some sort of federal taxation would need to remain even if not for revenue-raising purposes.  Aside from a crude but automatic background method of inflation prevention, taxes can also give We the People leverage over the oligarchs by providing a handy "carrot and stick" means of controlling the economy to one degree or another.  So let's not box ourselves in with too pure a version of MMT, or throw out the proverbial baby with the bathwater.

Otherwise we will find ourselves, to quote Paul Krugman, "Running on MMT".

Saturday, February 16, 2019

We Have A National Emergency, All Right--And It's Trump

Trump just made himself even more of a man without a country, if that's possible, by declaring a "national emergency" to try to force his stupid border wall to be built.  This is almost certain to be challenged and defeated in court.  Meanwhile, he clearly caved to the Democrats otherwise, yet again.  Thus, his "national emergency" is a sign of desperation and weakness, not strength.  Keep digging your own grave, Donald....

Oh, and by the way--this is literally the kind of stuff that DICTATORS do, NOT Presidents.  Abusing your power by usurping Congress' rightful "power of the purse" just because you don't get your way is absolutely NOT NORMAL in any democracy, especially when the so-called "national emergency" at the southern border is contrived and manufactured from on high by none other than the White House.

And if your are looking for the money to pay for that wall, perhaps the first place you should look is the missing $21 TRILLION (more than the entire US GDP, and until very recently, more than the entire gross National Debt) that the Pentagon somehow "lost" and can't seem to find or even account for.  To minimize it as just an "accounting error" is, albeit ironically, SO CLOSE to actually getting the point of Monetary Sovereignty.  Which is to say you could, you know, "just print the money", in your own words, Donald.  (And yes, he actually said that in reference to the National Debt in 2016.)  Trillion-dollar coins, anyone?

We never thought we would agree for once with the vile Ann Coulter, but apparently even a stopped clock is right twice a day:  "The only national emergency is that our president is an idiot".  Truer words have never been spoken.

Tuesday, February 5, 2019

State Of The Planet Address 2019

Today, Trump gives the State of the Union Address (spoiler alert:  it sucks.)  And the TSAP is giving our annual State of the Planet Address.  Yes, we know it is a bit of a downer to say the least.  So sit down, take off your rose-colored glasses, and read on:

Our planet is in grave danger, and has been for quite some time now.  We face several serious long term problems:  climate change, deforestation, desertification, loss of biodiversity, overharvesting, energy crises, and of course pollution of many kinds.  Polar ice caps are melting.  Rainforests have been shrinking by 50 acres per minute.  Numerous species are going extinct every year.  Soil is eroding rapidly.  Food shortages have occurred in several countries in recent years.  Weather has been getting crazier each year thanks to climate change.  We have had numerous and often record-breaking wildfires, floods followed by long periods of drought, and a "storm of the century" at least once a year for the past several years.   And it is only getting worse every year.  In fact, 2016 has been the hottest year on record, and 2017 was the hottest year without an El Nino.  Look no further than the three record-breaking storms in the past 15 years:  Katrina (2005, highest storm surge), Sandy (2012, largest diameter), and now Harvey (2017, a 1000-year flood, and overall worst hurricane on record), followed by Irma and Maria which devastated Puerto Rico, for a taste of the not-too-distant future.  And that was before Hurricane Michael devastated a rather large chunk of Florida recently.

In fact, on the other side of the world, just a little over a year ago, the worst monsoon season in recent memory has recently displaced 41 million people due to record flooding.  Thus for many, the future is sadly already here to one degree or another.

None of this is an accident of course.  These problems are man-made, and their solutions must also begin and end with humans.  We cannot afford to sit idly by any longer, lest we face hell and high water in the not-too-distant future.  Our unsustainable scorched-earth policy towards the planet has to end.  Yesterday.

While we do not invoke the precautionary principle for all issues, we unequivocally do for the issue of climate change and any other environmental issues of comparable magnitude.  In fact, for something as dire as climate change, as of 2015 we now support a strong "no regrets" approach.  With no apologies to hardcore libertarians or paleoconservatives, in fact. We are not fazed one bit by the naysayers' pseudoscience as it does not really "debunk" the scientific consensus on anthropogenic global warming. The only serious debate is about how fast it will happen, and when the tipping point (or points) will occur. It is not a matter of if, but when. And the less precarious position is to assume it is a real and urgent problem. We need to reduce CO2 emissions to the point where the CO2 concentration is at or below 350 ppm, ASAP.  And it is currently at an unsustainably high level of 400+ ppm, and growing rapidly every year.

Given the latest IPCC report, which is truly nothing short of horrifying, the general consensus among climate scientists is that we have only at most 12 years left (now more like 11) to act radically before truly catastrophic climate change is a foregone conclusion.   And 2030 will be here before we know it.  

