Hey FERAL Reserve, Cut Interest Rates NOW!

The FERAL Reserve still has yet to cut interest rates, and despite the Dow Jones recently hitting 40,000, the risk of recession is apparently growing by the day.  And after falling dramatically from its 2022 peak of 9% once the pandemic-induced (more like lockdown-induced) supply chain issues and shortages got resolved, inflation currently remains stubbornly stuck in the neighborhood of 3%.  Because Jerome Powell is too stubborn to cut rates, thus keeping us trapped in a quagmire.  Hello, stagflation!

A recession is probably already baked into the cake at this point, and thus is probably too late to avoid entirely.  Granted.  But the Fed can still at least delay the onset, reduce the length and severity, and promote a speedier recovery IF they would deign to cut rates yesterday.  And even just delaying the onset by a quarter or two would likely postpone it until after the November election, reducing the odds that the Donald would win again. 

Hey FERAL Reserve: Cut Interest Rates NOW!

The FERAL Reserve still has yet to cut interest rates, and despite the Dow Jones recently hitting 40,000, the risk of recession is apparently growing by the day.  And after falling dramatically from its 2022 peak of 9% once the pandemic-induced (more like lockdown-induced) supply chain issues and shortages got resolved, inflation currently remains stubbornly stuck in the neighborhood of 3%.  Because Jerome Powell is too stubborn to cut rates, thus keeping us trapped in a quagmire.  Hello, stagflation!

A recession is probably already baked into the cake at this point, and thus is probably too late to avoid entirely.  Granted.  But the Fed can still at least delay the onset, reduce the length and severity, and promote a speedier recovery IF they would deign to cut rates yesterday.  And even just delaying the onset by a quarter or two would likely postpone it until after the November election, reducing the odds that the Donald would win again. 

How To Defuse The QUADRILLION Dollar Derivatives Bubble (Part Deux)

Last year we discussed the QUADRILLION dollar derivatives bubble and the risks that come with it.  Well, guess what?  That bubble is still there, just WAITING to pop, and thus drag down the rest of the economy with it as well due to is massive size and interconnectedness.  And it has only grown dramatically since the last major financial crisis and Great Recession in 2007-2009.  

Ellen Brown recently wrote another excellent article about what to do about it.  She notes how this dangerous derivatives bubble was no accident, but came into being via deliberate deregulation that specially privileged derivatives.  Repealing the Glass-Steagall Act in 1999 was only the start.  In 2000, the Commodity Futures Modernization Act (CFMA) not only removed derivatives from any sort of federal oversight, but it also declared them be legally enforceable, a privilege that NO other bets have ever historically enjoyed.  (Let's face it, derivatives are literally nothing more than glorified bets.)  Then in 2005, the Bankruptcy Act gave derivatives extra special "safe harbor" protections as well.  And after the Great Financial Crisis, a crisis in large part caused by wanton derivatives speculation, what law was passed to pretend to tame this out of control casino? You guessed it:  the Dodd-Frank Act of 2010, a band-aid which only further entrenched the fundamental derivatives problem that was left to fester. 

That is, fully legalized and unregulated gambling with other people's money on a truly gargantuan scale by the ultra-rich, using very questionable and opaque financial instruments, all backed by special privilege and protection of the law, is still very much a thing, alas.  And like any casino, the house (the oligarchy) always wins.  Privatize the profits, socialize the losses.  Heads, they win, tails, We the People lose.

Talk about moral hazard! 

Clearly, repealing Gramm-Leach-Bliley (the 1999 law that repealed Glass-Steagall, thus reinstating the latter), repealing the CFMA especially, repealing the "safe harbor" protections in the Bankruptcy Act, and repealing Dodd-Frank should be the absolute highest priorities to defuse this massive ticking time bomb.  No doubt about that.  That is, we must regulate derivatives at LEAST as stringently as they were in the 20th century, if not more so.  Additionally, a modest financial transactions tax (say, 0.1% on all transactions) would also be a good idea as well.  The latter can alternatively be achieved by raising and expanding the current SEC Fee to include ALL financial instruments equally, including derivatives.

We should also jettison the largely inaccurate term "hedge fund" from our collective vocabulary as well.  They should really be called "speculation funds", since that is what they really are in practice.

Oh, and to the FERAL Reserve:  CUT INTEREST RATES YESTERDAY!  And stop Quantitative Tightening yesterday as well.  It is really playing with fire in the worst way right now.  KNOCK IT OFF.

The aforementioned items would be enough to defuse it in the near term, while the following items would be to clean up the damage and/or prevent it from happening again in the future:

• Ban the practice of "quote stuffing" and other practices of deliberate market manipulation.
• Ban stock buybacks by corporations.
• Going forward, ban any and all types of new and exotic derivatives that are not completely transparent.  Opaque derivatives based on sketchy underlying fundamentals should be considered fraud, plain and simple. 
• Absolutely NO more bailouts OR "bail-ins" of the banks ever again, period (but of course depositors should still be made whole per the FDIC, with no apologies to any ultra-purist libertarians or paleoconservatives).
• Implement "Quantitative Easing For (We The) People" (that is, with direct payments to individuals, not banks) as needed.
• Phase out the practice of "fractional reserve banking" by very gradually raising the reserve ratio requirement until it reaches 100%.
• Fully nationalize the largely privately-owned FERAL Reserve to make it truly FEDERAL for once.  And established state and local public banks as well, like North Dakota currently has.
• And last but not least, all banks that are "too big to fail" are really too big to exist, and should thus be either forcibly broken up, taxed heavily, or nationalized as public utilities.  YESTERDAY!

