Wow, today must be the Donald's very worst day ever, or least in a great while. First, his former campaign chair Paul Manafort (of Russiagate infamy) was found guilty of eight out of 18 counts related to tax fraud and bank fraud (the rest were a hung jury), and is thus now a convicted felon. Secondly, his former lawyer and personal "fixer", Michael Cohen, has just pled guilty to eight counts of his own as well, most significantly including two related to campaign finance violations. You know, that whole bit about illegally paying hush money to two porn stars to keep quiet about Trump's affairs with them, so as to influence the 2016 election in Trump's favor, turned out not to be a hoax after all--and it directly implicates Trump himself since the payments were about him.
So not only have both of these former associates of his now effectively joined the growing club of convicted felons in his orbit, but now they are in a crucial position to "flip" on Trump. And there is a very good chance that they will both sing like a canary, if they haven't done so already. It's only a matter of time. Check checkity check check, checkmate!
The jig is up, Donald. The mounting evidence of your numerous high crimes and misdemeanors can no longer be denied. So do us all a YUUUUGE favor and RESIGN, yesterday. Clean out your desk now, and don't let the door hit you on the way out.
Or, as you like to say, "YOU'RE FIRED!"
Tuesday, August 21, 2018
Sunday, August 12, 2018
Interest Rates: A Razor-Sharp, Double-Edged Sword
After debunking the Big Lie of Economics (namely, that federal taxes actually pay for federal spending and that the federal government can somehow run short of dollars) in our previous post, the question of inflation and how to control it remains. Most economists (including Rodger Malcolm Mitchell) believe that raising interest rates is the best way to do control inflation, while others (mainly in the Modern Monetary Theory (MMT) school of economics, along with Ellen Brown) believe that doing so is practically blasphemy and will only make things worse, relying instead on taxes of various kinds (if anything at all) to control it, albeit crudely. So which is it?
Well, it seems that the answer is a lot more nuanced than either side likes to believe. For starters, there are at least two different kinds of inflation: 1) cost-push inflation, and 2) demand-pull inflation. Sometimes both types occur together almost equally, other times one clearly outweighs or excludes the other. And whether raising interest rates is helpful or harmful depends on exactly which kind of inflation one is trying to fight.
For cost-push inflation, which is caused by rising production costs resulting from things like higher fuel prices, taxes, or borrowing costs on businesses that get passed onto consumers. And raising interest rates will only make that kind of inflation worse by increasing borrowing costs for businesses even higher still. Doing so is like fighting fire with gasoline, and should generally be avoided like the plague.
For demand-pull inflation, which is caused by demand for goods and services outstripping supply for same, on the other hand, raising interest rates is highly effective at preventing and curing such inflation. If interest rates are (artificially) coupled to money supply, raising the former will effectively shrink the latter, which is of course disinflationary or deflationary. But even more importantly, whether they are coupled to the money supply or not, raising interest rates also increases the demand for dollars by increasing the reward for holding them. Remember, as Rodger Mitchell explains, Value = Demand/Supply, and Demand = Reward/Risk, where inflation and default are the risks and interest is the reward.
(Since the risk of default is by definition zero for a Monetarily Sovereign government that consistently acts like it and is not foolish enough to borrow money denominated in a foreign currency, that leaves only inflation vs. interest. And the net reward is given by: Interest Rate - Inflation Rate = Real Cost of Money.)
Note too that interest rates can have both types effects, but which one outweighs the other depends on the type of inflation as well as the general condition of the overall economy. At the same time, the effects of raising and lowering interest rates need not be symmetrical, since lowering interest rates to stimulate the economy often amounts to "pushing on a string" in terms of effectiveness. Especially since interest on Treasury securities is literally new money that is pumped into the economy, and lowering rates will reduce that money accordingly. True, there is in fact a positive correlation between the effective Fed Funds Rate and the CPI inflation rate, but that is as much of a chicken-and-egg problem as anything, given that the two types of inflation are both measured the same way, and that the FERAL Reserve usually raises rates in response to or in anticipation of inflation. (For all their faults, they have generally succeeded in keeping inflation more or less under control at least since the post-gold standard era.)
But how exactly does one distininguish which type of inflation predominates at a given time, and thus whether to raise or lower interest rates? Usually it is fairly simple. When the velocity of money (the rate at which money circulates through the economy) is going "too fast for conditions" relative to the economy, that is a fairly strong indicator that demand-pull inflation predominates and that interest rates ought to be raised, even if there is some cost-push inflation mixed into the overall inflation rate. But if the velocity of money is sluggish, raising rates will likely be counterproductive, at least in the absence of massive deficit spending (i.e. new money creation).
Because regardless of whether or not there is any link at all between interest rates and the actual supply of money, raising rates (especially when raised higher than the inflation rate) will always slow down the velocity of money, ceteris paribus. Likewise, cutting interest rates accelerates the velocity of money at least somewhat, even if that alone doesn't always stimulate the economy enough in practice.
So what about taxes, then? In theory, raising taxes and/or cutting government spending should also control inflation by effectively shrinking the money supply. Remember, since the federal government is Monetarily Sovereign, any tax revenue they raise is effectively destroyed in practice (just like how all deficit spending effectively creates money out of thin air). But this is a very crude way to do it, and is too slow and political to be particularly useful. That said, having some level of federal taxation can indeed act as an "automatic stabilizer" even with no changes to the tax code, since when the economy overheats, the velocity of money is high and thus more tax revenue is removed from the economy, while the reverse is true during recessions when the the velocity of money is slower. That is especially true for the idea of the Universal Exchange Tax, since it specifically taxes the movement of money, but can be true for all taxes. But interest rate control is ultimately a superior method--as long as the inflation in question is the demand-pull variety resulting from an excessive money supply and/or velocity of money. And knowing that, there is no good reason why a Monetarily Sovereign government should be shy about creating enough money to fulfill any of its ambitions that benefit the the bottom 99%.
The best, of course, is when interest is NOT coupled to the creation of money. But until they end the charade and implement Overt Congressional Funding instead, and also fully nationalize the FERAL Reserve, the best way to fight stagflation is to raise interest rates (to fight inflation) while also increasing deficit spending (to fight stagnation), effectively decoupling the two for the time being. And to fight high inflation in an overheating economy, raise interest rates first with no changes to deficit spending, and if that doesn't work, then reduce deficit spending. But don't keep interest rates too high for too long--eventually they need to be cut to avoid doing more harm than good to the economy. And note also that there is no historical correlation between deficit spending and inflation, at least not during peacetime and post-gold standard. Only during truly major wars has there been any sort of correlation between the two, given how wars tend to create shortages of goods and services.
Wait, what? That's right, there has been no correlation between federal deficit spending (i.e. money creation) and inflation in recent decades, meaning that any relationship between the money supply per se and inflation is a very tenuous one. Let that sink in for a moment. So we are nowhere near the point where increasing the money supply poses any risk of runaway inflation. And even if we were, we know precisely how to prevent and cure it.
In other words, it looks like both Rodger Mitchell and Ellen Brown are both correct to one degree or another. But what about what the FERAL Reserve is doing right now, raising interest rates (and implementing Quantitative Tightening) in the midst of historically high deficit spending? Well, seeing as how inflation is still low and currently dominated by oil prices and the Trump tariffs that are just beginning to bite, it is safe to say that cost-push inflation, not demand-pull inflation, thus predominates now and in the near future, and thus raising interest rates any further now is probably not the wisest idea. Especially given that, as Ellen Brown notes, the banksters have currently set a minefield of trigger points for variable-rate loans and mortgages, that will be set off if the Fed Funds Rate goes up much higher. And these oligarchs thus stand to pull off one of the greatest wealth transfers in history, from the bottom 99% to the top 1% and especially the top 0.01% (i.e. to the oligarchs themselves).
Bottom line: While taxes are more of a blunt instrument when used to control inflation, interest rates are essentially a razor-sharp, double-edged sword, one that we need to be very careful about using willy-nilly. Don't say we didn't warn you.
Well, it seems that the answer is a lot more nuanced than either side likes to believe. For starters, there are at least two different kinds of inflation: 1) cost-push inflation, and 2) demand-pull inflation. Sometimes both types occur together almost equally, other times one clearly outweighs or excludes the other. And whether raising interest rates is helpful or harmful depends on exactly which kind of inflation one is trying to fight.
For cost-push inflation, which is caused by rising production costs resulting from things like higher fuel prices, taxes, or borrowing costs on businesses that get passed onto consumers. And raising interest rates will only make that kind of inflation worse by increasing borrowing costs for businesses even higher still. Doing so is like fighting fire with gasoline, and should generally be avoided like the plague.
For demand-pull inflation, which is caused by demand for goods and services outstripping supply for same, on the other hand, raising interest rates is highly effective at preventing and curing such inflation. If interest rates are (artificially) coupled to money supply, raising the former will effectively shrink the latter, which is of course disinflationary or deflationary. But even more importantly, whether they are coupled to the money supply or not, raising interest rates also increases the demand for dollars by increasing the reward for holding them. Remember, as Rodger Mitchell explains, Value = Demand/Supply, and Demand = Reward/Risk, where inflation and default are the risks and interest is the reward.
(Since the risk of default is by definition zero for a Monetarily Sovereign government that consistently acts like it and is not foolish enough to borrow money denominated in a foreign currency, that leaves only inflation vs. interest. And the net reward is given by: Interest Rate - Inflation Rate = Real Cost of Money.)