Now THAT is a national emergency!  And a global one, in fact.  Thus, a full-steam-ahead, Green New Deal 2.0 is LONG overdue.

Solving the problem of climate change will also help to solve the other ecological crises we are facing, for they all ultimately have the same root causes, not least of which is our insatiable addiction to dirty energy.  However, there is a right way to solve it, and several wrong ways.  Technology is important, but it won't be decisive on its own (economics geeks may recall Jevons Paradox).  The real problem is the paradigm that our society has been following, and that system is based on wetiko, the parasite of the mind and cancer of the soul.  It often seems that the only difference between capitalism and cannibalism is the spelling.

The TSAP endorses the ideas embodied in Steve Stoft's new book Carbonomics, most notably a tax-and-dividend system that would tax carbon (i.e. fossil fuels) at the source, and give all Americans an equal share of the revenue generated from this tax.  (Note that our proposal to tax natural resources and pay out an Alaska-like citizen's dividend already includes this.)  Yes, prices for various things would undoubtedly rise due to this tax, all else being equal, but the dividend will allow Americans to pay for this increase. The average American would in fact break even, but those who (directly or indirectly) use less energy than average will effectively pay less tax, while the energy hogs will effectively be taxed more, as they should be. Thus it is certainly not a regressive tax, and may even be mildly progressive. This is both the simplest and most equitable way to reduce carbon emissions as well as other forms of pollution, not to mention waste of dwindling non-renewable resources. The real challenge is getting the feds to accept something that won't directly benefit them (in the short term).  Carbonomics also includes other good ideas, such as improving how fuel economy standards are done, and crafting a better verison of the Kyoto treaty.   

In addition to the ideas in Carbonomics, we also support several other measures to help us end our addiction to fossil fuels once and for all.  Our Great American Phase-Out plan would phase out all fossil fuels by 2030 at the latest, via alternative energy, efficiency, and conservation.  One good idea to further the development of alternative energy would be the use of feed-in tariffs for renewable power sources. 

Of course, it is not enough to stop emitting carbon dioxide, we also need to remove the current excess levels of it from the atmosphere as well, as that stuff can otherwise linger for centuries and continue wreaking havoc on the climate.  We support ending net deforestation completely, and putting carbon back in the ground through carbon sequestration. One method is known as biochar, a type of charcoal made from plants that remove carbon dioxide from the air, that is subsequently buried. This is also an ancient method of soil fertilization and conservation, originally called terra preta.  It also helps preserve biodiversity.  Another crucial method would be regenerative organic farming, which also turns the soil into an effective carbon sink as well.  And we will most likely also need to employ higher-tech methods of sucking carbon out of the air as well.

We've said this before, and we'll say it again.  Our ultimate goal is 100% renewable energy by 2030, but we need to hedge our bets.  We can phase out fossil fuels, or we can phase out nuclear power, but we can't do both at the same time--and fossil fuels need to be phased out first, and quickly.  Nuclear is doing a pretty good job of phasing itself out as it is.  So let's not get rid of it prematurely.  

But the biggest elephant in the room (make that the elephant in the Volkswagen) is overpopulation.  It does not make for pleasant dinner conversation, but it must be addressed or else all other causes become lost causes in the long run. We absolutely need to have fewer kids, or nature will reduce our population for us, and the latter will NOT be pleasant to say the least. The TSAP believes in voluntarily reducing the total fertility rate (TFR) to 1.5-1.9 children per woman to do so, but let us be clear that we do NOT support draconian and/or coercive measures of population control (like China has used).  We believe that more liberty is the answer, not less.   In fact, the two most effective means of reducing the birthrate are poverty reduction and female empowerment.

Fortunately, America's TFR has recently dropped to around 1.8, with no indication of rising back above replacement rate in the near term.  But clearly we cannot keep growing and growing, that's for sure (in fact, we need to shrink). And our insatiable addiction to economic growth (despite being decoupled from well-being) is also every bit as harmful as overpopulation as well, if not more so.  Growth for the sake of growth, the ideology of the cancer cell,  is clearly one of the most asinine obsessions our nation (and world) has ever had.  We clearly need to transition to a steady-state economy, most likely following a period of what Naomi Klein calls "selective degrowth" as well.  And to do that, we need a radical paradigm shift to happen yesterday.  Put another way, we need to leave room for Nature, lest Nature not leave room for us.  We have been warned, decades ago in fact.  Unfortunately, such warnings have largely fallen of deaf ears until very recently.

Yesterday is the time to jettison the Twin Big Lies that "everybody must work for a living" and "everybody must procreate".  Because doing so is the sine qua non of any realist plan to avert ecological catastrophe.