In the meantime, we all need to brace ourselves for a possible financial crisis and recession in the future.  It is highly unlikely that Congress will act in time, as they are largely bought and paid for by Wall Street and the big banks (who also largely own the FERAL Reserve as well).  But don't fall for the idea that we should withdraw all of our money now, as that would literally be a self-fulfilling prophecy (causing a bank run).  The FDIC guarantees the first $250,000 per depositor per bank, so unless you have more than that (and didn't put it in multiple banks like you should have), it does not make sense to do so.

So what are we waiting for?

Hey FERAL Reserve, Cut Interest Rates NOW!

Inflation is now effectively beaten.  Not only has it cooled significantly, but now the specter of deflation has recently been raised, and has already been seen in the prices of durable goods falling a bit recently.  Oil is also down as well, which has of course led to a recent drop in gasoline prices.  And this is in spite of the ongoing conflict in the Middle East, which otherwise would have raised oil prices, ceteris paribus, due to the resulting geopolitical instability and uncertainty. 

Deflation may sound like a good thing, especially after such a high inflationary episode, but if it persists, it can turn into a downward economic spiral that is far worse than inflation (think the Great Depression, or Japan's three decades of rolling deflation from the early 1990s until very recently).  It also amplifies the sting of debt, and with debt of all kinds at such stratospheric levels today, America needs that like a hole in the head.  Once such a spiral begins and sets in, it is very, very difficult to extricate from.  Not even QE can seem to end it (though giving such "helicopter money" directly to We the People might work). And deflation is, at best, very difficult to control.

So the FERAL Reserve really needs to cut interest significantly, and pause QT, yesterday, before they create a problem that is practically impossible to dislodge.  And if that doesn't work, prepare to not only restart QE, but also implement "QE for the people" as well. say you weren't warned.

UPDATE:  Looks like the Fed decided to stop hiking interest rates, and signaled three interest rate cuts next year in 2024.  So now is the best time to put your money in a CD account to lock in the current rates.

Do Interest Rate Hikes Really Fight Inflation?

Short answer:  In a word, NO.

Long answer:  It's a very nuanced and complicated issue, but in practice, hiking interest rates generally does more harm than good, and at best is really not very effective in fighting inflation. 

Interest rate hikes, far from being a "razor-sharp, double-edged sword" (as we at the TSAP used to say) in theory, they are in practice just as blunt of an instrument as tax hikes are.  And they only "work" insofar as they cause a recession, as history has shown.  When the FERAL Reserve raises interest rates, it is "pushing on a a string" when they raise them insufficiently to cause a recession, and "blunt force trauma" to the economy when they raise them enough to do so.  And when they cut rates, it is even more so like "pushing on a string", as the damage is usually already done by that point, and of course they cannot cross the "zero lower-bound" into negative rates without inherently turning the world of finance upside-down.  There seems to be no "Goldilocks zone" for interest rate policy during times of high inflation, and the "therapeutic window" is generally closed.

Knowledge says that choking the economy until it goes limp and then choking it some more technically reduces inflation by killing demand for goods and services.  But wisdom says that one could hardly call that a success.

Not only are interest rate hikes inherently recessionary, they can also paradoxically increase one of the two types of inflation, "cost-push inflation", even as they tamp down the other type, "demand-pull inflation."  Both types are two sides of the same coin, so it can easily result in (or exacerbate) chronic stagflation, for which the only "cure" is to hike the rates so extremely high to cause a deep recession or depression, followed by cutting rates very quickly, at the cost of massive collateral damage.  A "cure" that is worse than the disease.

And the fallout falls not on the rich, who are largely insulated from the consequences, but overwhelmingly on the poor and working class, and also the middle class as well.

Cutting the money supply, whether fiscally via austerity or monetarily via quantitative tightening, is also similarly recessionary and damaging as well.  Both forms of tightening, along with interest rate hikes, are at best "break glass in case of emergency" measures that should almost never be used, period.

In other words, if you "burn the village to save it", the village will eventually return the favor.  You reap what you sow.  That's literally how karma works.

Even Rodger Malcolm Mitchell himself has recently turned against the idea of interest rate hikes, a policy he once strongly supported.  That really says something indeed.  Ellen Brown would agree as well.

So what works instead?  According to Mitchell, the root cause of ALL inflations is shortages.  Whether it's oil, gas, energy in general, food, labor, or otherwise, shortages are the common denominator.  To cure inflation, we must cure the shortages.  Now that is often a lot easier said than done, but governments who issue their own currency can help resolve shortages by fiscally incentivizing more production of such scarce goods and services.  And, of course, to also refrain from creating shortages in the first place with things like price controls or other artificial restrictions by fiat that are known to backfire. 