Note too that interest rates can have both types effects, but which one outweighs the other depends on the type of inflation as well as the general condition of the overall economy. At the same time, the effects of raising and lowering interest rates need not be symmetrical, since lowering interest rates to stimulate the economy often amounts to "pushing on a string" in terms of effectiveness. Especially since interest on Treasury securities is literally new money that is pumped into the economy, and lowering rates will reduce that money accordingly. True, there is in fact a positive correlation between the effective Fed Funds Rate and the CPI inflation rate, but that is as much of a chicken-and-egg problem as anything, given that the two types of inflation are both measured the same way, and that the FERAL Reserve usually raises rates in response to or in anticipation of inflation. (For all their faults, they have generally succeeded in keeping inflation more or less under control at least since the post-gold standard era.)
But how exactly does one distininguish which type of inflation predominates at a given time, and thus whether to raise or lower interest rates? Usually it is fairly simple. When the velocity of money (the rate at which money circulates through the economy) is going "too fast for conditions" relative to the economy, that is a fairly strong indicator that demand-pull inflation predominates and that interest rates ought to be raised, even if there is some cost-push inflation mixed into the overall inflation rate. But if the velocity of money is sluggish, raising rates will likely be counterproductive, at least in the absence of massive deficit spending (i.e. new money creation).
Because regardless of whether or not there is any link at all between interest rates and the actual supply of money, raising rates (especially when raised higher than the inflation rate) will always slow down the velocity of money, ceteris paribus. Likewise, cutting interest rates accelerates the velocity of money at least somewhat, even if that alone doesn't always stimulate the economy enough in practice.
So what about taxes, then? In theory, raising taxes and/or cutting government spending should also control inflation by effectively shrinking the money supply. Remember, since the federal government is Monetarily Sovereign, any tax revenue they raise is effectively destroyed in practice (just like how all deficit spending effectively creates money out of thin air). But this is a very crude way to do it, and is too slow and political to be particularly useful. That said, having some level of federal taxation can indeed act as an "automatic stabilizer" even with no changes to the tax code, since when the economy overheats, the velocity of money is high and thus more tax revenue is removed from the economy, while the reverse is true during recessions when the the velocity of money is slower. That is especially true for the idea of the Universal Exchange Tax, since it specifically taxes the movement of money, but can be true for all taxes. But interest rate control is ultimately a superior method--as long as the inflation in question is the demand-pull variety resulting from an excessive money supply and/or velocity of money. And knowing that, there is no good reason why a Monetarily Sovereign government should be shy about creating enough money to fulfill any of its ambitions that benefit the the bottom 99%.
The best, of course, is when interest is NOT coupled to the creation of money. But until they end the charade and implement Overt Congressional Funding instead, and also fully nationalize the FERAL Reserve, the best way to fight stagflation is to raise interest rates (to fight inflation) while also increasing deficit spending (to fight stagnation), effectively decoupling the two for the time being. And to fight high inflation in an overheating economy, raise interest rates first with no changes to deficit spending, and if that doesn't work, then reduce deficit spending. But don't keep interest rates too high for too long--eventually they need to be cut to avoid doing more harm than good to the economy. And note also that there is no historical correlation between deficit spending and inflation, at least not during peacetime and post-gold standard. Only during truly major wars has there been any sort of correlation between the two, given how wars tend to create shortages of goods and services.
Wait, what? That's right, there has been no correlation between federal deficit spending (i.e. money creation) and inflation in recent decades, meaning that any relationship between the money supply per se and inflation is a very tenuous one. Let that sink in for a moment. So we are nowhere near the point where increasing the money supply poses any risk of runaway inflation. And even if we were, we know precisely how to prevent and cure it.
In other words, it looks like both Rodger Mitchell and Ellen Brown are both correct to one degree or another. But what about what the FERAL Reserve is doing right now, raising interest rates (and implementing Quantitative Tightening) in the midst of historically high deficit spending? Well, seeing as how inflation is still low and currently dominated by oil prices and the Trump tariffs that are just beginning to bite, it is safe to say that cost-push inflation, not demand-pull inflation, thus predominates now and in the near future, and thus raising interest rates any further now is probably not the wisest idea. Especially given that, as Ellen Brown notes, the banksters have currently set a minefield of trigger points for variable-rate loans and mortgages, that will be set off if the Fed Funds Rate goes up much higher. And these oligarchs thus stand to pull off one of the greatest wealth transfers in history, from the bottom 99% to the top 1% and especially the top 0.01% (i.e. to the oligarchs themselves).
Bottom line: While taxes are more of a blunt instrument when used to control inflation, interest rates are essentially a razor-sharp, double-edged sword, one that we need to be very careful about using willy-nilly. Don't say we didn't warn you.
Thursday, August 2, 2018
The Big Lie of Economics
Big Lies have a very long history indeed. As the infamous Nazi propaganda minister Joseph Goebbels (who knew quite a thing or two about lying) noted, the bigger and dumber the lie is, the more likely people are to believe it. And you know what, it works. Counterintuitive, perhaps, but true nonetheless.
So what if some politician, pundit, academic, or activist were to make the following claims, which you probably have heard over and over again, ad nauseam? Would you believe them? Here goes:
- 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, 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, both large tax hikes and/or deep spending cuts. (Austerity for the bottom 99%, that is.)
So why do they borrow, if they don't really need to? First, it is due to one of several arcane and archaic rules left over from when we actually had the gold standard, which we haven't had since 1971*, that requires matching spending with either taxes or borrowing. Secondly, federal government borrowing is simply issuing Treasury securities, which are in practice really a fancy kind of national savings account rather than "debt" as the term is usually understood. And those Treasury securities are a safe haven for investors that helps to stabilize the financial system, and also provides a handy platform for the government to control interest rates. So Congress could simply pass a law changing the rules and implement Overt Congressional Funding instead, thereby completely decoupling spending, borrowing, and taxes, while still allowing investors to park their money in Treasury securities if they so choose.
Oh, and how about taxes then? Where exactly does all of that money go? Well, that is where it really gets, um, interesting to say the least. (Sit down before you read any further.) For practical purposes, all of those trillions of federal tax dollars each year get....DESTROYED upon receipt. Yes, you read that right, DESTROYED. Since the federal government by definition has an infinite amount of money since they can create it at will by fiat, taking money from We the People is like bringing coals to Newcastle only to destroy them. Of course, due to those arcane and archaic rules, the money does not get destroyed immediately, but rather it first makes a brief pit stop at the privately-owned FERAL Reserve. But the end result is exactly the same nonetheless.
(In contrast, state and local governments are NOT Monetarily Sovereign, so they must either raise taxes or borrow money in order to spend, and their tax dollars are deposited in private bank accounts prior to spending them. Ditto for the Euro nations as well.)
That does not meant that federal taxes are entirely useless, however. For one, they can be used to give the official currency "teeth" by compelling its use to pay such taxes and not accepting any other currency as payment for such taxes. They also function as a useful tool for social engineering that is difficult or impossible to do otherwise (think vice taxes and Pigouvian taxes, as well as taxes on the ultra-rich) as well. And they can also act as a (rather crude) tool for inflation control as well, by being a sort of "automatic stabilizer" when the economy overheats. But paying for federal spending and servicing the national debt? If you believe that we need to actually take money out of the economy to pay for that which the government can literally just create out of thin air, well, we've got a nice bridge we'd like to sell you.
Thus, it follows logically that the rest of the aforementioned list of lies are, well, lies all the same. Austerity (which does far more harm than good) need not be on the menu any longer, and we can opt for truly shared American prosperity instead. And that means that all of the right-wing, neoliberal pack of lies about the economy also falls like the house of cards that it is. All of those things that both corporate parties claim that we cannot afford can now be ours. If only our politicians would just be honest for once (as tall an order as that may be).
Bottom line: Money is really nothing more than a tool. And like any tool, it can indeed be weaponized--in this case, by the oligarchs and their sycophantic lackeys in government against We the People. They use the con-tricks of austerity and artificial scarcity to systematically widen the Gap between the haves and have-nots (and between the have-mores and have-lesses). But it does not have to be this way at all, and in fact We the People can turn the tables on the oligarchs by electing honest representatives that know the true meaning of Monetary Sovereignty.
So what are we waiting for?
(Hat-tip to the ever-insightful Rodger Malcolm Mitchell, Alan Longbon, and Joseph M. Firestone, for all showing us the wisdom of Monetary Sovereignty and the related Modern Monetary Theory, respectively. Before first discovering their writings on the topic in 2018, even the TSAP had previously fallen for at least a few of the variations of the Big Lie above.)
*NOTE: The Gold Standard in the USA functionally ceased to exist when Nixon suspended convertability of dollars to gold in 1971. Though originally intended to be temporary, this "Nixon Shock" was made permanent in 1973, ending the Bretton-Woods System for good, and any remaining nominal link between dollars and gold (along with any restrictions on private gold ownership and trading) was subsequently removed from the law books by 1976. The United States Dollar is now a purely fiat currency and the federal government is now fully Monetarily Sovereign (even if they don't always act like it).
So what are we waiting for?
(Hat-tip to the ever-insightful Rodger Malcolm Mitchell, Alan Longbon, and Joseph M. Firestone, for all showing us the wisdom of Monetary Sovereignty and the related Modern Monetary Theory, respectively. Before first discovering their writings on the topic in 2018, even the TSAP had previously fallen for at least a few of the variations of the Big Lie above.)