Last but not least, the TSAP now believes that as long as men remain in charge, we are all merely rearranging deck chairs on the Titanic.  Let's face it, it ain't gonna be us fellas who will save the world, as the past 7000 years or so have shown.  We paved paradise and put up a parking lot, we created a desert and called it peace.  We devoured and suffocated our own empire, and our proverbial 15 minutes of fame is almost up.  Only when women finally take over and reclaim their rightful position as the new leaders of the free world--and they will--will there be any real permanent solution.

Bottom line: we need to take the environment much more seriously than we do now.  We ignore it at our own peril.  And while the current administration in DC clearly doesn't care, We the People must act nonetheless.  With no apologies to the deniosaurs or Big Oil or Big Gas, or Dirty Coal.

Oh, by the way, wanna hear a joke?  Peak Oil.  Not saying it won't happen, of course--it will eventually peak and decline at some point--but climate change kinda supersedes it.  While conventional oil most likely has already peaked, there is more than enough total oil (including unconventional) to deep-fry the Earth--and most of which needs to stay in the ground if we wish to avoid catastrophic climate change.  Fossil fuels are, after all, what Buckminster Fuller referred to as our planet's "energy savings account", which we need to wean ourselves off of and save just in case of a planetary emergency--and he first said this in 1941!

So quibble all you want, but the truth must be faced head-on.  We have a planet to save.  So let's roll!

Saturday, February 2, 2019

When Will This Groundhog Day End?

Today is Groundhog Day.  And every day if the past two agonizing years under Trump have been a different sort of Groundhog Day, much like the movie in which the same day keeps repeating itself. 

Hopefully Mueller is truly in his endgame now, and the Trump regime will be over very soon.  And then America's long, dark night of the soul will finally end.

Saturday, January 26, 2019

The Government Shutdown Is Over, But the Damage Is Done

Yesterday, after 35 agonizing days of the partial federal government shutdown that he himself created just to manufacture chaos, Trump finally caved to Pelosi and reopened the government for three weeks with no funding for his border wall.  He made it seem like he won, but it is obvious that he caved, bigly.  Believe me.  And now after alienated most Americans, his caving now alienated his rabid base as well, making him a man without a country now.  Oh, and on the same day, his buddy Roger Stone was indicted in the ongoing Mueller investigation as well.  Things really don't look so good for him now at all.  Sad!

The shutdown may be over, but the damage is done.  And not just to Trump either.  The damage to federal employees, contractors, SNAP beneficiaries, and the overall economy will take a lot longer to recover from, as well as (most ironically of all) the immigration courts whose judges had been furloughed for so long.   Trust in the governments has also sank to a new low as well.  So this is basically a Pyrrhic victory at best for America overall.

In three weeks, Trump may decide to shut down the government yet again if they won't give him his stupid wall, or more likely he will declare a national emergency to try to force the wall to be built and that will backfire bigly on him when challenged in court.  Regardless, he is now running on empty, and the tide has fully turned against him.  (Let's hope he doesn't try to play "chicken" with the debt ceiling next.)

So Donald, do us all a YUUUGE favor and RESIGN, yesterday.  Don't let the door hit you on the way out.  Same goes for Mitch "Awkward Turtle" McConnell and the entire GOP in general. You will NOT be missed.

In other words, as you like to say:  "YOU'RE FIRED!"

Sunday, January 13, 2019

Raise The Floor, And Also Trim The Top

It is well known that excessive inequality is very harmful to both the economy and society at large.  Even before we learned the truth about Monetary Sovereignty (MS) and Modern Monetary Theory (MMT) in 2018, the TSAP has long supported both a Universal Basic Income for all, and has also supported hiking taxes on the rich as well.  And even after learning about MS and MMT, we still support hiking taxes on the ultra-rich, and for good reason.

Some may be scratching their heads.  Why do we even need federal taxes at all, if our Monetarily Sovereign federal government has infinite money?  They clearly don't need taxes to pay their bills.  But taxes also have other useful functions as well:
  • Taxes compel the use of the official currency, thereby giving it value in the first place.  
  • Taxes automatically "claw back" excess liquidity in the money supply due to the "velocity of money", thus to an extent crudely preventing demand-pull inflation before it happens.
  • Taxes can be used for social engineering (think vice taxes and Pigouvian taxes) in ways that are otherwise difficult, impossible, illiberal, illegal, and/or unethical to do by other means.
  • And finally, progressive taxes can be used to "trim the top" when levied on the top 0.1%, thus reducing inequality without leading to runaway inflation.  Rodger Malcolm Mitchell compares this to a "trophic cascade", such as when wolves (i.e. the federal government) keep elk populations (i.e. the oligarchs) from getting out of control and devouring everything in sight.
So what sort of federal taxes would be suitable for this purpose, knowing what we know now?
  • A rich-only, steeply progressive income tax like the kind that prevailed before WWII.  At least the first $100,000 to $500,000 would be exempt, and the new brackets would include marginal rates of 50% above the first $1 million, 70% above the first $10 million, and perhaps 90% above the first $100 million.  With NO LOOPHOLES this time. 
  • Tax dividends and capital gains the exact same as ordinary income, but index the basis to inflation for capital gains.
  • For the largest corporations, especially those who are "too big to fail", a top tax rate of at least 50%, with NO LOOPHOLES this time.  Tax only retained earnings.  Smaller corporations should not be taxed at all.
  • The Universal Exchange Tax, i.e. a tiny tax of 0.1% or less on all electronic transactions.  It would actually be highly progressive in practice since the rich make a disproportionately high amount and number of transactions compared to the non-rich.  "The more you play, the more you pay."
  • Various vice taxes (alcohol, tobacco, cannabis, etc.) and Pigouvian taxes (pollution and resource depletion).
  • Land value taxes and severance taxes on natural resources such as oil and gas.
  • And, of course, the estate tax needs to be made more progressive as well.
State and local governments, of course, are not Monetarily Sovereign, and thus need to raise revenue to pay their bills.  And they can piggyback on the aforementioned federal taxes and levy their own, especially the Universal Exchange Tax and the land value tax and severance taxes, and thus reduce or eliminate their currently regressive sales and property taxes.  Additionally, federal aid to the states should be increased for precisesly the same reason.