Oil, gas, or energy shortage?  Incentivize more domestic oil/gas production in the short term, followed by renewable energy production in the medium to long term as well.  Buy oil/gas or energy at at premium and resell it or give it away at a loss.  Food shortage?  Buy food at a premium and resell it or give it away at a loss.  Computer chip shortage?  Incentivize domestic chip factories.  Labor shortage?  Implement a "reverse payroll tax" like the EITC but simpler and more straightforward, to boost the paychecks of workers without increasing costs for employers.  Or the government can hire the most in-demand workers directly at a premium.  And consider replacing all or some means-tested social welfare programs with an unconditional Universal Basic Income (UBI) that does not perversely penalize people for working.  And so on.  That's the power of creating one's own currency via Monetary Sovereignty. 

QED.  Case closed, at least until we find even more compelling evidence otherwise. Therefore, the TSAP's new position in interest rates shall supersede everything we have said in the past about the topic.

UPDATE:  So what is the ideal interest rate then?  Should we do what MMT advocates, and just park it at zero and leave it there? There is a good case to be made for that, and the answer probably depends on a number of factors.  But negative interest rates are really not a wise idea for a national currency (too negative and people just hoard cash under the mattress, while not negative enough is really no better than zero).  For complementary and alternative local currencies, negative interest (aka demurrage) can perhaps make sense, like the Austrian town of Worgl famously did during the Great Depression, but the benefits of such likely do not scale up very well.  Thus for national currencies, zero is the practical lower bound.  And if zero interest (i.e. being able to borrow money for free) is still not stimulative enough, then do "QE for the People" by printing more money and giving it directly to everyone, rather than the banks in "regular" QE.  Problem solved. 

James Gailbraith makes a great case for low interest rates overall.

Thus, like MMT, the natural interest rate should be assumed to be zero by default, but unlike MMT, we should still not tie our hands and take higher rates off the table completely as a "break glass in case of emergency" measure.  Nor should Treasury bond sales be completely discontinued either, as those help stabilize the financial system in times of instability.

But what about speculative bubbles?  Don't low interest rates encourage those?  Yes to some extent, but only if Wall Street is deregulated like the Wild West (like now).  Therefore, better regulation of the big banks and shadow banking system, and a financial transactions tax, are a better idea to rein in reckless speculation than high interest rates. 

TL;DR version:  In a nutshell, raising interest rates has a tendency to backfire and generally does more harm than good, once all the jargon and accoutrements are stripped away. Occam's Razor would say that deliberately making everything effectively more expensive across the board (by making money itself harder and costlier to get) to engineer a recession is a terrible way to fight inflation, and can only encourage a perpetual quagmire of stagflation.

What about the Canadian experience in the 1980s?  Well, their inflation and unemployment were even worse than the USA despite (or more likely because) they kept their interest rates higher for longer.  And that disparity persisted well into the 1990s, until they devalued their overvalued currency, and then cut interest rates, which seemed to solve the problem.

"Too Big To Fail" = Too Big To EXIST

Once again, the issue of "too big to fail" is in the foreground, as we have obviously learned NOTHING from the last financial crisis.  If there is ANY lesson that we must NEVER forget, it is this: "too big to fail (or jail)" is really too big to EXIST, period.  And here is what we absolutely MUST do going forward:  give all banks and corporations large enough to have "systemic risk" (that is, where them failing would literally bring the whole economy down) a choice between the following menu of options:

1. Pay a prohibitive 90% marginal tax rate on all profits beyond the first billion, or,
2. Break up into smaller, unaffiliated banks or companies, similar to what anti-trust laws require for monopolies, or,
3. Full nationalization by the federal government, and (if already failed or failing) replacing the entire board of directors.

That's it.  That's the ONLY real solution. 

Of course, we also need to bring back the Glass-Steagall Act and pass a financial transactions tax and repeal the safe harbor provision of bankruptcy law and regulate derivatives better and stuff like that.

So what are we waiting for?

Pay No Attention To The Little Man Behind The Curtain

A new book by Matthew Desmond, Poverty By America, is the latest book about the topic of why poverty persists in the richest country on Earth.  In it, he discusses what he feels is the root cause of poverty's persistence, namely all of the ways that the non-poor benefit at the expense of the poor by keeping them poor.  It is true that it is not always enough to comfort the afflicted, sometimes you need to "afflict the comfortable" as well, to paraphrase the famous author and filmmaker Michael Moore.  

While there is a great deal of truth to what he says, and he makes some great points, the TSAP feels that the author is unfortunately 1) engaging too much in zero-sum game thinking, where in for one person to win, someone else has to lose, 2) largely ignoring the "little man behind the curtain", that is, the oligarchs of the big banks and Wall Street who fundamentally rig the game, and the FERAL Reserve that they own and control.  By focusing on all of the ways that the middle class and somewhat rich benefit at the expense of the poor, it also has the effect of ignoring what the billionaire class has done and is continuing to do to the broader working class, which includes the poor, the near poor, and the ever-shrinking middle class as well.  In contrast, David DeGraw back in 2014 wrote Peak Inequality, that really sheds light on the "little man behind the curtain":  the top 0.01%.  And it applies a fortiori to 2023, as inequality has only gotten worse.  If reading that doesn't make you feel RIPPED OFF, check your pulse 'cause you might be dead!

