What Will Really Cause The Next Big Crash?

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

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

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

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

Don't say you weren't warned.  On the bright side though, if the crash occurs before the November 6 election, it will essentially guarantee that the predicted Blue Wave will be a Blue Tsunami, washing away the current vile Red Tide of Trump and his sycophantic Republican lackeys, no matter how much GOP cheating occurs (and surely there will be plenty).

We Are Running Out of Time To Save the Planet

Every year since 2011, the TSAP has been giving our annual State of the Planet Address in mid-to-late January.  But given the latest IPCC report, which is truly nothing short of horrifying, we are giving an additional one now in October as well.  Yes, we know it is a bit of a downer to say the least.  So sit down, take off your rose-colored glasses, and read on:

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

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

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

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

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

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

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

We support ending net deforestation completely, and putting carbon back in the ground through carbon sequestration. One method is known as biochar, a type of charcoal made from plants that remove carbon dioxide from the air, that is subsequently buried. This is also an ancient method of soil fertilization and conservation, originally called terra preta.  It also helps preserve biodiversity.  Another crucial method would be regenerative organic farming, which also turns the soil into an effective carbon sink as well.

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

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

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

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

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

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

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

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

The GOP's October Surprise Gift to the Democrats

On October 6, 2018, Judge Brett Kavanaugh was confirmed by the Senate as a US Supreme Court Justice despite the cloud of suspicion hanging over him concering his accusation of attempted rape, his dubious judicial record, and his repeated lying under oath about his rather checkered past.  All but one Republican, Lisa Murkowski, voted in favor, and all but one Democrat, Joe Manchin, voted against his confirmation.

The Republicans are now gloating in their victory, of course, but that victory will soon prove temporary since the voters will remember in Novemeber.  This very foolish move on the GOP's part will come back to haunt them in the form of the Blue Wave--scratch that, the Blue Tsunami--when the Democrats take back both houses of Congress by a landslide, and not a moment too soon either.  And then Kavanaugh can finally be impeached for lying under oath (aka perjury), followed by Trump and his deplorable cronies (including Pence) as well.

What, you doubt that?  Well, we can make it happen if we get out and VOTE on Novemeber 6, just one month from now and less than a week after Halloween.  Hopefully our ever-shortening attention spans in the age of Facebook and Twitter will last that long.

"Remember, remember, the 6th of November."

Americans Are Still Having Fewer Kids, and That's a Very Good Thing

Even in 2018, after several years of ostensible economic recovery, Americans (particularly Millennials) are still having fewer kids than they were before the Great Recession.  The total fertility rate in the USA has thus fallen to around 1.8 children per woman, down from 2.1 before the Great Recession (replacement rate is around 2.1).  And contrary to what the naysayers may claim, that is actually a very GOOD thing on balance.  The world is grossly overpopulated and in serious ecological overshoot, and Americans' truly elephantine ecological footprint per capita due to our massive pollution and overconsumption of resources only makes it that much more important to reduce birthrates in the USA relative to the rest of the world.  And such grave ecological concerns greatly dwarf any social and economic concerns about population aging and other consequences of low birthrates.  Especially since with a Monetarily Sovereign government like our own federal government, money is literally no object when it comes to things like Social Security, Medicare, Medicaid, and things like that--the government can literally only go broke if they choose to.  And our addiction to economic growth is also part of the problem in terms of ecological sustainability, so that fear needs to be jettisoned at once as well.

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

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

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

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

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

What "Give People Money" Gets Right--And Wrong at the Same Time

One of our favorite journalists, Annie Lowrey, recently wrote a book called Give People Money:  How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World.  As its self-explanatory title suggests, she is clearly in favor of the idea, at least in principle, and notes all of the many benefits to society that a Universal Basic Income (UBI) would have.  She does a great job of delineating such benefits and thoroughly debunks numerous myths about this big idea.  So overall, it is a good book.

That said, while her thesis starts out practically on fire in terms of ambition, it really starts to coast towards the end when the practical issue of cost starts to seep in.  Then, her proposals start to get significantly less ambitious than a true UBI, namely a negative income tax (like the kind Nixon once proposed and was ultimately weakened into what became the Earned Income Tax Credit) and/or a smaller UBI-style payment for children only.  True, those weaker versions would indeed be cheaper, and far better than doing nothing at all.  And it would certainly be more likely to pass through Congress, no doubt about that.  But the larger point is still being missed in terms of the nature of the cost issue.