A UBI would indeed abolish absolute poverty, no doubt about that.  And that alone would have numerous individual and social benefits.  But without progressive taxation of the top 1% and 0.1%, it would do nothing to reduce relative poverty, and may paradoxically increase inequality.  And inequality in itself is harmful, over and above the effects of poverty.  Thus, it is not enough to either raise the floor or trim the top, we need to do both.  Yesterday.

Thus, Rep. Alexandria Ocasio-Cortez essentially has the right idea as far as taxes go.  And of course, the oligarchs and their sycophantic lackeys are coming down hard on her, but that just goes to show how effective her ideas are in terms of reducing the Gap between the haves and have-nots, which the oligarchs utterly depend on.  All the more reason to do it.

UPDATE:  Elizabeth Warren recently proposed a wealth tax of 2% on the assets of those with a net worth of $50 million and up (that is, on the top 0.1%), and up to 3% above the first billion.  Only the amount over the first $50 million would be taxed.  Controversial as it is, it actually makes a lot of sense, and the TSAP would certainly not oppose it. 

Saturday, January 12, 2019

Do Deficits Matter? It Depends On One's Definition

The GOP has basically by word, deed, and especially by omission, admitted to being the party of "deficits don't matter, except when we say they do" hypocrisy.   The same party that excoriated Obama for initially high deficits (albeit inherited from Bush), has, under Trump, pushed the largest tax cut in recent history and blown up the deficit to approaching record levels now.  All while claiming that spending on Social Security, Medicare, and Medicaid, among other important programs, must be cut as a result.  You really cannot make this stuff up.

But is there any truth to the fears about deficit spending?  Not really, since the only real issues are political and psychological, which means they are all psychological.  Allow us to explain as follows:

Earlier this year, we at the TSAP have exposed the Big Lie of Economics, a lie so massive and specious that even WE partially fell for prior to 2018.  The Big Lie consists of the following statement and its corollaries:
  • Federal taxes pay for federal spending, and any shortfall in revenues (i.e. "deficit spending") must be made up by the federal government borrowing money to cover the deficit.
  • It must be this way, because otherwise the federal government will run short of dollars, which are finite.
  • The federal government is literally bankrupt and can no longer afford to keep paying for Social Security, Medicare, and Medicaid, let alone anything more ambitious and progressive.
  • Things like Universal Basic Income (UBI), tuition-free public college for all, state-of-the-art infrastructure, a Green New Deal, and single-payer Medicare For All sound like good ideas on paper, but we literally can't get the numbers to add up.  Sorry.  Oh well.
  • If the national debt as a percentage of GDP rises above some arbitrarily high level, the federal government will have no choice but to default.
  • Thus, we will have no choice but to accept an austerity "menu of pain" at this point, with both large tax hikes and/or deep spending cuts. (Austerity for the bottom 99%, that is.)
Do you still believe these statements? Well, guess what?  Each and every one of those specious statements is absolutely FALSE.  Period.  Not even a kernel of truth in there, except for the completely contrived self-fulfilling prophecy that believing such lies leads to, starting with the very first statement on that list, and it goes downhill from there. Federal taxes DO NOT pay for federal spending, because our federal government is Monetarily Sovereign and creates all the dollars they need to spend into existence on an ad hoc basis.  Tax dollars merely disappear into infinity, and the so-called "National Debt" is literally nothing more than a National Savings Account consisting of deposits in Treasury securities.  Yes, really.   And the only reason why we must currently match spending with taxes and/or "borrowing" is due to the arcane and archaic rules left over from when we actually had the gold standard.