*NOTE: The Gold Standard in the USA functionally ceased to exist when Nixon suspended convertability of dollars to gold in 1971. Though originally intended to be temporary, this "Nixon Shock" was made permanent in 1973, ending the Bretton-Woods System for good, and any remaining nominal link between dollars and gold (along with any restrictions on private gold ownership and trading) was subsequently removed from the law books by 1976. The United States Dollar is now a purely fiat currency and the federal government is now fully Monetarily Sovereign (even if they don't always act like it).
Wednesday, June 20, 2018
Protectionism Without Tariffs and Trade Wars? Easy-Peasy
Looks like Trump's asinine trade war (not just with China, but also our own allies as well) has now begun in earnest. And that does not bode well at all for our economy OR theirs, since no one really wins a trade war. Smoot and Hawley must both be spinning in their graves right now, as any history buff will note.
You may remember that one of our previous posts outlines the TSAP's rather nuanced position on tariffs and trade, but we should also elaborate more on how it is possible to have an intelligent and rational kind of protectionism that does NOT depend on tariffs, quotas, or any other beggar-thy-neighbor policies. For example, since our federal government is Monetarily Sovereign, they can easily afford to do the following to actually protect important domestic industries, as the ever-insightful Rodger Malcolm Mitchell notes:
- Federal government purchases from domestic suppliers, even at higher than import prices.
- Federal tax breaks for selected industries
- Direct federal cash infusions (i.e. direct subsidies) to the selected companies.
And that is true because, as he also notes, a Monetarily Sovereign government like ours literally has the unlimited ability to create and spend its own sovereign currency. All federal government spending, without exception, involves the ad hoc creation of brand new dollars every time, arcane and archaic rules notwithstanding. No need to bring the proverbial coals (i.e. tax/tariff dollars) to Newcastle only to effectively destroy them. And unlike tariffs and quotas, these measures result in a positive-sum game rather than a zero or negative-sum game.
Of course, all of these things are proverbial carrots, so what about the sticks, you ask? Even then, most tariffs (and quotas) are far too blunt an instrument, are prone to backfiring, and should be narrowly tailored and used only as a last resort (i.e. to enforce specific trade and other agreements that are being blatantly flouted, and/or for strictly Pigouvian reasons), if even at all. If outsourcing/offshoring of American jobs is the real concern, it would be far better to start by closing the ludicrous loopholes in the corporate tax code that encourage outsourcing/offshoring of such jobs in the first place. The latter tactic is the basis for Bernie Sanders' Outsourcing Prevention Act, which would also end or claw back subsidies for American corporations that send jobs overseas. And his other big idea, the Rebuild America Act, would create additional jobs rebuilding America's obsolete, neglected, and/or crumbling infrastructure as well.
Note that Trump had clearly stolen, bastardized, and ran with several of Bernie's ideas while combining it all with empty rhetoric and beggar-thy-neighbor policies. That is, when Trump's ideas are anything even close to coherent, as opposed to the usual incoherent verbal defecation that he is famous for.
But make no mistake. Our nation's once-great manufacturing base has been hollowed out for decades, and much of it is currently rotting and rusting thanks to the neoliberal "free trade" scam brought to us by Reagan (and Thatcher in the UK) and embraced by both corporate parties ever since. We ignore it at our own peril. And the genuine political left would truly do well to abandon this highly toxic and corrosive ideology yesterday.
Monday, June 18, 2018
We Condemn Trump's Deplorable Immigration Policy
We at the True Spirit of America Party hereby wholeheartedly condemn the Trump administration's ruthless, cowardly, and deplorable immigration policy. It started out bad enough with senseless raids against non-criminal and non-violent undocumented immigrants. But in recent weeks, things took an even darker turn. The administration's is literally separating undocumented children (including infants and toddlers!) from their parents (which easily qualifies as torture) as a cowardly and cynical ploy to gain "leverage" over both the immigrants themselves as well as the administration's political opponents. And even caging them in prison-like conditions on top of that while they await their questionable fate. Seriously, how absolutely low can one get?
And for those who say that it's "not so bad" or "it could be a lot worse", we say, compared to what, exactly? Nazi Germany? Soviet Russia? Because that is, quite frankly, a pitifully low bar to clear. And it is worth noting that, not even during the internment of Japanese Americans during WWII (as deplorable as it was) were children separated from their parents.
Future generations will ask everyone who was around when this happened, "what did you know, when did you know it, and what did you do about it?" And you should hope that you can honestly say that you actually had the intestinal fortitude to do the right thing and wholeheartedly opposed such evil and despicable acts that blatantly contravene international law and all that is decent in this world.
UPDATE: On June 20, Trump finally bowed to increasing public outrage and pressure and signed an executive order halting the deplorable practice of ICE agents separating families at the border. But the damage is basically done already, and the rest of Trump's current immigration policy still leaves a lot to be desired overall. And as of August, most of the separated children have still not yet been reunited with their parents even two months later.
And for those who say that it's "not so bad" or "it could be a lot worse", we say, compared to what, exactly? Nazi Germany? Soviet Russia? Because that is, quite frankly, a pitifully low bar to clear. And it is worth noting that, not even during the internment of Japanese Americans during WWII (as deplorable as it was) were children separated from their parents.
Future generations will ask everyone who was around when this happened, "what did you know, when did you know it, and what did you do about it?" And you should hope that you can honestly say that you actually had the intestinal fortitude to do the right thing and wholeheartedly opposed such evil and despicable acts that blatantly contravene international law and all that is decent in this world.
UPDATE: On June 20, Trump finally bowed to increasing public outrage and pressure and signed an executive order halting the deplorable practice of ICE agents separating families at the border. But the damage is basically done already, and the rest of Trump's current immigration policy still leaves a lot to be desired overall. And as of August, most of the separated children have still not yet been reunited with their parents even two months later.
Friday, May 25, 2018
The Trump "Gaffe" That Wasn't
Back in 2016, then presidential candidate Donald Trump said a lot of outrageous and controversial things and too many gaffes to count. But one in particular stands out in light of recent posts and current events, namely, the one in which he implied he would default on the national debt if he couldn't negotiate a better deal. Now that is clearly not something for a politician or candidate to even joke about, let alone actually do. But it was what he said after he was criticized for it and he backpedaled on it which was actually much more noteworthy:
Wait, what? You read that correctly. Modern Monetary Theory (MMT) has actually been arguing this for years now, as has Rodger Malcolm Mitchell and his own theory of Monetary Sovereignty (MS). That is, a Monetarily Sovereign government like our own federal government and many others (but unlike the euro nations or any US state or local government) has the inherent and unlimited power to create money by fiat. The only limits such a government has are those it chooses to impose on itself, such as the remaining arcane and archaic rules left over from when we actually had a gold standard before we got off of it in 1971. The world changed in that year, but our "leaders" have apparently not gotten the memo.
You might want to sit down before you read any further. Taxes do NOT actually pay for federal spending, rather, the government simply creates the money they spend ad hoc with a few clicks of a computer as they go along. Nor is there any physical need for them to borrow money, but they do so anyway by issuing Treasury securities (i.e. T-bills, T-notes, and T-bonds) whenever they create new money that is unmatched by taxes in order to match it with borrowing--all because of those arcane and archaic rules that they could remove with a stroke of a pen if they chose to. That is, IF they actually chose to.
So where do our tax dollars actually go then? Well, one could argue that those dollars are effectively taken out of the economy and needlessly destroyed. And yes, some of those dollars are ultimately destroyed in practice if not in theory. But it is worse than that, for at least at some point before destruction, they first have to make a pit stop at the privately-owned FERAL Reserve, where they do little more than further enrich the bankster oligarchs. Again, all because of those arcane and archaic rules.
And that big, scary number that we see on the National Debt Clock? Well, nowadays the national debt is literally just an accounting gimmick. What it really consists of are deposits in federal Treasury security accounts, not debt in the way that private debt is. Effectively, it is really a national savings account, and deficit spending is simply when the government puts more money into the economy (via spending) than it takes out (via taxes and fees). Thus, a deficit for the federal budget is actually a surplus for the rest of the economy, and vice-versa.
Of course, Rodger Mitchell has an even better, more fundamental idea that makes it so the government would never need to borrow a single penny ever again, and it doesn't require raising taxes OR cutting spending. Not only that, but it would guarantee that Social Security and Medicare, and any other program, would remain fully funded indefinitely as well without the use of FICA taxes (or any other tax for that matter). The solution, in his exact words:
Before that, there actually is a painless (albeit unconventional) method of paying off the existing debt in one fell swoop. Not just this year's deficit, but ALL of the cumulative $21 trillion of the debt. It's called the Noble Solution (named after its creator, Richard E. Noble) and does not involve any significant tax hikes or spending cuts. So what is it? It's something we never would have advocated just a few years ago: printing (electronically creating) money out of thin air to pay it off all at once. After all, FERAL Reserve has been creating money out of thin air for decades now (including that recent whopping $16 trillion secret bailout of the banks, which eventually rose to nearly $30 trillion) so we might as well put this practice to productive use. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it for good.
But wouldn't that lead to hyperinflation? Not if it is properly done with due diligence. Noble points out that while creating such money is undoubtedly inflationary, using it to pay off the debt (which is in Treasury bonds and is thus already part of the money supply) would be deflationary in that it would shrink the money supply by an equal amount. Thus, the two effects would cancel each other out, as paper (electronic data) would be exchanged for paper (data). Of course, we would have to bypass the FERAL Reserve to avoid creating more debt in the process, such as #MintTheCoin. Or better yet, abolish or nationalize the FERAL Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress and the Department of the Treasury. America would then be free and clear for the first time in history since Thomas Jefferson. And it would cost us NOTHING.