While there a number of things that need to be done to solve these massive intertwined and synergistic problems of poverty and inequality, keep in mind that we can mathematically end poverty overnight with a Universal Basic Income (UBI).  And also another that our tax code is actually regressive at the very top, where thanks to numerous loopholes, the top 0.01% often pay only a fraction of what those below them pay, if anything at all.  Aside from closing loopholes and greatly hiking the top marginal tax rates for those making over $10 million per year, another idea that has yet to be tried is a financial transactions tax on stocks, bonds, derivatives, and stuff like that. Alternatively, essentially all taxes could be replaced by a tiny 0.1% or less Universal Exchange Tax (UET) on all electronic transactions, period.  With a tax base of most likely $5 quadrillion or more, a 0.1% rate would raise $5 trillion per year, enough for the entire federal budget and then some.  It would actually be quite progressive in practice, since the rich make far more transactions than the non-rich.  And such a tax would still be quite painless for literally everyone except perhaps speculators and money launderers.

And of course, we need to nationalize the private FERAL Reserve, and restore the power of money creation back to its rightful creators, Congress, who would then authorize the Treasury to do so.  Such power is far too important to leave to the big banks and they sycophantic lackeys and technocrats. 

So what are we waiting for?

How to Prepare for the Next Big Crash (Part Deux)

As we have noted before, things are really not looking good for the global economy this year.  Whether we actually experience another financial crisis on the order of 2008 or even 1929 (or worse) is a matter of debate, but the time to prepare for such a scenario is yesterday.  At the very least, another recession is inevitable at this point by 2019 at the very latest, since no economic expansion has lasted much more than eight years straight in this country (with the notable exception of 1991-2001 that lasted exactly ten years).  Granted, the expansion from July 2009 to the present mostly benefited the rich, and until around 2014 practically entirely benefited the rich, but it was still technically an expansion of the economy even if the growth was largely uneconomic in practice.  And expansions can only go on so long before a contraction (i.e. recession or depression) inevitably occurs--it's just a fundamental truth of the business cycle.

One thing is for sure--things are very different this time around at least in terms of monetary policy.  At least in 2008, interest rates were well above-zero, and could be cut to stimulate the economy (or, more accurately, stop or slow down the hemorrhaging).  When that proved to be futile, then the Feral Reserve and many of the world's other major central banks resorted to "quantitative easing" (i.e. creating money out of thin air and giving it to the banks directly).  In late 2014, the USA tapered off and ended its QE policy, and in December 2015 ended its zero interest-rate policy by raising the Fed Funds Rate to 0.25-0.50%.  Since then, the FERAL Reserve has raised rates five more times, most recently on March 21, 2018 to 1.50-1.75%, and many more hikes are on their way.  And combined with Trump's new trade war against China, that may have been enough to finally lance the massive bubble--make that the festering BOIL--that the stock market has been in for years now.  And since they now have a little bit of room to cut it--if they don't wait too long to do so--they probably seriously think that they can somehow engineer a soft landing if (and that's a VERY big "if") that is even possible at this point.  But not much room, really.

But many of the central banks of the world are still starting from zero or close to zero--and some banks including the European Central Bank and the Bank of Japan have even resorted to negative interest rates (!) by 2016.  That means they are effectively charging depositors for the "privilege" of depositing money, and effectively paying borrowers to borrow money, which basically turns the world of finance upside-down.  Such negative rate territory is uncharted waters, since until a few years ago no country has ever dared to do such a thing.  And there is currently no evidence to suggest that such a move will be beneficial in the long run, and may in fact turn out to do more harm than good overall.

So monetary policy basically needs a new set of tools and a new game plan to deal with the next crisis, whenever it occurs.  The Feral Reserve and the other central banks of the world are basically still using an outdated playbook.  In the near-term, two things need to change yesterday.  First of all, they need to abandon interest-rate targets altogether for the time being, and instead focus on targeting the growth of the overall economy.  Like Paul Volcker did in 1979-1982, but done in reverse since the "inflation dragon" is not the problem this time (unless the Trump tariffs really begin to bite). Secondly, implement Quantitiative Easing for We the People in general (as opposed to the banks, which only benefits the ultra-rich) by injecting newly-created money into everyone's bank accounts.  Granted, the latter measure would probably require an Act of Congress to allow it to occur legally, but as the Feral Reserve was just two years ago seriously debating the legality of negative interest rates, I'm sure they could find some sort of a loophole to allow it in an emergency such as a massive financial crisis.  And of course fiscal stimulus would likely be necessary as well, in additional to much needed reforms to regulate Wall Street and the big banks (a law that rhymes with "brass seagull" comes to mind, as well as a financial transactions tax and better regulation of the shadow banking system), but those two changes to monetary policy would go a long way towards preventing the next recession/crisis from turning into another 2008 or 1929 or even worse.  And the silly idea of negative interest rates really needs to be abandoned as well.

