How To Prevent--And Cure--The Next (Or Any) Recession Or Depression

With a recession likely coming later this year or next year at the latest, it is important to realize the causes so such recessions can be cured or even prevented in the first place.  Enter Rodger Malcolm Mitchell, the guru of Monetary Sovereignty, penned this important and timely article.

He notes that every single recession and virtually every depression in history has been preceded by a cut in federal deficit spending, or worse, a federal surplus.  That is not coincidence, since cutting the federal deficit slows the growth of the money supply, and surpluses actually shrink the money supply, all else being equal.  (Federal deficit spending = spending new dollars into existence.)  A growing economy requires a growing supply of money, and when the money supply fails to keep up with the demand for money for too long, the economy reacts by shrinking.  Thus, barring a truly massive increase in private debt (i.e. more money lent into existence by banks) deficit cuts ultimately result in recessions and surpluses result in depressions or at least really long and deep recessions.  And recessions and depressions can only be cured by increasing the money supply dramatically, typically by increasing federal deficit spending.  That's it.

And this makes perfect sense, since GDP is literally nothing more than a money measure.  To wit, GDP = Federal Spending + Nonfederal Spending + Net Exports.  Kinda hard to grow that without sufficently growing the money supply as well.

Everything else is basically a sideshow, but that said, sometimes sideshows can be significant too.  Take the current Trump Trade War, for example.  This lose-lose, negative-sum game would have been recessionary by now had it not been for the massive growth in the federal deficit occurring at the same time, and eventually it may still cause the next recession in spite of the deficit.  But if the Republicans decide to cut federal spending because of manufactured deficit hysteria, that will cause a far worse recession or depression, on top of the consequences of the trade war.  And Wall Street recklessness can indeed cause financial crises, which of course can have knock-on effects on Main Street as well, as we have seen numerous times already.  Though even that is most likely due to the fact that stock market crashes--or any other asset price crash--will shrink the money supply, all else being equal.  And that is especially true when there is a "credit crunch" where banks suddenly refuse to lend as much as before, as we have seen in the wake of both the 1929 and 2008 stock market crashes (but not 1987).

What about oil and gasoline prices?  True, 10 out of the past 11 recessions have been preceded by sharp increases in fuel prices.  And that makes sense in a country in which oil is the lifeblood of the economy.  But even this is more nuanced than one may think.  Neither increases in interest rates alone nor increases in fuel prices alone seem to be enough to cause a recession by themselves unless such increases are truly extreme, which is very rare.  But the simultaneous combination of significantly large increases in both (that is, a sharp hike in the Fed Funds Rate by more than 2.00-2.50% AND at least a doubling of crude oil prices within a year or two) appears to be sufficient to cause a recession.  Of course, given how rare it is for recessions to not be preceded by cuts in deficit spending, it is not clear if sufficient deficit spending can be enough to prevent an oil-induced recession while interest rates are also hiked to prevent or cure inflation.  But at the very least, increasing federal deficits will cure such recessions once the inflation dragon is defeated.

Overall, we know what causes virtually all recessions and depressions.  That means we also know how to prevent and cure them as well.  That is, when recession hits, or ideally before it hits, we should increase federal deficit spending, or at least refrain from cutting it.  It's really not rocket science.

The Best Way To Honor Our Fallen Heroes

This Memorial Day, and any other day of the year for that matter, the best way to honor our fallen heroes is to stop making more of them, as blogger Dave Hitt famously noted.  We need to bring our troops home and stop sending more and more of our servicemembers to these unnecessary wars of choice.  And of course, our Veterans need to be properly cared for as well, something that, with few exceptions, both corporate duopoly parties in government have consistently failed to do for decades now.

Let us now take a moment of silence for our fallen heroes who have made the ultimate sacrifice for our country.

What The (Latest) Right-Wing Attack On Women's Reproductive Rights Is Really About (Hint: It's NOT The Sanctity Of Life)

In recent weeks, the long-standing right-wing assault on women's reproductive rights has heated up dramatically.  Now that there are enough right-wing reactionary judges on the Supreme Court to seriously endanger Roe v. Wade, several states have passed increasingly restrictive abortion laws.  It did not stop with the TRAP laws, bizarre restrictions, and attempts to defund Planned Parenthood years ago.  And it will NOT stop with the latest "heartbeat" laws in Missouri, Ohio, and Georgia, or with Alabama's near-absolute BAN on abortion either.  And if unchecked, it will NOT stop with overturning Roe v. Wade (and Doe v. Bolton) either, since after that, Griswold v. Connecticut and Eisenstadt v. Baird (the cases that legalized birth control) is ultimately in their sights as well.