Alternatively, Joseph M. Firestone points out that the very same effect can also be had more gradually, with Congress passing an Act (such as the very next budget or appropriations bill) that removes those arcane and archaic rules entirely, and mandates/guarantees than any new deficits as well as any outstanding Treasury securities (i.e. national debt) be funded / paid for automatically with the very same ad hoc money creation that they already do in practice, but no longer needing to match it with new borrowing or tax revenues. Thus, the federal government would no longer need to borrow even one penny (i.e. issue any new Treasury securities) unless they truly wanted to for reasons unrelated to the federal budget. And according to Rodger Mitchell, such bonds do, in fact, have other useful, unrelated functions (i.e. providing a safe haven for investors to park their money, and an effective platform for the government to control both short and long-term interest rates, and thus the demand for dollars). But the point is they would no longer HAVE to do so just to meet their current and future fiscal obligations, so the national debt would stop increasing and gradually decrease as any existing Treasury securities mature and/or are redeemed. And thus the 100% contrived political issue (and cudgel) that is the national debt / deficit would quickly become a dead issue, and we can finally focus on other, real priorities for a change.
So what are we waiting for?
This is the United States government. First of all, you never have to default because you print the money. I hate to tell you. So there’s never a default.And that second "gaffe", ladies and gentlemen, was actually NOT a gaffe at all. Why? Because it is actually TRUE, believe it or not. Even a stopped clock is right twice a day, after all.
Wait, what? You read that correctly. Modern Monetary Theory (MMT) has actually been arguing this for years now, as has Rodger Malcolm Mitchell and his own theory of Monetary Sovereignty (MS). That is, a Monetarily Sovereign government like our own federal government and many others (but unlike the euro nations or any US state or local government) has the inherent and unlimited power to create money by fiat. The only limits such a government has are those it chooses to impose on itself, such as the remaining arcane and archaic rules left over from when we actually had a gold standard before we got off of it in 1971. The world changed in that year, but our "leaders" have apparently not gotten the memo.
You might want to sit down before you read any further. Taxes do NOT actually pay for federal spending, rather, the government simply creates the money they spend ad hoc with a few clicks of a computer as they go along. Nor is there any physical need for them to borrow money, but they do so anyway by issuing Treasury securities (i.e. T-bills, T-notes, and T-bonds) whenever they create new money that is unmatched by taxes in order to match it with borrowing--all because of those arcane and archaic rules that they could remove with a stroke of a pen if they chose to. That is, IF they actually chose to.
So where do our tax dollars actually go then? Well, one could argue that those dollars are effectively taken out of the economy and needlessly destroyed. And yes, some of those dollars are ultimately destroyed in practice if not in theory. But it is worse than that, for at least at some point before destruction, they first have to make a pit stop at the privately-owned FERAL Reserve, where they do little more than further enrich the bankster oligarchs. Again, all because of those arcane and archaic rules.
And that big, scary number that we see on the National Debt Clock? Well, nowadays the national debt is literally just an accounting gimmick. What it really consists of are deposits in federal Treasury security accounts, not debt in the way that private debt is. Effectively, it is really a national savings account, and deficit spending is simply when the government puts more money into the economy (via spending) than it takes out (via taxes and fees). Thus, a deficit for the federal budget is actually a surplus for the rest of the economy, and vice-versa.
Of course, Rodger Mitchell has an even better, more fundamental idea that makes it so the government would never need to borrow a single penny ever again, and it doesn't require raising taxes OR cutting spending. Not only that, but it would guarantee that Social Security and Medicare, and any other program, would remain fully funded indefinitely as well without the use of FICA taxes (or any other tax for that matter). The solution, in his exact words:
The best way is to eliminate the federal budget deficit and debt: Ending government borrowing. The government has the unlimited ability to create and spend money without borrowing. The process will be:
1) Congress will create an account called "Money."
2) Congress will determine how much money this account contains. The process will be similar to the way Congress now determines the debt ceiling.
3) Federal agencies will write checks against this account according to budgets decided by Congress. If any federal agency needed additional funds, Congress would decide whether or not to allow this spending, in the same way that Congress votes for additional spending by the military et al.
This would eliminate concerns about "our grandchildren paying for the federal debt." There would be no federal debt.And as long as such money were created without any interest or related fees (as per Ellen Brown) such a solution would actually work. Modern Monetary Theory indeed supports such an idea. But before we can do that, of course, we must first have an independent Treasury and/or a public national bank in place of the privately-owned FERAL Reserve. (And since he mentioned the debt ceiling, that is another thing we should really get rid of as well in the meantime, since it does far more harm than good.)
Before that, there actually is a painless (albeit unconventional) method of paying off the existing debt in one fell swoop. Not just this year's deficit, but ALL of the cumulative $21 trillion of the debt. It's called the Noble Solution (named after its creator, Richard E. Noble) and does not involve any significant tax hikes or spending cuts. So what is it? It's something we never would have advocated just a few years ago: printing (electronically creating) money out of thin air to pay it off all at once. After all, FERAL Reserve has been creating money out of thin air for decades now (including that recent whopping $16 trillion secret bailout of the banks, which eventually rose to nearly $30 trillion) so we might as well put this practice to productive use. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it for good.
But wouldn't that lead to hyperinflation? Not if it is properly done with due diligence. Noble points out that while creating such money is undoubtedly inflationary, using it to pay off the debt (which is in Treasury bonds and is thus already part of the money supply) would be deflationary in that it would shrink the money supply by an equal amount. Thus, the two effects would cancel each other out, as paper (electronic data) would be exchanged for paper (data). Of course, we would have to bypass the FERAL Reserve to avoid creating more debt in the process, such as #MintTheCoin. Or better yet, abolish or nationalize the FERAL Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress and the Department of the Treasury. America would then be free and clear for the first time in history since Thomas Jefferson. And it would cost us NOTHING.
Alternatively, Joseph M. Firestone points out that the very same effect can also be had more gradually, with Congress passing an Act (such as the very next budget or appropriations bill) that removes those arcane and archaic rules entirely, and mandates/guarantees than any new deficits as well as any outstanding Treasury securities (i.e. national debt) be funded / paid for automatically with the very same ad hoc money creation that they already do in practice, but no longer needing to match it with new borrowing or tax revenues. Thus, the federal government would no longer need to borrow even one penny (i.e. issue any new Treasury securities) unless they truly wanted to for reasons unrelated to the federal budget. And according to Rodger Mitchell, such bonds do, in fact, have other useful, unrelated functions (i.e. providing a safe haven for investors to park their money, and an effective platform for the government to control both short and long-term interest rates, and thus the demand for dollars). But the point is they would no longer HAVE to do so just to meet their current and future fiscal obligations, so the national debt would stop increasing and gradually decrease as any existing Treasury securities mature and/or are redeemed. And thus the 100% contrived political issue (and cudgel) that is the national debt / deficit would quickly become a dead issue, and we can finally focus on other, real priorities for a change.
So what are we waiting for?
Saturday, May 19, 2018
Enough Is Enough Already! (Yet Again)
Another day, another horrible mass shooting. Another week, another horrible school shooting--this time at a Santa Fe, Texas high school by an a 17 year old student armed with a common shotgun and pistol, who killed 8 students and 2 teachers, and injured at least ten others. This was the deadliest school shootings since the Parkland school shooting on February 14, 2018, and the 22nd school shooting of 2018 to date. Seems that mass shootings in general have become an almost daily occurrence in recent years, and school shootings in particular an almost weekly occurrence--in the USA at least. But the rest of the industrialized world doesn't really seem to have this kind of problem. Why is that? Well, there's always....
GUNS.
America is the land of 300 million guns, and combined with a culture that is crazier and more violent than most other "developed" countries, and much more extreme inequality, it is a very lethal combination indeed. And some states, most notably Florida and Texas, have particularly lax gun laws compared to other states. Of course, the biggest elephant in the room is the fact that at least 98% of mass shooters are MEN. Thanks to the patriarchy and the sort of "toxic masculinity" that it creates, combined with the above factors, too many men end up resorting to violence. Like the Iron Maiden song says, "a briefcase, a lunch, and a man on the edge". With a gun. I mean, what could possibly go wrong, right?
There should be no doubt at this point that something needs to be done. However, we do not believe that banning all guns for everyone, or adopting British or European-style gun laws, is the solution, as the genie is already out of the bottle, and there is also that whole Constitution thingy as well. Thus, the TSAP recommends that the following measures be taken:
While we don't know why this particular mass murderer did what he did, it was most likely due to a combination of toxic masculinity, easy access to deadly weapons, an apparent desire to copycat the infamous Columbine massacre, and some sort of grudge with the school that he shot up. Regardless of the motive, the first two factors are absolutely essential for virtually all mass shootings, whether in schools or otherwise.
What is unusual about this particular shooting is the lack of any known "red flags" that most school shooters (and mass shooters in general) tend to share, as well as the fact that it was conducted with fairly common weapons (a pistol and shotgun that apparently belonged to his father) instead of the usually obligatory AR-15 or similar weapons of war. He had no history of violence, and was even a varsity athlete. He literally had only one known risk factor--access to his dad's guns at home. And while he may very well be the exception that proves the rule, it also goes to show just how pervasive this epidemic is, to the point where it is no longer even quite as predictable anymore. And how the sheer number of guns of all kinds in this country clearly doesn't seem to make us any safer either.