More fundamentally, of course, we need to nationalize the FERAL Reserve to make it a truly public national bank that creates money interest-free, and take the power back from the big banks.  Ellen Brown has written books about that very subject.  In the meantime, though, the aforementioned recommendations would still work in the near term.

But let's be brutally honest here.  What we are really witnessing these days is the slow and painful death of a woefully obsolete system, one that has been kept on life support for many years now.  And eventually we will have to pull the plug on it, sooner or later.  It's just a matter of time.

One Weird Trick, Part Deux

It just so happens that the very next day after we posted our "One Weird Trick to Rescue Economy" article, the highly progressive former Democratic Congressman Dennis Kuchinich posted an article of his own at The Nation.  Titled "Our Political Economy Is Designed to Create Poverty and Inequality", the article discusses how the economy is currently rigged in favor of the top 1% (especially the top 0.01%) at the expense of the ever-growing poor and ever-shrinking middle class.  This rigging is done through the tax code, obviously, but also through more subtle machinations such as the privatization racket (where formerly public services and utilities are privatized, at the expense of the people and for the benefit of the rich) which also includes our monetary system and the privately-owned FERAL Reserve that has controlled it for over a century now.

And most notably, he discusses a bill that he himself sponsored in 2011-2012 called the NEED Act, which would have ended this monetary racket via an independent Treasury (much like Ellen Brown's public banking idea) and the abolished the scam known as fractional-reserve banking.   The newly-created greenbacks would then be used to create full employment via funding much-needed improvements in infrastructure as well as education, healthcare, and other government spending, which would have been a great stimulus to the economy.   The bill would also restore the federal usury cap to an even lower 8% (it was 12% before it was removed in 1978) as well.  It even had the potential to also create a citizen's dividend (aka a Universal Basic Income), provide universal healthcare, shore up Social Security, and solve so many other problems at once.  Overall, an excellent bill.  But of course, the cowardly and venal Congress unfortunately did not pass it.

In case you were worried whether such an idea would create hyperinflation, allow us to put that fear to rest.  Currently, the private banks create new money out of thin air all the time, every time they make a loan.  The FERAL Reserve does this too, most notably the secret $16 trillion (which eventually became more like $29 trillion) bailout of the banks just a few years ago.  So why not have this process be publicly controlled and used for the benefit of We the People rather than the oligarchs?

As Ellen Brown notes, the Weimar hyperinflation in Germany from 1921-1924 occurred while the money was being created by the private banks.  Germany had been punished with crippling debt by the Allies in the aftermath of WWI, and they needed to create a lot of money to pay it.  The biggest problem, though, were the speculators who shorted their currency (betting that it would go down in value), which became a self-fulfilling prophecy. And the banks just kept on printing more and more marks to satisfy the speculators' demands, creating a vicious cycle of runaway hyperinflation.  The madness only stopped once the government got a handle on it by finally taking back control of the money supply in 1924, which was followed by a few years of relative prosperity before the deflationary Great Depression began in 1929.  And Brown also notes, as we noted in our previous article, that Germany got out of the Depression by using the "one weird trick" themselves (too bad they didn't do it much sooner, that is, before you-know-who took over in 1933).

(And just in case anyone predictably tries to play the "Jew card" after reading this, keep in mind that most oligarchs/banksters are actually WASPs rather than Jews, and have been for quite a while now.  Even the Vatican has their own bank now.  And the TSAP does not condone anti-Semitism of any kind.)

So what are we waiting for?  Let's finally put an end to artificial scarcity and artificially-created unemployment for good. Yesterday.

One Weird Trick to Rescue Economy, Defeat Oligarchy, and Pre-empt Fascism--Banksters HATE This!

As the classic clickbait-y title implies,what if there was a way to accomplish such a thing at little to no cost, and would also result in lower taxes for the masses as well? What if that option has always existed, but knowledge of it has been suppressed by the elites for decades out of fear of losing their power?

Well, it's actually true, believe it or not.  It's so simple that people tend to overlook it, and it's called public banking.  To wit, the government would print/create its own money interest-free, independently of the banks.  And thus the FERAL Reserve (which is about as "federal" as Federal Express, given how it is privately owned by the big banks) would become truly federal for once, with banks serving We the People, not the other way around.  National debt would become a non-problem overnight.  (This idea can also be implemented at the state and local levels as well.)  Of course, the banksters would absolutely HATE that.  For example, both JFK and Lincoln tried to do such a thing in fact, and we all know what eventually happened to them.  But the fact remains that We the People, through our elected representatives in Congress, nonetheless have to power to do exactly that.  We essentially gave the banksters their power, and we can also take it away--were it not for their venal and cowardly puppets in Congress today, that is.