As for inflation, there is essentially zero correlation between deficit spending and inflation, and history bears that out.  And even if there were inflation that resulted, that could be easily cured by raising interest rates as needed.  And due to the velocity of money, federal taxation of any kind, at even a relatively low rate, can to an extent automatically "claw back" any excesses in the money supply that may result, which can prevent inflation before it occurs.

So having established that, we must now note that sustaining the Big Lie, a lie that really only benefits the oligarchs and their sycophantic lackeys of both corporate duopoly parties in government, is now physically and metaphysically untenable.  Especially given the many converging real and contrived crises now facing our nation and world.  Make no mistake, we absolutely must end this Big Lie YESTERDAY or else face extremely painful austerity, recession, depression, or worse in the very near future.

Thus, we should all write letters to our Congresscritters based on the following sample letter written by the ever-insightful Dr. Joseph M. Firestone and disseminated by the ever-insightful Rodger Malcolm Mitchell:

Dear __________________
At one time or another you and nearly every one of your fellow Representatives (or Senators) have expressed great concern, even alarm, at the size of the national debt and the often increasing debt-to-GDP ratio.
Many of you have pointed out that if the national debt were broken down into how much each American owed that would add more than $50,000 to our individual debts, even though the national debt is not an obligation of each American citizen, but of our government.
You and your political allies have also pointed out that in view of the size of the national debt it is important for the Government to either reduce spending, raise taxes or both.
You have said doing this is necessary to be “fiscally responsible”, and, at least, to reduce the annual deficit, and the debt-to-GDP ratio.
You have voted for and supported legislation in order to be “fiscally responsible” in this way, and in doing so you have cut many programs of long standing that were delivering great benefits to people, harming them and their families.
Some of you have expressed regret and sorrow about this, while insisting on the need for sacrifice in order to be fiscally responsible.
I, your constituent, have heard this fiscal responsibility story from you for many years now, including your sentiments about how much you hate “the national debt,” what an evil it is, and how much we have to lighten its burden on our grandchildren.
In view of all this from you, it surprised me greatly to learn recently, that the very existence of the national debt is Congress’s fault, including your own and your colleagues. I say this for a very simple reason.
That reason is that you and your colleagues can, in an afternoon, make it standard legislative practice to include the following clause, or an alternative formulation meaning the same thing, in every appropriations bill or continuing resolution for Federal Spending. The clause is:
Now here comes the key part:
“Upon passage of this appropriations bill, the Federal Reserve is directed to fill the Treasury’s spending account at the New York Federal Reserve with the addition to its Reserve Balance necessary to spend the appropriation.
“In addition, the Federal Reserve is directed to fill the Treasury spending account with the additions to the Treasury Reserve balances necessary to repay all outstanding debt instruments including principal and interest as they fall due for the fiscal year of this appropriation.”
In short, the Federal Reserve would pay off T-securities, making the so-called “debt” disappear.
The Fed simply would create U.S. dollars from thin air, just as it always has been authorized to do, and just as it does when it buys federal bonds with its Quantitative Easing (QE) programs.
The first sentence provides the reserves necessary for the Treasury to spend its mandate from Congress without issuing new debt.
And the second provides the reserves necessary for the Treasury to pay down the existing outstanding Treasury debt instruments as they fall due within the time period of the appropriation or continuing resolution bill.
If this or similar language were included in every such bill it would mean that (1) deficit spending by Congress would no longer involve issuing new debt instruments, so the debt would no longer grow and (2) that all outstanding debt instruments would be paid off as they fall due as long as Congress continues to include the new language in all its appropriations bills and continuing resolutions.
So, it seems to me that the sole reason why the national debt exists at all in 2017 is that when President Nixon took the United States off the gold standard in 1971, the Congress did not adjust to the new reality of fiat monetary sovereignty by funding Federal spending using language like the above.
I believe that Congress made a grievous mistake in not changing its funding language immediately after the change to a fiat currency in 1971, and mandating the Federal Reserve to fill Treasury’s spending account with the reserves needed to spend its appropriations.
That mistake has led to the whole situation of debt terrorism we see around us now, and to all the damaging propaganda and horrible legislative outcomes we have suffered at the hands of Republicans and Democrats alike.
You have all been very wrong about the need to sacrifice. There was no need to sacrifice!
You have been all wrong about all of that for 40 years now, and you should all wear sackcloth and ashes and hang your heads for the damage you have done to America.
Since the Administration of President Carter we have been treated to these meaningless harangues about a faux financial problem that is purely one of politics and messaging and not one of public financing at all.
And this faux problem, solely of Congress’s own making has led to much suffering among most of the American people, including decades of less than full employment, the denial of universal health care coverage, deteriorating public spaces and infrastructure, refusal to deal with a life-threatening climate change problem, increasing economic inequality, a declining educational system, decreasing life expectancy, and a host of other problems too numerous to mention.
Well, I have had enough of all this, and especially of the pretense that the Federal Government doesn’t have enough money to buy any goods or services for sale using US currency.
I know that using the words above or words very like them, you and a majority of your colleagues in Congress can appropriate funds for anything you want to spend on.
So, never let me hear from you ever again that we can’t afford this good program or that good program or any other program that will benefit a majority of the people of the United States.
I now know that is a lie. And I insist that you never tell that lie again in public, and that from now on you advocate for and insist on legislative language similar to the above, being included in all appropriation bills and continuing resolutions passed by Congress.
I demand, that as my representative, you vote against any bill that lacks that language.
And I tell you now that if you fail to comply with this demand of mine, I will do all I can to defeat you in the next election and will work for and vote to elect any opponent of yours who is willing to promise that she or he will include such language in all appropriations bills or continuing resolutions.
In closing, I hope I have made myself abundantly clear. I insist that the lies and propaganda advancing faux fiscal responsibility stop immediately.
I insist that the issue of the national debt be taken off the table by including the language suggested above or a similar formulation, followed by gradual pay-off of all outstanding Treasury debt instruments. And I insist that you represent me in this way going forward and for as long as you serve.
I want Job 1 for you to be seeing to it to the best of your ability that this language is in all appropriation bills or continuing resolutions coming out of Congress. I will want other things from you too.
But, as I say, this is Job 1, and if you want my vote in the future you will see to it that it is well done, so that the various lies and fables surrounding Federal spending are at last ended, and so our nation may move forward to true fiscal responsibility, which is Government spending for public purpose.
Sincerely Yours, Your Constituent,
Granted, this letter is probably TL;DR and should perhaps be more concise, but the part in blue is really the heart and soul of the letter.  As Rodger Mitchell further explains:
The above letter is way too long to send as is. Further, I disagree with two of the points it makes: 
  1. I disagree that all “debt” (i.e. T-securities) should be allowed to expire...and not [be] replaced. T-securities serve useful purposes. They help the Fed control interest rates and they provide a safe place to hold large amounts of money.
  2. I disagree that “. . . Treasury Reserve balances (are)necessary to repay all outstanding debt.” Maturing Treasuries are repaid by transferring existing dollars from the T-security accounts back to the checking accounts of the T-security holders.  [Only the interest needs to be created anew.]
That said, the fundamental idea of having the Fed buy enough T-securities to reduce the outstanding “debt” would change the dialog, and ease the drive to cut social benefit spending.
And there you have it.  A bit more nuanced, but the same basic idea.  It would probably also be useful to add that there is a federal statute on the books that codifies the aforementioned arcane and archaic rules left over from when we actually had the gold standard.  That statute is codifed as 2 USC Ch. 20, most notably Section 902. Once one gets through the legalese mumbo-jumbo, one can plainly see that this requirement for "sequestration" upon "falling short" of federal budgetary dollars to pay bills is an outmoded contrivance that no longer serves any useful purpose at all.  Amending or repealing this obsolete section, or even the entire Chapter 20, is not just a good idea, but a matter of grave necessity to save our country at this point.  The same goes for 31 USC section 3101, which is the statute that imposes that other outmoded contrivance, the so-called "debt ceiling" as well.  Repealing both of these obsolete laws will permanently make it so the text in blue in the aforementioned letter will no longer need to be every spending bill as a formality to work around such laws each time going forward after the first one--especially if that text in blue were to be inserted in whatever remains of the repealed/amended 2 USC Ch. 20.

