The International Monetary Mess
If we understand what is going on we can address our problems and those of the rest of the world. The Website "Against Austerity" goes into these subjects fairly well. So rather than repeat I'll critique some of their points.
"Alexander Hamilton, the architect of America’s First National Bank, proved that a national debt, if not excessive, is a great advantage to a modern nation. A sustained economic recovery requires a source of credit which can be neither zombie banks nor the federal budget." [AgainstAusterity]
Against Austerity probably didn't know that Franklin did an even better job of making a case for Government issued accounting money (in his day paper money). Franklin showed that simply issuing paper money that could be used to pay taxes and against tax receipts could boost local economies. Alexander Hamilton was actually not as hot on that idea as Franklin had been. The authors should have cited Franklin.
We need trillions in long-term investments
All this is necessary, intra-country and externally to improve the lot of our country and the world. Our favoring speculators and financial capital over "real capital" has setup a system where companies are cannibalizing assets to buy stock and inflate stock prices, where the underlying economy is so weak that young folks feel frozen out of it. Yet we need a lot of actual capital investment and labor!
Create an Infrastructure Bank
"According to its 2013 Report Card for America's Infrastructure, the American Society of Civil Engineers (ASCE) estimates that America needs to invest $3.6 trillion in infrastructure by 2020." [AgainstAusterity]
Investing in that sum would create assets to back our money supply. So the argument that it would break any budget reflects a level of understanding in economics equal to that of Former Governor Perry.
"This sum – targeted to roads, rail, bridges, power, water, schools and similar projects – is roughly equal to the entire US Federal budget for a year. We can not simply pay these costs on-budget, which would add $600 Billion per year, costing the American taxpayer more than Medicare. A pay-as-you-go approach on the scale we require is not only politically unrealistic, it would place an excessive burden on the federal budget, thus creating a vulnerability to speculative attacks on the dollar." [AgainstAusterity]
We need to create an Infrastructure Bank to work with the Department of Transporation, FCC, State and Local Government, to use the resources of the Federal Reserve to fund Fiscal investment at the State Level. And we need to invest this money through States and local government!
Why we shouldn't borrow the money from Wall Street
When a government taxes first and invests with privateering money, they end of getting higher taxes and little delivered. We are losing public schools and losing control over our education system because we don't treat these things as investment. Usurers steal!
"In 2011, the Poway Unified School District near San Diego, CA needed $105 million to make needed upgrades to its aging public schools. Unable by law to increase property taxes, and unable to afford the cost of a short-term loan, the district used a controversial loan called a capital appreciation bond." [AgainstAusterity]
The Banks engaged in Usury!
"With this bond, an example of the schemes becoming all too common to keep cash-strapped infrastructure functioning, the District will delay repayment for 20 years, and pay over the following 20 years at a total cost of nearly 1 billion dollars. In addition to the costs of construction, this means another $900 million in interest payments will be foisted upon local taxpayers." [AgainstAusterity]
Which means that the schools built would not have enough money to stay opened!
"Imagine this scenario playing out with $3.6 trillion. Borrowing public money from private banks is not only obscenely expensive, it's terribly unjust to taxpayers, who will work ever harder to pay for the unearned luxuries of super-rich financiers rather than their own needs." [AgainstAusterity]
Our Money supply is about 3.7 trillion dollars. We could fund an infrastructure Bank and grant this money to appropriate authorities and save us the misery. The infrastructure bank could lend based on future tax revenue at Zero interest and that would inflate the local economy enough so that the loan could be paid back quickly! What we don't want to do is act precipitously.
Seize the Fed: Federal lending And Federal spending
The authors suggest we seize the Fed. The reality is that the USA already pretty much owns the Fed, while the banking system controls it mostly because our politicians are too deeply into graft and extortion (either being extorted or extorting donors) to challenge it. All we need to do is to replace Officers with people who will serve the country as a whole and pass appropriate legislation. They:
"propose to seize the functions of the Federal Reserve System and use it as a national bank to finance the long-term needs of the American people. The policy of federal lending, as distinct from federal spending, can be used to break the current political impasse. Federal lending allows us to make massive long-term commitments at modest short-term costs. For states and businesses, the cost of capital can be radically lowered – down to 0% for public infrastructure, and a competitive advantage of the United States in world markets can be secured. The overriding goal is the creation of 30+ million new jobs in production, with high capital investment, high energy intensity, high value added, and high technology." [AgainstAusterity]
We can simply modify its charter with relatively small amendments and create Infrastructure banks to make grants and zero interest loans.
"The theoretical basis and historical validation for the program advanced here is the traditional American System of Alexander Hamilton, Friedrich List, Henry Carey, Henry Clay, Abraham Lincoln, the populists, and the New Deal. The method of transforming the central bank into a national bank to finance a recovery derives from the work of Woytinsky and Lautenbach, interpreted in the light of the experience of the US Lend-Lease Program." [AgainstAusterity]
Sounds good. Though its a stretch to include Alexander Hamilton.