Ellen Brown, author of Web of Debt (2007) and The Public Bank Solution (2013), has a lot to say about such an idea.   She brilliantly illustrates just how important the democratization of money is to a free society, and the history of just how much the bankster oligarchy has been ripping us all off for centuries.  For example, did you know that nearly HALF of the taxes we pay essentially go towards servicing the massive government debt to the banksters?  Did you know that nearly HALF of the price of practically everything we buy is a result of cumulative compound interest and/or hidden taxes embedded within such prices?  Did you know that infrastructure costs can also be cut in HALF simply by financing them with public banking?  And did you know that private banks actually create money out of thin air via a perfectly legal and centuries-old racket known as "fractional reserve banking"?  And that interest charged, not the expansion of the money supply, is the real cause of nearly all of the "inflation" that we see?  And for decades now, wages have not only lagged behind productivity gains, but haven't even kept up with such inflation?  Meanwhile the top 1%, and especially top 0.01%, have made out like bandits at the expense of the bottom 99%, with resulting inequality (which hurts the economy) soaring to levels not seen since the 1920s or even the Gilded Age.  If that doesn't make you feel RIPPED OFF, check your pulse 'cause you might be dead!

So what does all of this have to do with fascism?  Well, it appears that a certain little painter from Austria decided to exploit a rather similar situation in 1930s Germany after taking over.  In fact, rescuing the ailing economy, especially reducing or abolishing unemployment, was one of Hitler's biggest campaign promises.  And he did in fact succeed in doing so, and did so better than FDR despite Germany starting out in much worse shape than the United States was in 1933.  So how did the Nazis manage to pull it off?  By thinking outside the box and having their government essentially create their own money independently of the banks. Their country was literally bankrupt from the aftermath of losing WWI as well as being hit particularly hard by the Great Depression, but by creating their own money and spending it to "prime the pump", they were able to transcend their economic woes, and were thus able to restore full employment within a few short years.  In fact, their unemployment rate dropped by HALF within a year!  Contrast this with Austria, whose unemployment rate remained stubbornly high and barely even budged from 1932-1937, only dropping significantly in 1938 after Hitler annexed their country as part of the Third Reich.  Prior to that, the Austro-fascist regime was essentially following the outdated Austrian School austerity policies that Ludwig von Mises himself would have likely approved of.  The point of this discussion is NOT to praise Hitler or the Nazis in any way, but rather to show what opportunists they were and how to prevent such an evil authoritarian regime from ever rising again--if only the (erstwhile) free world had the foresight to get their economic policies right in the first place.  Because then, there would be essentially no legitimate grievances large enough for such a regime to exploit.

Of course, we would be remiss if we didn't also note that Hitler's "economic miracle" came with a serious dark side as well, even before the Holocaust began in earnest.  At least part of the drop in unemployment was the result of 1) removing Jews from the workforce after revoking their citizenship, replacing them with ethnic Germans, 2) removing women from the workforce (i.e. by firing many of them and also paying mothers to stay home), replacing them with men, and no longer counting women in the statistics, 3) bringing back the draft, and 4) spending ludicrous amounts of money on the military, financed by debt.  But since none of these things occurred until 1935 or even later, one could safely conclude that at least the first two years of the "economic miracle" can be easily traced to the pump-priming that resulted from their independent money creation.  The point is, there is no logical reason why that policy cannot be replicated minus the dark side, as fascism/racism/sexism/militarism is NOT a prerequisite for sound fiscal and monetary policy, any more so than it is for making the trains run on time like Mussolini did.

And just in case you thought that this "one weird trick" was peculiar to fascism, keep in mind that Hitler in fact got the idea from--wait for it--ABRAHAM LINCOLN.  Yes, really. Meanwhile, fascist Austria did the opposite under Dolfuss and Schuschnigg, and they messed the economy up so badly that the Austrian people actually eagerly welcomed the Nazis when they eventually took over in 1938.

Bottom line:  we know now what economic policies really work in practice, as opposed to half-baked voodoo economic theories and crank science.  As the saying goes, "it's the economy, stupid!"  So how long till we finally get it right?

The Ultimate Stimulus Package

Wanna know a secret, everyone?  An open secret, yet probably the best-kept one of all?  The total amount of global debt, all $233 trillion (!) of it, is 100% man-made. That's right--the very concept of debt is man-made, because money itself is man-made.  That includes both private debt as well as the public debt that the austerity hawks won't stop fretting about.  Every single penny of it.  Money is really nothing more than a simple accounting entry in a computer these days anyway.  So make the entry and be done with it already.

Wait, hold on--did he just say what I think he said?  You got that damn right, and I didn't stutter either.  The single best stimulus package that could possibly be done given the current state of the global economy is--you guessed it--a DEBT JUBILEE of sorts.  You know, kinda like the ancient Israelites did every 50 years, where all debts were cancelled and forgiven across the board, period.  The only difference today is the scale and the technology involved, and the fact that we use pure fiat currency instead of specie makes it even easier still.  So why aren't we doing it?  I mean if the world owes $233 trillion, who on Earth do we owe it all to?  You guessed it--the BANKSTERS.  And the biggest contributor to the gargantuan size of the debt (and the number one cause of inflation as well) is compound interest, also known as USURY.  So there are plenty of powerful vested interests who would oppose such a thing, and it's time to take the power back.