And instead of so-called "debt ceiling", which almost no other nation in the world has, we could simply have a spending limit that would be deemed automatically raised each time a new budget, continuing resolution, or appropriations bill is passed and signed into law, NOT by a separate vote. And that limit will only apply to spending on any new obligations taken on going forward, not on outstanding obligations.  The only functional reason for this at all would be as a "safety valve" or "circuit breaker" that would stop feeding the beast of inflation in the (unlikely) event of truly excessive inflation.

In the meantime, if Congress refuses to act, the executive branch does still have one powerful "ace in the hole":  the trillion-dollar coin.  While a pure "Treasury Warrant" idea is of very questionable legality and would likely be struck down by SCOTUS, under current law the Department of the Treasury has the explicit legal authority to mint platinum coins in literally any denomination.  Thus, they can easily mint one or two (or twenty!) trillion-dollar coins, or even a $100 trillion coin, as an effective workaround for the time being and use the resulting seigniorage to pay any bills and preclude default even if Congress plays "chicken" with the debt ceiling as a cudgel to force a default if they don't get their way.

TL;DR version:  Put simply, deficits really DON'T matter, except politically and psychologically.  And even that can be solved via Overt Congressional Financing (OCF).  As for the argument that economic growth must outpace bond yields, that is also just another version of the Big Lie debunked above, as OCF would essentially render it meaningless.