And before anyone starts getting on their anti-youth high horse about this, keep in mind that the zero-tolerance school policies put in place in the wake of Columbine, along with the increasingly prison-like atmosphere in schools these days, have done absolutely nothing to stop school shootings from increasing dramatically since then. Such tragic events went from occurring an average of once or twice a year in the 1990s and early 2000s to nearly once a WEEK this year so far as well as the past few years. If anything, one can argue that the "powder keg" atmosphere made things worse in the long run (especially in cases like these with no known risk factors aside from access to guns). And of course, most mass shooters in general are over 21 and the vast, vast majority are over 18.
I don't know about you, but my favorite part of the Second Amendment is where it says "well-regulated". Too bad so many Republican Congresscritters who are bought and paid for by the NRA can't seem to read the first half of the freaking sentence. Oh, and nevermind that when it was written, guns at that time fired at most one round per minute, not 600+ per minute like so many of today's killing machines. Not like the gun lobby and their lackeys really do nuance.
UPDATE: Looks like the killer was a real "Nice Guy"(TM). Like Elliot Rodger kind of "nice", that is. So "nice", in fact, that at least the first of his victims was a girl who he had wanted to date but had rejected him. Such an aggrieved male entitlement mentality is part and parcel of the toxic masculinity that underlies nearly every single mass shooting thus far.
GUNS.
America is the land of 300 million guns, and combined with a culture that is crazier and more violent than most other "developed" countries, and much more extreme inequality, it is a very lethal combination indeed. And some states, most notably Florida and Texas, have particularly lax gun laws compared to other states. Of course, the biggest elephant in the room is the fact that at least 98% of mass shooters are MEN. Thanks to the patriarchy and the sort of "toxic masculinity" that it creates, combined with the above factors, too many men end up resorting to violence. Like the Iron Maiden song says, "a briefcase, a lunch, and a man on the edge". With a gun. I mean, what could possibly go wrong, right?
There should be no doubt at this point that something needs to be done. However, we do not believe that banning all guns for everyone, or adopting British or European-style gun laws, is the solution, as the genie is already out of the bottle, and there is also that whole Constitution thingy as well. Thus, the TSAP recommends that the following measures be taken:
- Bring back a new and improved 1994 assault-weapons ban yesterday, this time with more teeth. This time, include all rapid-fire devices and all magazines with more than ten rounds in the ban as well as the previously-banned types of semi-automatic rifles and their knockoffs.
- Remove the 20-year ban on gun violence research, yesterday.
- End the gun-show loophole and implement universal background checks, yesterday.
- Put a significant excise tax on all bullets/ammo, like Chris Rock recommended. (Seriously)
- Treat ammo sales the same as gun sales. Or better yet, treat bullets like Sudafed: must show ID, limit on the number that one can buy, the number bought would be recorded, and if you do buy too many, you will be investigated.
- Pass a "one gun a month" law at the federal level. And consider perhaps putting a limit on the number of guns that an individual can own at a given time, except for antiques/relics/curios.
- Require reporting of lost or stolen guns.
- Regulate firearms like other consumer products in terms of health and safety standards--currently such standards are nonexistent.
- Improve enforcement of existing gun laws, which tend not to be enforced very well these days, and improve state reporting of prohibited persons to NICS. Also, prohibit anyone on the terrorism watch list from buying any guns, period.
- Consider a massive gun buyback program, one that pays significantly more than what the guns are worth on the street. Voluntary for any still-legal weapons, mandatory for any newly-banned ones.
- And last but not least, improve our woefully-inadequate mental healthcare system.
While we don't know why this particular mass murderer did what he did, it was most likely due to a combination of toxic masculinity, easy access to deadly weapons, an apparent desire to copycat the infamous Columbine massacre, and some sort of grudge with the school that he shot up. Regardless of the motive, the first two factors are absolutely essential for virtually all mass shootings, whether in schools or otherwise.
What is unusual about this particular shooting is the lack of any known "red flags" that most school shooters (and mass shooters in general) tend to share, as well as the fact that it was conducted with fairly common weapons (a pistol and shotgun that apparently belonged to his father) instead of the usually obligatory AR-15 or similar weapons of war. He had no history of violence, and was even a varsity athlete. He literally had only one known risk factor--access to his dad's guns at home. And while he may very well be the exception that proves the rule, it also goes to show just how pervasive this epidemic is, to the point where it is no longer even quite as predictable anymore. And how the sheer number of guns of all kinds in this country clearly doesn't seem to make us any safer either.
And before anyone starts getting on their anti-youth high horse about this, keep in mind that the zero-tolerance school policies put in place in the wake of Columbine, along with the increasingly prison-like atmosphere in schools these days, have done absolutely nothing to stop school shootings from increasing dramatically since then. Such tragic events went from occurring an average of once or twice a year in the 1990s and early 2000s to nearly once a WEEK this year so far as well as the past few years. If anything, one can argue that the "powder keg" atmosphere made things worse in the long run (especially in cases like these with no known risk factors aside from access to guns). And of course, most mass shooters in general are over 21 and the vast, vast majority are over 18.
I don't know about you, but my favorite part of the Second Amendment is where it says "well-regulated". Too bad so many Republican Congresscritters who are bought and paid for by the NRA can't seem to read the first half of the freaking sentence. Oh, and nevermind that when it was written, guns at that time fired at most one round per minute, not 600+ per minute like so many of today's killing machines. Not like the gun lobby and their lackeys really do nuance.
UPDATE: Looks like the killer was a real "Nice Guy"(TM). Like Elliot Rodger kind of "nice", that is. So "nice", in fact, that at least the first of his victims was a girl who he had wanted to date but had rejected him. Such an aggrieved male entitlement mentality is part and parcel of the toxic masculinity that underlies nearly every single mass shooting thus far.
Saturday, May 12, 2018
The $21+ TRILLION Question
Although the government shutdown and debt-ceiling brinksmanship has been averted (for now), the $21+ TRILLION question remains: what are we going to do about the national debt? Especially now that it is set to skyrocket even further into the stratosphere due to both massive tax cuts (mainly for the rich and mega-corporations) and spending increases, including on our already over-bloated and over-extended military. It is now mathematically impossible to pay it off at this point. So what is the solution, then?
Obviously, if we find ourselves in a hole (especially one as deep as this), the very first thing we should do is stop digging. That is known as the First Law of Holes. That means no more deficit spending for the foreseeable future, period. But unfortunately, that's a lot easier said than done. Taxes will have to go up and spending will have to go down--dramatically. And that would do more harm than good at the levels it would need to be done. There is really no way around that.
However, there actually is a painless (albeit unconventional) method of paying off the debt in one fell swoop. Not just this year's deficit, but ALL of the cumulative $21 trillion of the debt. It's called the Noble Solution (named after its creator, Richard E. Noble) and does not involve any significant tax hikes or spending cuts. So what is it? It's something we never would have advocated just a few years ago: printing (electronically creating) money out of thin air to pay it off all at once. Alas, the genie is out of the bottle now, as the Feral Reserve has been creating money out of thin air for decades (including that recent whopping $16 trillion secret bailout of the banks, which eventually rose to nearly $30 trillion) so we might as well put this practice to productive use. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it for good.
But wouldn't that lead to hyperinflation? Not if it is properly done with due diligence. Noble points out that while creating money is undoubtedly inflationary, using it to pay off the debt (which is in Treasury bonds and is thus already part of the money supply) would be deflationary in that it would shrink the money supply by an equal amount. Thus, the two effects would cancel each other out, as paper (electronic data) would be exchanged for paper (data). Of course, we would have to bypass the Feral Reserve to avoid creating more debt in the process, such as #MintTheCoin. Or better yet, abolish or nationalize the FERAL Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress and the Department of the Treasury. America would then be free and clear for the first time in history since Thomas Jefferson.
Of course, while doing it once may not be harmful, doing it regularly can be. To make sure we never have to do this again, we must make sure the debt never, ever, reaches such stratospheric levels again, period. In addition to nationalizing the Feral Reserve to make it a public national bank that creates interest-free currency, fiscal policy must be tightened after the Noble Solution is implemented and the debt is paid off. We have already outlined in previous posts what must be done as far as taxes and spending are concerned. Alternatively, or in addition to the above, there is also the legendary Warren Buffett's clever idea: make a law that anytime the budget deficit exceeds 3% of GDP, all sitting members of Congress are ineligible for re-election, period. Problem solved.
Of course, the longer-term drivers of future debt obligations are the programs that make up so-called "entitlement" spending, mainly Social Security, Medicare, and Medicaid. But even here, there is less than meets the eye. For Social Security, that can be resolved by 1) scrapping the wage cap on FICA taxes (or raising it to an arbitrarily high level like $1 million or $10 million), 2) indexing initial benefits to prices or median wages instead of average wages, and 3) very gradually raising the full retirement age to 70 for those born after 1980 or so. In fact, if we did all those things plus a very slight 0.2% hike in the FICA tax, we could even expand Social Security (and perhaps briefly lower the retirement age a bit in the short term) while still keeping it solvent for the foreseeable future. For Medicare and Medicaid, the only real long-term solution to their burgeoning fiscal woes is a truly universal single-payer healthcare system that can bend the cost curve downward by taking the profit out of healthcare and especially tackling the price-gouging of Big Pharma. Any other proposed solutions are mere window-dressing at best.
