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:
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:
  1. 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.
  2. 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.
  3. 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.
  4. Nuclear power--the TSAP no longer supports expanding it any further.
  5. The nuclear family--Yang does seem to idealize it a little too much at times, though still far less so than Republicans do.
  6. 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.
  7. 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.
  8. 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.
  9. He wants to reduce the student loan debt burden, but not have a complete jubilee like the TSAP recommends.
  10. 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.

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! 

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, 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?

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.

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!)

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.