We could start by paying off the national debt in one fell swoop via money creation, as is recommended by Richard E. Noble.  The Noble Solution, if you will.  And contrary to popular opinion, doing so would NOT cause hyperinflation if done properly because while creating money is inflationary, paying off large debts (i.e. "debt-deflation") is inherently anti-inflationary, so the two effects would cancel each other out.  And the newly created money would be done interest-free as well.  And also give everyone $1000 or $2000 as well.  Remember, back in 2011 Bernie Sanders audited the Feral Reserve and found that they gave a whopping $16 trillion secret bailout to the banks in 2009-2010 (and later rose to $29 trillion in total).   And with that money, they could have paid off the entire national debt (below $12 trillion then) and still had trillions left over to give to We the People by depositing money in our bank accounts.  And the government would have been able to do a much bolder fiscal stimulus package since there would be no worries about the debt.  Yes, really.  And the "recession" (i.e. depression) would have ended a LOT sooner as a result.

As for private debt, an Act of Congress could conceivably be passed that nullifies all such debt as well, including (but not limited to) student loan debt, mortgage debt, credit card debt, and medical debt. Creditors wouldn't like it, of course, but debtors greatly outnumber creditors, so the net effect would be beneficial overall for society.  And repeat every 50 years or so.

Additionally, while we are at it, we should also nationalize the privately-owned FERAL Reserve and make it a truly public FEDERAL Reserve that creates its own money interest-free, as Ellen Brown recommends.  We should also put a 10% cap on ALL interest rates period, including private loans and credit cards, and eventually phase-out the very concept of interest altogether.

Also, the TSAP would recommend a Universal Basic Income Guarantee for all, an idea whose time has come and that is in fact LONG overdue.  That would solve so many problems indeed.

Now THAT would be a real stimulus package!  Not only would it act like a giant B-12 shot for the economy by causing increased economic growth in the short to medium term, but in the long run it would also help us end our addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host.

Remember, as Buckminster Fuller famously noted in the 1970s, there are enough resources on Earth for everyone in the world to live like a millionaire, but such resources are currently being hoarded and wasted by the oligarchs to prop up their massive Ponzi scheme.  It's time to end the current obsolete paradigm of scarcity (most of it artificial) in favor of a new paradigm of abundance for all, that we may all enjoy mutual benefit and protection.  Yesterday.

(In the meantime, though, there is always Rolling Jubilee.)

How to Prepare for the Next Big Crash (Part Deux)

As we have noted before, things are really not looking good for the global economy this year.  Whether we actually experience another financial crisis on the order of 2008 or even 1929 (or worse) is a matter of debate, but the time to prepare for such a scenario is yesterday.  At the very least, another recession is inevitable at this point by 2017 at the latest, since no economic expansion has lasted much more than eight years straight in this country (with the notable exception of 1991-2001 that lasted exactly ten years).  Granted, the expansion from July 2009 to the present mostly benefited the rich, and until around 2014 practically entirely benefited the rich, but it was still technically an expansion of the economy even if the growth was largely uneconomic in practice.  And expansions can only go on so long before a contraction (i.e. recession or depression) inevitably occurs--it's just a fundamental truth of the business cycle.

One thing is for sure--things are very different this time around at least in terms of monetary policy.  At least in 2008, interest rates were well above-zero, and could be cut to stimulate the economy (or, more accurately, stop or slow down the hemorrhaging).  When that proved to be futile, then the Feral Reserve and many of the world's other major central banks resorted to "quantitative easing" (i.e. creating money out of thin air and giving it to the banks directly).  In late 2014, the USA tapered off and ended its QE policy, and in December 2015 ended its zero interest-rate policy by raising the Fed Funds Rate to 0.25-0.50%.  But now, the central banks of the world are starting from zero or close to zero--and some banks including the European Central Bank and the Bank of Japan have even resorted to negative interest rates recently.  That means they are effectively charging depositors for the "privilege" of depositing money, and effectively paying borrowers to borrow money, which basically turns the world of finance upside-down.  Such negative rate territory is uncharted waters, since until a few years ago no country has ever dared to do such a thing.  And there is currently no evidence that such a move will be beneficial, and may in fact turn out to do more harm than good overall.

So monetary policy basically needs a new set of tools and a new game plan to deal with the next crisis, whenever it occurs.  The Feral Reserve and the other central banks of the world are basically still using an outdated playbook.  In the near-term, two things need to change yesterday.  First of all, they need to abandon interest-rate targets altogether for the time being, and instead focus on targeting the growth of the overall economy.  Like Paul Volcker did in 1979-1982, but done in reverse since the "inflation dragon" is not the problem this time.  Secondly, implement Quantitiative Easing for We the People in general (as opposed to the banks, which only benefits the ultra-rich) by injecting newly-created money into everyone's bank accounts.  Granted, the latter measure would probably require an Act of Congress to allow it to occur legally, but as the Feral Reserve is currently debating the legality of negative interest rates in the future, I'm sure they could find some sort of a loophole to allow it in an emergency such as a massive financial crisis.  And of course fiscal stimulus would likely be necessary as well, in additional to much needed reforms to regulate Wall Street and the big banks (a law that rhymes with "brass seagull" comes to mind, as well as a financial transactions tax and better regulation of the shadow banking system), but those two changes to monetary policy would go a long way towards preventing the next recession/crisis from turning into another 2008 or worse.  And of course the silly idea of negative interest rates needs to be abandoned as well.