Century Bonds for Infrastructure and Science Drivers
The Fed could easily be forced to do this, if we had the will to do it. Wall Street would scream bloody murder and fund the election of privateers. That is the only reason we haven't already done this. We need to amend our constitution as I talked about in my Second Bill of Rights discussions. If people get mad enough we can implement all of it and then do the amendments as an afterthought.
"Either through law or political pressure, the Federal Reserve must be forced to put out a tender offer to states and regional authorities like the New York-New Jersey Port Authority stating the Fed’s willingness to buy an initial $3.6 trillion of state bonds within the next 10 years, with the proceeds devoted exclusively to rebuilding the public infrastructure of the United States. These must be century bonds, with 100 year maturities and the coupon rate must be set at 0%. Once the first tranche of $3.6 trillion is expended, subsequent tranches of $1 trillion each should be offered, until the point at which full employment is reached. The states issuing the bonds can offer solid collateral of the infrastructure improvements that are being created." [AgainstAusterity]
I'd say should. Sadly we just elected someone going the other direction.
"These state and authority bonds will make possible the long overdue rebuilding of the entire US Interstate Highway System, including its bridges; the national passenger, freight, and commuter rail using the technology of the 21st century; the national electricity production and transmission grid; canals, ports, sewage and water systems; telecommunications; public housing; schools, hospitals, libraries, public buildings, etc." [AgainstAusterity]
The authors have a bit of tunnel vision, but their cause is right! All these are sources of production and real wealth!
"This credit will also be applied to science drivers. From modernizing and expanding America’s national laboratories - including high-energy physics, power technologies (such as contributing more resources to nuclear fusion research, and the long-overdue development and deployment of thorium reactors) and biomedical research – to restarting the space program for exploration and colonization." [AgainstAusterity]
Federal Credit for Production
"History shows it is impossible to defeat a depression without a recovery in the capital goods industry. The idea of a “consumer-led recovery” was implicit in the Obama stimulus of 2009, which had positive effects, but which has failed to produce a sustained broad-based recovery."
Key is to differentiate between those kinds of wealth that are reinvested in production, productive goods and services and what is hoarded. We failed to get broad recovery mostly because we could not shake lose hoarded funds, or punish those earning unearned income through speculation or even outright fraud. We did some of the following in 2010. The key is to limit such funds to actual productive investment. Otherwise executives convert it to their own pockets. These must be treated as Utilities. Modest profit is acceptable, vast fortunes represent usurpation and theft.
"We must offer low-interest and interest-free federal credit to automobile manufacturers, Silicon Valley, biotech and pharmaceuticals, farmers, and any and all companies active in manufacturing, construction, mining, scientific research, energy production, and other forms of tangible, physical, commodity production. Massive demand will be created for American-made materials and goods in the rebuilding of infrastructure. Cheap credit for productive activity must be available all the way down to the local auto repair shop, dry cleaner, plumber, electrician, or restaurant, since all of these represent tangible physical production. Financial services will no longer be eligible to be subsidized by cheap federal credit." [AgainstAusterity]
The other side of this is that the tax burden must fall on unearned income from the three privileges: unearned properties, financial holdings and corporations. We should tax dividends, paid or unpaid, on a withholding basis. The companies should be able to not pay the Federal Government til either the dividends are paid to investors and if they reinvest dividends in productive assets they should be able to exempt those monies. This would incentivize companies more than free credit.
Federal Credit for Student Loans and Home Mortgages
"In May 2013, Senator Elizabeth Warren (MA) introduced the "Bank On Students Loan Fairness Act," a historic breakthrough in the effort to nationalize the Federal Reserve. In light of the July 2013 doubling of Federal Stafford loan rates, Warren's bill, S.897, would refinance these loans through the Department of Education at 0.75%. Quality, affordable education and housing are essential to the health of the nation, and can both be secured with low-interest financing from a national bank. By removing the burden of usury from the necessities of the American people, we free them in their pursuit of happiness." [Austerity]
WE really should give grants, scholarships, to those who can earn the grades. Education should be affordable. Maybe even free to the student.
Nationalize the Federal Reserve
The following is not really true:
"A president of the caliber of Franklin D. Roosevelt could implement the policy outlined here with a single phone call to the Federal Reserve chairman, informing him of what the national interest requires in the current emergency. The ultimate goal must be the nationalization of the Federal Reserve, meaning that its policies must no longer be set by secret cliques of bankers meeting in the paneled boardrooms, but rather by public laws approved by the House and Senate and signed by the president – the only conceivable method under the current system. These laws must determine the amount of credit to be made available, the interest rates to be applied, and the approved categories of lending." [AgainstAusterity]
But A progressive Congress could pass enabling legislation which would do the same. The issue is, we need to get such a congress. Currently the country is going the other way.
*I started this post before the election. Obviously it sounds implausible at the moment. But that could change if we got excited and fought for a Democratic Majority.
- L Wrandal Wray