Again, to quote Dr. Firestone:

The national debt exists today because when the nation went off the gold standard in 1971 and adopted its fiat currency system, Congress did not explicitly repeal its mandate (very appropriate when our currency was convertible to gold on demand, at least in theory) requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments when the Government deficit spends caused the national debt to persist until 1996. Congress, then, unintentionally, removed the mandate, leaving in its place the perceived compulsion of an old die-hard financial practice supported by the false ideology of neoliberalism, and a real, but unrecognized, option to abandon the practice by using platinum coin seigniorage. 
Had Congress repealed the practice when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and both our national debt and our debt-to-GDP ratio would be at 0% today.

It's long past time to end the Big Lie already, period.  The very best time to do so was in 1971-1973 when we functionally got off the gold standard and/or 1975-1976 when all remaining nominal ties between gold and the dollar were formally severed for good.  The second best time is NOW.

Friday, January 4, 2019

Desperate Donald Is Off The Rails

The Donald is even more chaotic than usual lately, as the government shutdown continues with no end in sight because he won't get his way with his stupid wall.  And he is even more off the rails than usual, since he knows his days are numbered with the Mueller investigation closing in on him as we speak.  Indictment and/or impeachment are looking increasingly likely every day that goes by, especially with the new Democratic majority in the House.  So now Trump is doing everything he can to cause as much chaos as possible to "wag the dog" and distract from his myriad scandals, especially Russiagate.

The jig is up, Donald.  Do us all a YUUUGE favor and RESIGN, yesterday.

Sunday, December 30, 2018

What Will Cause The Next Big Crash of 2018-2019? (Updated)

There is a recent article by Matt Taibbi in both Rolling Stone and Common Dreams that predicts a looming economic disaster due to three colliding problems.  And those three problems are as follows:  1) FERAL Reserve monetary tightening, both in terms of raising interest rates as well as the more subtle but significant Quantitative Tightening (QT), 2) Trump's tax cuts depending on unrealistically high economic growth to "pay for themselves", and 3) Trump's tariffs and the resulting trade war.  And the collision of all three together will not end well, according to Taibbi, and he is probably right for the most part.

But even these are mere sideshows compared to the very biggest underlying root cause of the next looming crash, even if one or more of these problems are in fact the proverbial spark that sets off the financial powder keg.   So what is this underlying powder keg, exactly?  Well, it is the mother of all stock market bubbles, artificially inflated by corporations buying back their own stock to manipulate share prices.  And famous economist Ted Bauman predicts that when it finally bursts, any day now in fact, the market will quickly plummet by 70% or more, causing a crisis that makes 2008 and perhaps even 1929 look like a walk in the park by comparison.

Recently, it looks like the stock market crash of 2018-2019 has already begun in earnest, with Trump's off-the-rails Twitter tirades and his chaos-manufacture in Washington including his stupid government shutdown being the primary catalysts.  Also, the FERAL Reserve raised interest rates yet again.  And it looks like the market has quite a way to fall still, after the worst Christmas Eve ever in history and the worst December since 1931.  The proverbial boil has now effectively been lanced, but the pus is still oozing out at a rapid pace, with much more to follow.

So how did we get here in the first place?  The story begins in the 1920s, when corporate stock buybacks were all the rage, and in fact caused the 1929 Wall Street crash.  The Great Depression soon followed.  In 1934, this highly manipulative practice was rightly outlawed, and the ban remained in effect for nearly half a century until the Reagan administration lifted this ban in 1982 as part of Reagan's deregulation platform.  And since 2010, stock buybacks have accelerated dramatically, artificially inflating the stock market numbers and lulling hapless investors into a false sense of security.  And the recent Republican tax cuts have only accelerated this trend even further (since corporations now have even more money with which to buy back their stocks).  That's right--"trickle down" theory is a myth.

And what goes up, must come down, and the bigger they are, the harder they fall.

Don't say you weren't warned.

Saturday, December 22, 2018

Dear Trump and Congressional Republicans: YOU'RE FIRED!

Well, it's official now. Trump's third government shutdown to date has begun.  All because he couldn't get Congress to give him $5 billion for his stupid border wall.   Yes, really.  And while at first he bragged about "owning" the shutdown, he then had the chutzpah to blame it on the Democrats.

Meanwhile, the Trump administration is chaotic, dysfunctional, and losing officials left and right, the stock market is crashing as we speak, and Trump himself is under federal investigation for numerous crimes and will most likely be impeached and/or indicted any day now.  We clearly don't have anything close to a functional government now.   The only silver lining?  This, along with the new Syria controversy, may be the catalyst, the very last straw, for the GOP to finally Dump Trump for good.

