Take Back The Flag

Just pointing out that today is Flag Day.  But this blog looks no different today because we display the Stars and Stripes every day (albeit inverted ever since Trump took office, as our nation is in distress).

To all the ignorant fools who burn it, remember what it is that you're really burning, and all those that fought and died for it. Those who consider themselves to be on the political left would be better served by "taking back the Flag" and waving it proudly, so it is not perverted into an ultra-right-wing symbol by the fascists. Make it clear that the government policies you oppose are not in the national interest. And let everyone know that you can just as strongly love this country as you fear its government.  In fact, plenty of true patriots often do feel that way, and as Jefferson once said, "dissent is the highest form of patriotism."

The Flag is not Republican, Democrat, liberal, conservative, or belonging to any other faction. It is the American Flag, and it belongs to all of us.  Live free or die!

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?

The Mueller Report Is Out--And Even The Redacted Version Is A Lot More Damning Than Trump Wants You To Believe

Well, the much anticipated Mueller Report is out now, and even the redacted version is a LOT more damning than Trump or Barr want anyone to believe.  Seriously.  While it is ostensibly inconclusive about Trump's personal participation in the Russian hacking and interference, the three most important words in the entire 400+ page report are "does NOT exonerate", particularly in relation to the high crime of obstruction of justice. And even the inconclusiveness was largely due 1) important evidence apparently being deleted/destroyed by some of the major players in the Russiagate scandal, and 2) apparent duress, however subtle, to one degree or another, from the Justice Department under Trump.

I mean, this is the very same Donald Trump who unceremoniously fired FBI Director James Comey, then forced Attorney General Jeff Sessions to resign, and even tried to fire Robert Mueller himself--all because he wanted the ever-growing Russiagate investigation to just go away already.  Ipse dixit--he himself said it, after all.  If that is not a textbook example of obstruction of justice, and one that would make even Tricky Dick Nixon himself blush, in fact, I really don't know what is anymore.

And that is just the redacted version!  In other words, Trump is NOT out of the woods yet, if ever.  His fate now rests in the hands of Congress, as well as the Southern District of New York, who is now led by Attorney General Letitia James.  So Donald, if I were you, I would do us all a YUUUGE favor and RESIGN, yesterday.  Then pray that you don't ultimately end up behind bars, because I doubt they would take very kindly to the likes of you in the big house.

Here's A Novel Idea: Just Abolish It Already!

Now that a federal judge recently struck down as unconstitutional the longstanding requirement that only men, and not women, have to register for Selective Service (aka the draft), its legal status is in limbo until the Supreme Court sorts it out.  Some believe that the best solution is to expand it to include women, and that does indeed make sense from a gender equality perspective.  But here is an even better solution:  just abolish it already, period.

The United States has not had an active draft since it was officially abolished in 1973, at the end of the Vietnam War, and for good reason:  it no longer made any sense.  Following that, the requirement to register for Selective Service was subsequently ended in 1975, pushing the Selective Service System into "deep standby", which was essentially complete hibernation.  After all, it makes no sense to have registration if there is no active draft or chance for one in the near future, right?  Such hibernation lasted until 1980, when President Carter reactivated the registration requirement--but not the draft itself--in order to, in his own words, "send a signal to the Russians" since the Cold War looked like it was (briefly) heating up a bit once again.  Fair enough.

But here we are now in 2019, and the largely symbolic registration requirement still remains in effect, and for what, exactly?  It is basically an antiquated relic from a time when given the technology (or lack thereof) of the day, it may have been perhaps a bit more difficult to quickly reactivate a draft even if truly necessary.  But even in 1980, and with relatively puny enforcement, the registration system was back up and running within a matter of months despite being idle for five years.  And today if they really wanted to, even without registration, the government could literally find anyone they wanted to draft from all of the many other databases that already exist.  That method may have a bit more friction to it, of course, but a little bit of friction for something with that much gravitas is really not a bad thing.

And the odds of an active draft ever being reinstated in the foreseeable future are almost nil given today's technology and the increasingly professional nature of the US Armed Forces.  Even if we run very short of troops, we can simply pay them more and we will be thus able to meet our recruiting goals.  And if we still can't meet our goals, we should really question the wisdom of whatever war(s) we happen to be fighting at that time, and exactly whose interests are really being served.  To put it bluntly, a country that needs a draft to defend itself deserves to lose, and in a truly just war, conscription would be unnecessary since volunteers would surely be plentiful.

(Some would note exceptions, of course, but those very rare exceptions only prove the rule.)

Therefore, the TSAP believes that registration requirement be abolished at once and the Selective Service System be put back into the hibernation of "deep standby" just like it was in 1975-1980.  And if they like, they can also update the law currently on the books to include women in the event it is ever reactivated in the future.  But make no mistake, the TSAP has never, and will never, support a draft--unless of course you mean the "consensual conscription" idea that we have floated before in which all wars longer than 90 days are put up to a popular vote, and only "yes" voters (and perhaps followed by abstainers) would get drafted.  That's about as fair as it gets.  Otherwise, we unequivocally say, as they famously said back in the day:

"HELL NO, WE WON'T GO!"

and, as the late Major General Smedley Butler famously said,

"TO HELL WITH WAR!"

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?

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.

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!".

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".