Of course, Rodger Mitchell has an even better, more fundamental idea that makes it so the government would never need to borrow a single penny ever again, and it doesn't require raising taxes OR cutting spending. Not only that, but it would guarantee that Social Security and Medicare, and any other program, would remain fully funded indefinitely as well without the use of FICA taxes (or any other tax for that matter). The solution, in his exact words:
But the bottom line is that the debt must be defeated, and soon. We simply cannot afford to continue kicking this can further down the road. Otherwise we may very well go the way of the Romans. The greatest tragedy of which being the fact that it was all 100% contrived and therefore 100% avoidable all along.
However, there actually is a painless (albeit unconventional) method of paying off the debt in one fell swoop. Not just this year's deficit, but ALL of the cumulative $21 trillion of the debt. It's called the Noble Solution (named after its creator, Richard E. Noble) and does not involve any significant tax hikes or spending cuts. So what is it? It's something we never would have advocated just a few years ago: printing (electronically creating) money out of thin air to pay it off all at once. Alas, the genie is out of the bottle now, as the Feral Reserve has been creating money out of thin air for decades (including that recent whopping $16 trillion secret bailout of the banks, which eventually rose to nearly $30 trillion) so we might as well put this practice to productive use. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it for good.
But wouldn't that lead to hyperinflation? Not if it is properly done with due diligence. Noble points out that while creating money is undoubtedly inflationary, using it to pay off the debt (which is in Treasury bonds and is thus already part of the money supply) would be deflationary in that it would shrink the money supply by an equal amount. Thus, the two effects would cancel each other out, as paper (electronic data) would be exchanged for paper (data). Of course, we would have to bypass the Feral Reserve to avoid creating more debt in the process, such as #MintTheCoin. Or better yet, abolish or nationalize the FERAL Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress and the Department of the Treasury. America would then be free and clear for the first time in history since Thomas Jefferson.
Of course, while doing it once may not be harmful, doing it regularly can be. To make sure we never have to do this again, we must make sure the debt never, ever, reaches such stratospheric levels again, period. In addition to nationalizing the Feral Reserve to make it a public national bank that creates interest-free currency, fiscal policy must be tightened after the Noble Solution is implemented and the debt is paid off. We have already outlined in previous posts what must be done as far as taxes and spending are concerned. Alternatively, or in addition to the above, there is also the legendary Warren Buffett's clever idea: make a law that anytime the budget deficit exceeds 3% of GDP, all sitting members of Congress are ineligible for re-election, period. Problem solved.
Of course, the longer-term drivers of future debt obligations are the programs that make up so-called "entitlement" spending, mainly Social Security, Medicare, and Medicaid. But even here, there is less than meets the eye. For Social Security, that can be resolved by 1) scrapping the wage cap on FICA taxes (or raising it to an arbitrarily high level like $1 million or $10 million), 2) indexing initial benefits to prices or median wages instead of average wages, and 3) very gradually raising the full retirement age to 70 for those born after 1980 or so. In fact, if we did all those things plus a very slight 0.2% hike in the FICA tax, we could even expand Social Security (and perhaps briefly lower the retirement age a bit in the short term) while still keeping it solvent for the foreseeable future. For Medicare and Medicaid, the only real long-term solution to their burgeoning fiscal woes is a truly universal single-payer healthcare system that can bend the cost curve downward by taking the profit out of healthcare and especially tackling the price-gouging of Big Pharma. Any other proposed solutions are mere window-dressing at best.
Of course, Rodger Mitchell has an even better, more fundamental idea that makes it so the government would never need to borrow a single penny ever again, and it doesn't require raising taxes OR cutting spending. Not only that, but it would guarantee that Social Security and Medicare, and any other program, would remain fully funded indefinitely as well without the use of FICA taxes (or any other tax for that matter). The solution, in his exact words:
The best way is to eliminate the federal budget deficit and debt: Ending government borrowing. The government has the unlimited ability to create and spend money without borrowing. The process will be:
1) Congress will create an account called "Money."
2) Congress will determine how much money this account contains. The process will be similar to the way Congress now determines the debt ceiling.
3) Federal agencies will write checks against this account according to budgets decided by Congress. If any federal agency needed additional funds, Congress would decide whether or not to allow this spending, in the same way that Congress votes for additional spending by the military et al.
This would eliminate concerns about "our grandchildren paying for the federal debt." There would be no federal debt.And as long as such money were created without any interest or related fees (as per Ellen Brown) such a solution would actually work. Modern Monetary Theory indeed supports such an idea. But before we can do that, of course, we must first have an independent Treasury and/or a public national bank in place of the privately-owned FERAL Reserve. (And since he mentioned the debt ceiling, that is another thing we should really get rid of as well in the meantime, since it does far more harm than good.)
But the bottom line is that the debt must be defeated, and soon. We simply cannot afford to continue kicking this can further down the road. Otherwise we may very well go the way of the Romans. The greatest tragedy of which being the fact that it was all 100% contrived and therefore 100% avoidable all along.
Saturday, April 28, 2018
We Endorse Andrew Yang 2020 (With Reservations)
As we have noted in the previous post about upcoming Democratic 2020 presidential candidate Andrew Yang, based on his stance on the issues, the TSAP hereby endorses him as our honorary candidate, albeit with the following reservations:
- First and foremost, the TSAP beleives that the Universal Basic Income (UBI) Guarantee for all should either be the same for all ages, or at least half the adult amount for unemancipated young people under 18. And people 18 and over should get the full amount, period, without any conditions, and seniors over 65 should be free to choose between UBI or Social Security, but not both. Yang's proposal differs from that in that only people aged 18-64 will get it, and if you haven't graduated high school, you won't get it until age 20. That is ageist, classist, ableist, and paternalistic, and thus will not eliminate poverty for everyone, defeating the program's purpose.
- Dovetailing with reservation #1 above, Yang's desire and ideas to help poor people and especially single parents (which the TSAP fully agrees with) kinda clashes with his age restrictions on the UBI. Many younger mothers (and fathers) along with their children will thus remain locked into poverty until age 20 unless Yang removes that age restriction from the UBI. And the effects of early childhood poverty can linger long after they are no longer poor.
- For the American Exchange Program he proposes, the TSAP has quite a bit of skepticism, both logistically as well as in terms of equity. And the idea of tying it to the UBI for recent high school graduates kinda defeats the purpose of UBI.
- Nuclear power--the TSAP no longer supports expanding it any further.
- The nuclear family--Yang does seem to idealize it a little too much at times, though still far less so than Republicans do.
- His whole plank about the ubiquitous "kids and smartphones" issue, though more enlightened and nuanced than most proposals out there, does still seem to reek of ageism and paternalism a bit.
- He does not appear to be calling for free college for all like we do, but rather "controlling the costs". The TSAP believes that, while a step in the right direction, it still misses the mark.
- He wants to "modernize" military spending, but says nothing about cutting it. The TSAP says, why not both? We need to cut our ridiculously bloated military spending yesterday, by at least half--and we will still have the strongest fighting force in the world, by far.
- He wants to reduce the student loan debt burden, but not have a complete jubilee like the TSAP recommends.
- And of course, not a single word about the FERAL Reserve and its usury-and-debt-based funny money that is the root of so many of our problems. Which is understandable, since the banksters would like have him meet the same fate as JFK and Lincoln if he actually stood up to them and tackled this head-on while in office.
That said, the above reservations aside, we will nonetheless wholeheartedly endorse him for President of the United States. Just about everything else on his platform we fully and enthusiastically support. Given all the things he gets right, he will be a major asset to our nation and world.
Thursday, April 12, 2018
An Honorary TSAP Candidate, Andrew Yang 2020
Imagine if you were to indefinitely receive $1000 per month, with no strings attached. That is a whopping $12,000 per year. Not enough to live large on by itself, but most Americans can certainly use the help these days. And the only catch? It would be funded by a certain type of business tax of 10% on most goods and services, that would predictably be passed onto the consumer and thus result in an overall 10% increase in prices. Clearly, most if not nearly all people would come out way ahead. Would you take it?
If the answer is yes, then Andrew Yang is your man. The 43 year old entrepreneur plans to run for President of the United States in 2020, and is promising something than Hillary, Trump, and even Bernie did not--a Universal Basic Income (UBI) Guarantee for all, which the TSAP has also advocated. And the tax he is proposing is a value-added tax (VAT) that most other countries have, similar to a sales tax but collected a bit differently and built into the price of the affected goods and services. He believes that robotics and automation will eventually take so many jobs that our collective hand will be forced to come up with a UBI, and his VAT idea for a funding source would theoretically be the best way to capture the gains that businesses make from robotics and automation (and thus internalize the externalities that the resulting losses impose on society).