Once again, in case we didn't make it clear already:  YOU'RE FIRED!  Now go clean out your desk and GTFO.  Goodbye, and good riddance!  Don't let the door hit you on the way out, Donald!

Friday, December 21, 2018

Why We (Partly) Agree With Trump on Syria (and Afghanistan)

Trump just announced that he will be pulling all troops out of Syria, and reducing troops in Afghanistan as well.  Predictably, this has earned him strong condemnation from both corporate duopoly parties that are invested in the military-industrial complex.  The truth, however, is more nuanced than that, even if Trump doesn't really do nuance.

It is obvious now that Trump is clearly Putin’s puppet and is pulling out of Syria for the very basest of ulterior motives: to appease Putin and Erdogan, to “wag the dog” and distract from his mounting scandals, and of course to nurture his own fat relentless ego. And he is doing it as abruptly and chaotically as possible, without so much as a heads-up beforehand to our allies, especially the Kurds who he seems to have no qualms about selling down the river to Turkey. Very base and cowardly indeed.  

That said, sometimes even a stopped clock is right twice a day. As we have noted time and time again, we need to get the hell out of out of not just Syria, but also the decades-long quagmires of Iraq and Afghanistan, the latter of which is longer than Vietnam at this point. ISIL, though still in existence as a terrorist group (kinda like al-Qaeda and the Taliban, etc.) is nonetheless defeated territorially compared to 2014. Time for other countries/actors to step up to the plate and do whatever remains of the heavy lifting now.   Long past time for that, in fact.

And we also need to stop suborning Saudi Arabia’s unconscionable mass-murdering proxy war in Yemen as well (though Trump seems cool with that for now).

"Endless war" is NOT a sustainable strategy.  In fact, it is not even a strategy at all, but a concept, and an absurd one at that.  The only people who benefit from it are the oligarchs and the military-industrial complex, as the late Maj. Gen. Smedley Butler once famously noted in his 1935 book War Is A Racket.  (Of course, WWII was the exception that proves the rule.)

Whether a war is a “wham, bam, thank you ma’am” kind of war like Libya or a decade(s)-long quagmire like Vietnam, Iraq, or Afghanistan, the end result is essentially ultimately the same sort of disastrous failed state that becomes a magnet for extremists.  And once it becomes Quagmire Accomplished like it is currently, whether we leave now, a year from now, ten years from now, or 100 years from now, the result on the affected nation(s) we invade and subsequently leave is basically the same.  Quick withdrawal is thus the lesser evil on balance.

In fact, Tom Englehardt (Tom Dispatch) and Peter van Buren had the best idea of all--quick withdrawal, after getting ISIL where it really hurts by taking out their OIL.  Such targets--wellheads and oil trucks--are not at all hard to find, and are fairly easy to take out from the air.  And put diplomatic and economic pressure on Turkey and other so-called "allies" to stem the flow of Daesh oil as well.  Because oil is their primary source of funding, and removing that will cause them to quickly collapse of their own weight, and when they are seen as a failure then few would want to join them.  And once we take it out, then GTFO and let Daesh fall on their own sword.  (And apparently, we ended up doing a modest version of exactly that sort of oil campaign, with a fair amount of success, albeit late in the game and minus the withdrawal.)

The TSAP agrees with that idea, and we would also like to add to that.  We have said it before, and we will say it again.   Before withdrawing, we should give every *woman* over there an AK-47 and tell them to take over their country and mow down anyone who stands in their way. Let Allah sort it out. Problem solved. But of course, the mostly-male powers that be would not be too keen on that idea. After all, they wouldn't want women in THIS country getting any ideas, now would they?  (Of course, the TSAP believes that women should indeed take over the world in order to save it, so that wouldn't really be a bad idea, come to think of it.) Honestly, it is certainly a better idea than arming questionable male "rebels" who end up turning traitor.  Seriously, think about it.

Look, we dig why the generals don't want to pull out anytime soon, especially not abruptly, and it's not just about job security either (though that is likely part of it too). No one wants it on their conscience if things go horribly wrong afterwards, and such consequences can in any way be linked (however tangentially and speciously) to such a withdrawal.  But Trump clearly has no conscience, and it was his decision, so we now get to let any potential adverse consequences weigh on his nonexistent conscience.  Thus, the generals should really see this as a golden window of opportunity to finally extricate ourselves from the quagmire of the Middle East wars--and even in a worst case scenario, everyone's hands will be clean but Trump's either way.  So what are we waiting for?

Like the song says, if we go it will be trouble, if we stay it will be double.  And those who fail to learn from history are doomed to repeat it.

JANUARY 2019 UPDATE:  Looks like the other notorious loose cannon of foreign policy, neocon John Bolton, is trying to delay the Syria pullout by "months or years".  So much for that.   In the meantime, is always fun for genuine progressives like us to watch neocons, neoliberals, neoconfederates, and Trump supporters fighting against each other.