Now you see why they were in such a rush to get Brett Kavanaugh confirmed despite the cloud of sexual assault (including attempted rape) allegations hanging over his head.  But why the recent push to ultimately eradicate women's reproductive rights NOW?  Why has it become so feverish, more so than usual?  It is no coincidence that Alabama's draconian abortion ban was signed into law on the same day that it was announced that the birth rate, particularly the total fertility rate (TFR), had apparently dropped to a new low for the USA:  1.728 children per woman. Granted it is not the only reason, but the panic among both the religulous reich as well as the corporate oligarchy is certainly palpable, since capitalism depends on growth for the sake of growth, the ideology of the cancer cell that eventually kills its host, by the way.  It's basically one giant Ponzi scheme, with patriarchy as its main protection racket.

What we are witnessing is a sort of "birth strike" by American women, and even men as well, particularly of the Millennial generation.   Given the outrageous cost of living these days, and especially the cost of raising even one child (let alone two or more), lack of social support for parents and a fraying social safety net in general, stagnant wages, a hollowed-out middle class, and the massive albatross of student loan debt, it actually makes perfect sense.  They are the ones who are actually thinking rationally here.

And contrary to what the naysayers may claim, that is actually a very GOOD thing on balance.  The world is grossly overpopulated and in serious ecological overshoot, and Americans' truly elephantine ecological footprint per capita due to our massive pollution and overconsumption of resources only makes it that much more important to reduce birthrates in the USA relative to the rest of the world.  And such grave ecological concerns greatly dwarf any social and economic concerns about population aging and other consequences of low birthrates.  Especially since with a Monetarily Sovereign government like our own federal government, money is literally no object when it comes to things like Social Security, Medicare, Medicaid, and things like that--the government can literally only go broke if they choose to.  And our addiction to economic growth is also part of the problem in terms of ecological sustainability, so that fear needs to be jettisoned at once as well.

In fact, one recent study finds the ideal TFR in terms of standards of living overall is in fact in the 1.5-2.0 range, basically the same as what the TSAP has long advocated since our founding nearly a decade ago in 2009.  Yes, really.  Take that, birth dearthers!

Of course, it is not all wine and roses either.  The very same New York Times article that we referenced in a previous post does note that both women and men are on average having fewer kids than their own self-reported ideal numbers, primarly due to economic reasons.  Part of the decline in fertility is due to Millennial women having more choices than previous generations, of course, but at the same time those choices are severely constrained by economics.  Our nation has a truly abysmal record of providing paid family leave, high-quality childcare, and social safety net benefits in general compared to most other modern and even semi-modern countries.  And in spite of increasing gender equality in many ways, the modern workplace remains both largely male-dominated and male-defined, and thus stuck in the past in terms of work-life balance.  And while the perennial fears of low birthrates are largely overblown, it is still entirely possible that if they eventually fall to extremely low levels (such as Japan's 1.2-1.4 over the past two decades) and remain that low for decades at a time, we may very well hit a "pothole" on the road to sustainability.  So there is still plenty of room for improvement in that regard, even if current TFRs are right where they should be.  And besides, it is simply the right thing to do regardless of fertility rates and any concerns about such numbers.

If the pro-lifers and pro-natalists really cared, they would instantly advocate not only very generous paid family leave and subsidized (if not free), high-quality childcare, but would also support things like Universal Basic Income (UBI) to eliminate poverty (especially child poverty) while also (partially) compensating the unpaid work of mothers (and some fathers as well).  They would also advocate better quality education from pre-K through post-grad, also free, as opposed to currently trying to kill the entire public education system via death by a thousand cuts.  They would advocate better work-life balance for both women AND men, higher minimum wages, and especially shortening the workweek (what's the point of having kids if you are never going to see them?).  And they would also advocate single-payer Medicare For All.  But do you see them advocating any of those things?  Of course not.  Gee, I wonder why.

So can you really blame young people for effectively going on a (partial) reproductive strike given the world we currently live in?  Of course not.

The best way to sum things up:  Want us Millennials to have (more) kids?  Give us a quarter-million dollars, then we'll talk.  Because that's about how much it costs on average to raise a child from birth through age 18--and that doesn't even include college.  And besides, our Mother Earth will truly thank us in the long run.  Otherwise, silence is golden.  Capisce?