Granted, the TSAP proposal is a bit different than his in two ways . First, we do not consider a VAT to be our preferred funding source (though we do not oppose it), as we prefer either the Universal Exchange Tax (UET), progressive income taxes, land value and severance taxes on natural resources, carbon taxes, luxury taxes, money creation, or some combination of these. Secondly, our proposal would have it for all ages, not just 18-64 like he wants, and under our proposal those old enough to receive Social Security can choose either the UBI or Social Security, whichever is higher (but not both). And those under 18 would receive at least half the adult amount if not the full amount, with it going to the parent(s) or guardian(s) by default (or to the young person directly, if emancipated earlier than 18). But otherwise, Yang's bold-yet-modest proposal is right up our alley. It is high enough to eliminate absolute poverty completely and give workers much more bargaining power, while still being low enough for society to afford as well as low enough to alleviate the largely overblown fear of disincentivizing work (since it is highly unlikely that anyone can live comfortably on only $12,000 per year for very long). And since there are no means tests or discrimination, and it is strictly individualized, that also means that there are no perverse incentives, welfare traps, or gaming the system either. And it would be like a giant, permanent B-12 shot for our currently secularly stagnating economy. It's a win-win-win situation for everyone but the oligarchs, in other words.
Thus, the TSAP hereby considers Andrew Yang as an honorary candidate for 2020. We are not sure how he stands on other issues--though we do know he's a Democrat--but unless his stance on other issues proves us wrong, we will nonetheless wholeheartedly endorse him in the meantime.
UPDATE: Looks like his stance on other issues is also generally within the bounds of what the TSAP supports as well, including (but not limited to) single-payer healthcare for all. Thus, we hereby endorse him as our honorary presidential candidate for 2020 unless he does an about-face and proves us wrong.
UPDATE: Looks like his stance on other issues is also generally within the bounds of what the TSAP supports as well, including (but not limited to) single-payer healthcare for all. Thus, we hereby endorse him as our honorary presidential candidate for 2020 unless he does an about-face and proves us wrong.
Saturday, April 7, 2018
Quagmire Accomplished, 15 Years Later
What's left after 15 years since George W. Bush had the not-very-bright idea of invading Iraq in 2003? One MILLION people dead in total, thousands of American servicemembers dead and many times that number wounded, trillions of dollars in the hole, the horrific scourge of ISIL that would not otherwise have even existed, and no one held accountable at all. Add the 16+ year long Afghanistan quagmire to the mix, and the more recent incursion into Syria, and the death toll and total costs rise even higher still.
The moral of the story: Wars have consequences, often serious and far-reaching ones. So going to war should NEVER be done unless absolutely necessary, and certainly not willy-nilly. Unnecessary wars of choice create terrorists faster than we can kill them. And whether it's a "wham, bam, thank you ma'am" sort of war like Libya or a decade(s)-long quagmire like Vietnam, Iraq, or Afghanistan, the end result is ultimately the same sort of disastrous failed state that becomes a magnet for extremists. And once it becomes Quagmire Accomplished, 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.
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. 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. VIVE LA FEMME!
The moral of the story: Wars have consequences, often serious and far-reaching ones. So going to war should NEVER be done unless absolutely necessary, and certainly not willy-nilly. Unnecessary wars of choice create terrorists faster than we can kill them. And whether it's a "wham, bam, thank you ma'am" sort of war like Libya or a decade(s)-long quagmire like Vietnam, Iraq, or Afghanistan, the end result is ultimately the same sort of disastrous failed state that becomes a magnet for extremists. And once it becomes Quagmire Accomplished, 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.
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. 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. VIVE LA FEMME!
Friday, March 30, 2018
The Real Cause of "Secular Stagnation": Extreme Inequality
Much has been made of the concept of "secular stagnation", namely, that the current and future long-term potential for economic growth has slowed dramatically compared with the not-too-distant past. Larry Summers defines it as "a prolonged period in which satisfactory growth can only be acheived by unsustainable financial conditions". And at least since the Great Recession, the data do indeed seem to bear this out. Most notably, for decades now the American economy has been requiring lower and lower interest rates to get the same effect in terms of boosting aggregate demand, the sine qua non of economic growth. One can even argue that, relatively speaking, the United States will have had a whopping "lost two decades" of growth from 2000-2020.
But why is this happening, exactly? Some blame demographic changes, particularly population aging, as one of the causes. But while this theory may be at least partially true, it only seems to explain, at most, one-third of the trend of secular stagnation. Others blame the decline in EROEI (Energy Returned on Energy Invested) as cheap and easy fossil fuels are increasingly less readily available than in the past, as well as the planetary limits to growth. That is indeed true in the very long run at least, and all the more reason to end our inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host, by the way.
But in the relatively near term at least, the biggest elephant in the room by far in terms of the causes of secular stagnation would be the extreme level of economic inequality in this country that is now back at Gilded Age levels. Or should we say, at banana republic levels these days. The top 1% controls roughly 40% of the nation's wealth, the top 20% controls roughly 90%, and the bottom 80% is left to fight over crumbs. Wages have lagged behind the cost of living for decades despite exponential increases in technological progress and resulting increases in labor productivity. The oligarchs at the top took nearly all of the gains. And the rest of us simply cannot afford to keep spending enough to keep the economy going without digging ourselves deeper and deeper in debt. Eventually, something has to give, since there is not enough aggregate demand, and increasing debt clearly cannot be sustained forever.
Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth". They really hit the nail right on the head here. After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.
Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII. The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system. And we also had a trade war from 1930-1934, which further deepened the Depression. The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.
But what about in the long run? Well, the Keynesian punch line to that is, "in the long run, we are all dead". Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well. That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral. Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.
Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth". They really hit the nail right on the head here. After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.
Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII. The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system. And we also had a trade war from 1930-1934, which further deepened the Depression. The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.
But what about in the long run? Well, the Keynesian punch line to that is, "in the long run, we are all dead". Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well. That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral. Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.
Thus, policies designed to tackle economic inequality would be beneficial in this regard. In addition to more progressive taxation of both individuals and corporations (like it was before Reagan) and/or the Universal Exchange Tax and/or Georgist taxation on natural resources, that would also include things like Universal Basic Income (UBI) as well. And nationalizing the Feral Reserve to make it a truly public national bank that creates money interest-free would be even better still, since usury (interest) and debt-based currency are essentially the biggest weapons of the oligarchy. Problem solved.
At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale. Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well. Yesterday.
So what are we waiting for?
At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale. Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well. Yesterday.
So what are we waiting for?
Thursday, March 22, 2018
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 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.
Wednesday, March 21, 2018
How to Prepare for the Next Big Crash
As we have noted in the previous article, the risk of the next big economic crash continues to loom larger than ever before, and it is most likely too late to actually prevent it from occurring entirely. That's not to say that there aren't things that should be done to prepare for it to make it less catastrophic, though. Back in 2014, the TSAP had predicted that a crash would occur within a few short years, and we had written an article then discussing how to prevent it before it occurs or at least take the edge off of it, while ending the previous economic "stagpression" for good. We also reiterated such ideas in 2016 as well, the year for which the insightful Thom Hartmann predicted the epic crash that was his book's namesake. (Being off by two years or so is still fairly accurate in our book.) And we should note that these things would indeed help take the edge off of the next looming financial crisis as well.
Two things come to mind right away: 1) a Universal Basic Income Guarantee for all, an idea that is LONG overdue, and 2) Quantitiative Easing for We the People in general (as opposed to the banks, which only benefits the ultra-rich) by injecting newly-created money directly into everyone's bank accounts and/or via debit card. Additionally, we need to better regulate the Wall Street casino so such a crisis could never, EVER happen again, and also JAIL the banksters who caused the crisis (instead of bailing them out) like Iceland did. A complete debt jubilee would be even better still (in general, but especially for student loans), but even the things we just mentioned are a fairly tall order for a government who is bought and paid for by the banksters/oligarchs. While other things need to be done as well in the long run, such as critical investments in infrastructure and education, the aforementioned measures would go a long way towards fixing our soon-to-be-ailing economy.
Those are the things that should be done at the government level, of course. At the individual level, there is really not much one can do except get OUT of the stock market while you still can, and take at least most of your money OUT of the big banks (before the "bail-ins" begin) and put it into smaller banks, credit unions, or even under your mattress. Or even in a big, brown bag inside a zoo (what a thing to do!)
Two things come to mind right away: 1) a Universal Basic Income Guarantee for all, an idea that is LONG overdue, and 2) Quantitiative Easing for We the People in general (as opposed to the banks, which only benefits the ultra-rich) by injecting newly-created money directly into everyone's bank accounts and/or via debit card. Additionally, we need to better regulate the Wall Street casino so such a crisis could never, EVER happen again, and also JAIL the banksters who caused the crisis (instead of bailing them out) like Iceland did. A complete debt jubilee would be even better still (in general, but especially for student loans), but even the things we just mentioned are a fairly tall order for a government who is bought and paid for by the banksters/oligarchs. While other things need to be done as well in the long run, such as critical investments in infrastructure and education, the aforementioned measures would go a long way towards fixing our soon-to-be-ailing economy.
Those are the things that should be done at the government level, of course. At the individual level, there is really not much one can do except get OUT of the stock market while you still can, and take at least most of your money OUT of the big banks (before the "bail-ins" begin) and put it into smaller banks, credit unions, or even under your mattress. Or even in a big, brown bag inside a zoo (what a thing to do!)
The Crash of 2018?
Despite the fairly rosy economic reports, the next financial crisis, recession, or perhaps even depression is most likely already baked into the cake at this point. It is not a matter of if, but WHEN, and just how bad it will be. In fact, we are overdue for one. And the beginning of the slump will be one of those things that will only be noticed in hindsight, as was the case last time ten years ago. And this one may very well make 2008 or even 1929 look like a walk in the park.