But let's be brutally honest.  What we are really witnessing these days is the death of an obsolete system, one that has been kept on life support for many years now.  And eventually we will have to pull the plug on it, sooner or later.  It's just a matter of time.

The Root of All Evil: Unmasking the Wetikonomy

The TSAP has recently discovered a parasite lurking in our midst.  This parasite is not one that you can see, but its evil works are apparent just about everywhere you look.  It is a mind-virus that digs deep into our subconscious and subverts our thinking in a manner that causes us to act against our best interests.  And its name is wetiko--essentially the root of all evil.

The concept of wetiko was discovered a few years back by Paul Levy, author of Dispelling Wetiko:  Breaking the Curse of Evil.  The word itself comes from Native Americans, who apparently coined it to describe the sort of destructive collective psychosis that they had observed and were too often on the receiving end of when the white settlers came and wreaked havoc upon them.  Levy apparently had a spiritual awakening and realized exactly what the root of all evil was, and describes it well in his book.  It explains evil far better than the Western concept of evil ever could.  Basically, this disease hides in the dark recesses and blind spots of our psyches, and causes us to behave in utterly destructive ways without really understanding why.  And just like a vampire, sunlight is the best disinfectant.  So let's expose it and defeat it!

What does this have to do with our economy?  Apparently just about everything, since the lion's share of it consists of what Levy calls the wetikonomy.  Basically, our economy (especially the bloated financial sector) is one big Ponzi scheme and shell game designed to benefit the very few at the top at the expense of the rest of us.  It is designed to rob from the poor (and what's left of the shrinking middle class) and give to the already ludicrously rich.  And it is based on lies and illusion, essentially wetiko writ very, very large.  The few financial players that run this toxic and corrupt system are known as Big Wetikos, most notably the debt pushers and financiers that are conning the rest of us.  And it perverts the whole economy, as it is dependent on the debt-based funny money created by the Big Wetikos.  As the Verve so eloquently noted in their song Bitter Sweet Symphony, you're a slave to money then you die.  Clearly it doesn't have to be this way.  But there is so much coercion (subtle and not-so-subtle) in the system that most people just go along with it while sleepwalking to their own doom and unwittingly perpetuating the wetikonomy, while the plutocrats laugh all the way to the bank.

We all need to wake up to the truth, and finally defeat this parasite for good before the shadowy elites succeed in scuttling this once-great nation.  And the TSAP will work very hard to wake up as many people as possible in order to achieve this goal.

Happy 100th Birthday, Feral Reserve!

The Feral Reserve has now turned 100 years old.  For the past century, the Feral Reserve (not a typo, since they are really no more "federal" than Federal Express) has been in charge of our nation's money supply and interest rates.  Owned by the big banks and run by a few unelected individuals, this Creature from Jekyll Island has had enormous financial power over us all for the past century.  They have created numerous business cycles, serious inflation, and made a killing by charging interest on the money they have printed while getting the nation into ever-deeper debt.  And it's long past time to end it.

As recently as last year, the TSAP party platform called for abolishing the Fed entirely and going back on the gold standard.  But we have discovered a much better way instead.  What is America's best kept secret?  Look no further than North Dakota, the only state to avert the Great Recession--it's called public banking.  Because it works.  The TSAP now believes that the Fed should be replaced by a truly public national bank.  One that is fully accountable to the people, and lends money to the goverment interest-free.  The power to create money should be returned to its rightful owners--a government of We the People, not a faceless quasi-private entity controlled by a cabal of international elite bankers.  And if we were to nominate a chairperson, it would have to be Ellen Brown, author of Web of Debt.

What better time than now?

Banks Gone Wild, Again

The Feral Reserve is at it again.  They have decided to create $600 billion to $1 trillion completely out of thin air.  Gold and oil are on the rise again. 

Of course, all that money is going to the banks, and will be concentrated among the super-rich at the top.  While the TSAP does not advocate creating money ex nihilo, if it must happen, it should be distributed to the people.  $600 billion would provide nearly $2000 to every man, woman, and child in the USA, or alternatively nearly $100 to every man, woman, and child in the entire world.  Would that boost consumer spending, and thus the economy?  You bet it will--but then comes the inflation surprise a few months later, of course. 

However, no amount of prinitng funny money got Japan out of their "lost decade" following the Nikkei crash of 1990, a crash spurred on by the same factors as our 2008 stock market crash (housing and credit bubbles).  Japan's prolonged deflationary recession lasted until 2003, a full 13 years.  And they still never fully recovered, unfortunately, despite a significant rebound from 2003-2007 before the current financial crisis and recession.  But I guess a deflationary recession is better than an inflationary depression.

We're "turning Japanese," all right.  Just not in a good way.