And that larger point is that since the United States federal government is Monetarily Sovereign, the whole cost issue is really a non-issue when you think about it.  It is a Big Lie that federal taxes actually pay for federal spending, and that the federal government can somehow run short of dollars.  They can literally create infinite money, thus money is literally no object in that regard, if only they would act like it and dispense with the Big Lie once and for all.

In fact, Rodger Malcolm Mitchell himself advocates a form of UBI that he calls the Economic Bonus (EB), which is Step #3 of his recommended Ten Steps to Prosperity.  It is similar to Social Security for all, but without the FICA tax (which he believes should be abolished), and paid for entirely via money creation (i.e. spending it into existence).  Though the figures he provides are not set in stone, he advocates that we start with $1000/month for everyone over the age of 21 and $500/month for everyone below that age.  The TSAP fully agrees, except that we think the age threshold for the full amount should be 18 instead.  Or perhaps give the same amount (say, $500) to everyone regardless of age to start with.  Either way, once it is started, the numbers can be easily adjusted.  And $1000/$500 is a very handy number since that is roughly the amount that would be enough to eliminate poverty as well as give workers much more bargaining power than they have currently, while still not being so ludicrously high as to trigger runaway inflation or other adverse effects.  And best of all, it wouldn't cost the taxpayer one penny.

And Presto!  The square has thus been circled--or is that the other way around?

Oh, and about that inflation thingy, keep in mind that despite three rounds of QE, nearly $30 trillion in secret bailouts for the banks, $21+ trillion in national debt, and the Pentagon "losing" another $21 trillion despite putting two (or four) wars on the proverbial credit card, all of this money created out of thin air in fact, and economic growth finally roaring back to life (for now), we are still nowhere near the point of runaway inflation.  Not by a long shot.  If anything, we are still under the shadow of what Larry Summers calls "secular stagnation" thanks to chronic, extreme economic inequality and related socioeconomic ills.  And if ever we did get anywhere near that point, we know now exactly how to prevent and cure such inflation via interest rate control, and failing that, simply create less new money going forward.

So what are we waiting for?

RIP John McCain, A True American Hero

After learning of the recent passing of Senator John McCain on August 25, 2018, we would like to give a brief eulogy for this great man.  We at the TSAP have clearly had our differences with him politically on most issues, but we could never deny him the respect that he deserves.  To call him a hero would be the understatement of the century, both for his undeniably great courage as a war hero in Vietnam as well as his constantly fighting the good fight against the current corrupt cesspool of an authoritarian regime during America's dark night of the soul, up until the very moment that he lost his final battle with brain cancer.  Few could honestly say that they have done even a fraction what he has done in his 81 marvelous years on this Earth.

And shame on anyone who tarnishes his name by spreading vicious lies and slander about him as some people (and bots) have apparently been doing lately, regardless of where they happen to fall on the political spectrum.  Seriously, knock it off.  NOW.

Whether you love him, hate him, or are altogether indifferent about him, one thing is absolutely for certain.  If there is a heaven, John McCain is one of the very few Republicans (or anyone in Congress these days for that matter) getting in.  May he rest in peace.

The Jig Is Up, Donald!

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!"

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.

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.)

Well, guess what?  Each and every one of those specious statements is absolutely FALSE.  Period.  Not even a kernel of truth in there, except for the completely contrived self-fulfilling prophecy that believing such lies leads to, starting with the very first statement on that list, and it goes downhill from there.  Wait, what?  That's right, federal taxes do NOT actually pay for federal spending, because our federal government is Monetarily Sovereign.   They literally create brand new dollars out of thin air every time they spend money, with no need to borrow any money or raise any tax revenue at all.

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).

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.

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.

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:

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?

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:

1. 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.
2. Remove the 20-year ban on gun violence research, yesterday. 
3. End the gun-show loophole and implement universal background checks, yesterday.
4. Put a significant excise tax on all bullets/ammo, like Chris Rock recommended. (Seriously)
5. 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.
6. 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.
7. Require reporting of lost or stolen guns.
8. Regulate firearms like other consumer products in terms of health and safety standards--currently such standards are nonexistent.
9. 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. 
10. 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. 
11. And last but not least, improve our woefully-inadequate mental healthcare system.

Of course, to truly solve our gun violence problem would require a fundamental overhaul and transformation of our society, which the TSAP clearly supports.  We need to go from being what Riane Eisler calls a "dominator" society to more of a "partnership" society, as the latter kind is far less violent overall.   But in the meantime, the aforementioned recommendations would go a long way towards taking the dangerous edge off of the problem. 

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.