The positive economic numbers mask a rather dismal underlying reality just beneath the surface: wages lagging behind the true cost of living, and (not coincidentally) unsustainable record-high levels of consumer debt. This time the debt increase is not primarily mortgages (though there is plenty of that too) but is now mostly student loans, along with that perennial, decades-old papering-over-declining-wages tool: credit cards. In fact both are a result of a problem decades in the making: reverse Robin Hood economics has robbed from the poor, gave to the rich, and torpedoed the middle class as the real economy has been systematically hollowed out since Reagan. And the debt has become a way to artifically and temporarily sustain ever-increasing consumer spending (and thus economic growth) despite stagnant or declining wages for the bottom 80% of Americans--and eventually even that becomes insufficient, and the house of cards collapses. That is the powder keg, just waiting for a spark to set it off. And practically any sort of "black swan" event could serve as the spark at this point. Here be dragons.
The stock market is a bubble. Scratch that, it is a big, festering BOIL just waiting to be lanced. The recent "correction" in early February is a warning, followed by a return to "normal" before the Big One happens sooner or later. If Trump goes through with his plan to start a trade war, that will likely trigger the crash, as will any further increases in FERAL Reserve interest rates. But it looks like a crash is coming, one way or another. So don't say we didn't warn you.
Sunday, March 18, 2018
We Need A Carbon Tax-and-Dividend, Yesterday
We at the TSAP have long been pushing for a carbon tax-and-dividend (aka fee-and-dividend, feebate, fee with rebate, revenue-neutral tax, or Alaska Permanent Fund) since we first heard about the idea. Steve Stoft, James Hansen, Elon Musk, and even some very unlikely supporters like the recently ousted Secretary of State and former ExxonMobil CEO Rex "Ruthor" Tillerson are known to support it to one degree or another. And the list is growing.
Aside from the primary (and urgent!) reason for it-- mitigation of climate cataclysm--there is also another pressing reason for it: simple justice. The distributional impacts of a straight carbon tax (without any rebates) would be highly regressive, hitting poor people the hardest, and studies show that simply having the carbon tax replace other taxes would also be quite regressive as well. And ignoring that fact would be a major intersectionality fail, to put it mildly. But refunding 100% of the revenue to everyone in equal amounts would effectively make the tax quite progressive in practice. And even better, it can also double as a Universal Basic Income (UBI) Guarantee for all, or at least a viable gateway to such a thing. Once it becomes normal for every citizen to receive even a small amount money unconditionally with no exceptions, then the Overton window of political acceptability would have shifted enough to make it possible to simply increase the amount and/or finance a larger UBI through other revenue sources as well. After all, if everyone's on the dole, then no one's really on the dole. And if everyone's a rentier, then no one's really a rentier. Thus, the idea transcends the left-right political spectrum and becomes an idea that even hardcore libertarians and right-wing populists/producerists can support, not just the left.
What better time than now?
Aside from the primary (and urgent!) reason for it-- mitigation of climate cataclysm--there is also another pressing reason for it: simple justice. The distributional impacts of a straight carbon tax (without any rebates) would be highly regressive, hitting poor people the hardest, and studies show that simply having the carbon tax replace other taxes would also be quite regressive as well. And ignoring that fact would be a major intersectionality fail, to put it mildly. But refunding 100% of the revenue to everyone in equal amounts would effectively make the tax quite progressive in practice. And even better, it can also double as a Universal Basic Income (UBI) Guarantee for all, or at least a viable gateway to such a thing. Once it becomes normal for every citizen to receive even a small amount money unconditionally with no exceptions, then the Overton window of political acceptability would have shifted enough to make it possible to simply increase the amount and/or finance a larger UBI through other revenue sources as well. After all, if everyone's on the dole, then no one's really on the dole. And if everyone's a rentier, then no one's really a rentier. Thus, the idea transcends the left-right political spectrum and becomes an idea that even hardcore libertarians and right-wing populists/producerists can support, not just the left.
What better time than now?
Saturday, March 10, 2018
Our Position on Tariffs and Trade
With Donald Trump essentially starting a trade war with his latest import tariffs (25% on steel, 10% on aluminum), the TSAP must clarify our often ambiguous position on tariffs and trade. Unlike both corporate political parties, we have always rejected the so-called "free trade" scam as the neoliberals typically define it (we aren't called the True Spirit of America Party for nothing, you know), but have nonetheless gone back and forth over the years on the question of just how protectionist we ought to be.
We believe that protectionism is indeed a razor-sharp, double-edged sword, and can backfire if done excessively or improperly, but if done wisely and properly (unlike Trump's bass-ackwards version) it can work well. No one really wins a trade war, so trade policy must be based on more than beggar-thy-neighbor policies. Thom Hartmann wrote an excellent article on how properly implemented tariffs can, in conjuction with subsidies and other important measures, contribute to the goal of protecting vital American industries and the jobs that go with them.
While we are not against tariffs, protective or otherwise, any tariffs should be carefully targeted to those essential goods and countries for which we have a significant trade deficit today. Unlike Trump's rash and hamhanded version of protectionism that is prone to backfiring, tariffs should not be applied to raw materials that American industry uses to make finished goods, nor should they apply indiscriminately to unnecessarily include our allies as well. They should apply primarily to situations where workers in other countries are grossly underpaid to make the good in question and/or environmental standards are more lax than ours. And they should never be done in isolation, but rather other measures should be done along with it, such as subsidies for crucial domestic industries, "Buy American" clauses in government stimulus packages, and even more importantly, closing the ludicrous loopholes in the corporate tax code that encourage outsourcing and offshoring of American jobs. The latter tactic is the basis for Bernie Sanders' Outsourcing Prevention Act, which would also end or claw back subsidies for American corporations that send jobs overseas. Note that Bernie was not against tariffs, and even advocated for some level of protective tariffs in 2016 before Trump cribbed his idea, bastardized it, and successfully stole his thunder as a result.
Alternatively, or in addition to the above, the TSAP also supports the Buffett Plan. In 2003, the legendary Warren Buffett came up with a simple and very clever idea to close America's yawning trade gap by issuing tradeable Import Certificates (IC) to American exporters equal to the dollar value of exports. And anyone holding these tradeable certificates would be allowed to import the same dollar amount of these certificates, thus being a similar idea to cap-and-trade. The inevitable result would be trade balance, as every dollar worth of imports would have to be offset by a dollar worth of exports. While the downside is that prices will inevitably go up somewhat as a result, the upside is that jobs will return to America and workers' wages would also go up as well, so the net effect would be beneficial overall. And if tariffs still exist and/or ICs are auctioned by the government, the revenue could be directly refunded to the people to further help offset the price hikes for any affected goods and services.
But make no mistake. Our nation's once-great manufacturing base has been hollowed out for decades, and much of it is currently rotting and rusting thanks to the neoliberal "free trade" scam brought to us by Reagan (and Thatcher in the UK) and embraced by both corporate parties ever since. We ignore it at our own peril. And the left would do well to abandon this highly corrosive ideology yesterday.
We believe that protectionism is indeed a razor-sharp, double-edged sword, and can backfire if done excessively or improperly, but if done wisely and properly (unlike Trump's bass-ackwards version) it can work well. No one really wins a trade war, so trade policy must be based on more than beggar-thy-neighbor policies. Thom Hartmann wrote an excellent article on how properly implemented tariffs can, in conjuction with subsidies and other important measures, contribute to the goal of protecting vital American industries and the jobs that go with them.
While we are not against tariffs, protective or otherwise, any tariffs should be carefully targeted to those essential goods and countries for which we have a significant trade deficit today. Unlike Trump's rash and hamhanded version of protectionism that is prone to backfiring, tariffs should not be applied to raw materials that American industry uses to make finished goods, nor should they apply indiscriminately to unnecessarily include our allies as well. They should apply primarily to situations where workers in other countries are grossly underpaid to make the good in question and/or environmental standards are more lax than ours. And they should never be done in isolation, but rather other measures should be done along with it, such as subsidies for crucial domestic industries, "Buy American" clauses in government stimulus packages, and even more importantly, closing the ludicrous loopholes in the corporate tax code that encourage outsourcing and offshoring of American jobs. The latter tactic is the basis for Bernie Sanders' Outsourcing Prevention Act, which would also end or claw back subsidies for American corporations that send jobs overseas. Note that Bernie was not against tariffs, and even advocated for some level of protective tariffs in 2016 before Trump cribbed his idea, bastardized it, and successfully stole his thunder as a result.
Alternatively, or in addition to the above, the TSAP also supports the Buffett Plan. In 2003, the legendary Warren Buffett came up with a simple and very clever idea to close America's yawning trade gap by issuing tradeable Import Certificates (IC) to American exporters equal to the dollar value of exports. And anyone holding these tradeable certificates would be allowed to import the same dollar amount of these certificates, thus being a similar idea to cap-and-trade. The inevitable result would be trade balance, as every dollar worth of imports would have to be offset by a dollar worth of exports. While the downside is that prices will inevitably go up somewhat as a result, the upside is that jobs will return to America and workers' wages would also go up as well, so the net effect would be beneficial overall. And if tariffs still exist and/or ICs are auctioned by the government, the revenue could be directly refunded to the people to further help offset the price hikes for any affected goods and services.
But make no mistake. Our nation's once-great manufacturing base has been hollowed out for decades, and much of it is currently rotting and rusting thanks to the neoliberal "free trade" scam brought to us by Reagan (and Thatcher in the UK) and embraced by both corporate parties ever since. We ignore it at our own peril. And the left would do well to abandon this highly corrosive ideology yesterday.
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