Sustainable Economic Policy VII

Responsible Fiscal Policy through Functional Finance IS Possible

On April 18 2016, Brookings Institute hosted "the Initiative for Policy Dialogue (IPD) and the Foundation for European Progressive Studies (FEPS), in partnership with the Global Economy and Development program", hosted a public discussion on “How can fiscal policy be growth-promoting and an anchor for macroeconomic stability?” They featured remarks by my favorite economists; Joseph Stiglitz, Massimo D’Alema, Jason Furman, Stephanie Kelton, and Ralf Stegner. The panel was chaired and moderated by Brookings Global Vice President Kemal Derviş. The webpage open:

"Fiscal policy has proven to be an effective way to stabilize macroeconomic growth and reduce the amplitude of the economic cycle. When used repeatedly, or excessively, however, it can lead to high levels of public debt that can undermine expectations of macroeconomic stability and so reduce or reverse the impact on growth. Getting the balance right is therefore critical in designing an optimal fiscal policy to support long-term growth." [Brookings]

Fiscal policy is currently restrained by our Privateering Private Banking System, moderated by Central Banks who govern the money supply in the interest of the private banking system -- and of "monied interests" who often wield massive power through their control of credit and ownership of properties directly or indirectly through debt.

Why Quantitative Easing really doesn't work that well

Quantitative easing "works" to a limited degree by easing liquidity through expanding the money supply (monetizing debt). It has the aim of:

"when the Fed buys these financial instruments, the money supply in the economy increases. This is evident when one looks at the U.S. monetary base, which shows that total amount of currency that is in circulation with the public, or held as commercial bank deposits in central bank reserves. (See Figure 3) [Forbes]

Quantitative Easing Cannot Substitute for Fiscal Policy

The Problem is that quantitative easing cannot substitute for fiscal policy. Ultimately the best way to inject money into the system is for the Federal Government to spend it directly on Goods and services. We've known this since Alfred Maynard Keynes wrote his seminal work on the subject. In our current system this is constrained by the need to "balance" budgets by issuing treasury debt to cover the money created.

Vertical / Horizontal Money What is That???

The ideas behind the post Keynesian notions of Modern Money Theory (MMT) hit me by surprise. They seemed counter intuitive given my own education on the history of the Breton Woods Agreement, structure of our Reserve System, etc... And some of the terms used throw me. My mind has to translate them to good Anglo Saxon terminology just to wrap my brain around them. In order to make other points, however, I need to both be able to wrap my head around these ideas and explain them to others. So if you are interested in the subject I invite you to puzzle through it with me. If not you might want to skip this post and come back to it when you are ready.

When lefties betray the middle and elect righties

There is no doubt in my mind that Jill Stein and her followers are trying to elect Donald Trump. This is a continuation of a strategy that started with their behavior while ostensibly supporting Bernie Sander's campaign that I discovered and documented while running down allegations lodged against Hillary during his primary campaign. What I found were a number of programs, run by 501-c-3 groups, that were aimed at dividing the left and supporting the worst leftist narratives, such as charges that she's a "war-monger," A "neo-liberal", etc... To me she is a moderate on foreign policy, and definitely not a neo-liberal, but then I understand the word differently from far leftists.

Trolling The Left Redux

I wrote on this during the primary season in an article called Trolling the Left Stopping Hillary. I also wrote about how much of what we were hearing during the primary was material that the folks, like the Clinton's, might have said themselves about their predecessors at one time. [Stabbed with our own sword], but after the primary I've found evidence that, in addition to wealthy Right Wing industrialists trolling the left, the Russians seem to have been involved. That doesn't mean that either Bernie or Jill would win anything, even if Hillary were to die of pneumonia.

Personal Ambition Not Public Good

It just means that their candidacies are part of a plan, hatched by the right, but with treacherous cooperation from people on the left, to bring down the left from within. They knew they could draw, not only on years of GOP slurs, but years of backstabbing and rewriting of history aimed at blaming Bill Clinton for his successes and forgetting that Bill saved the left from years of being marginalized by the Nixon/Reagan Revolution. All that is out of scope for this post. The purpose of this post is to document the degree of the treachery of the so-called "Bernie or Busters" and the fact that Jill Stein seems intent on electing Donald Trump. Hopefully she'd fail.

When I hung out by the Sea

Went to the beach,

and found the perfect spot,

up from the waves,

but near to the sea.

 

Tried to hang out,

but it was not to be.

In came the tide,

and with it the sea.

 

I had to move my blankets

Or they'd wash out with the tide.

I had to move myself,

though everything hurt when I tried.

I'd fallen asleep by the sea.

 

I'd made the mistake of lying out,

Sort of like a bleached whale.

But the sun burned me bad,

when I fell asleep by the sea.

 

So I walked slowly back to the hotel,

after buying an overpriced bottle of sunburn lotion.

And I took a painful shower in the room,

Wishing I had died, feeling kind of peeved,

for sleeping by the sea.

 

Well I learned a lesson from that day,

I learned to bring sunblock and umbrellas,

To wear a hat and long sleeves

when I sleep by the sea.

Chris (inspired by my Sister Susan's trip to Ocean City -- and painful memory)

The Timeless Seas!

Can I dangle my toes in the sea one more time?

Lie out in the sun like a beached seal

without fearing I've done some crime.

Well yes,

I think I've done my time.

And maybe it's time to chill out.

At least til I'm ready to go back to work.

 

So set up the umbrella, and stand up the chairs!

Towels and blankets, sun and sand.

Set the cooler down and fill it with ice and soda.

Tie it all together against breezy airs.

And let life again be grand.

 

...And watch the little-uns run into the water.

To dance and jump in mock fear of the waves.

Watch the sun rise up in the morning over the bay

And set again over the sea at the end of the day.

 

Let me watch them again,

their little minds as fresh as the wind.

As they dance and toddle, swim and learn,

and we put strong sunscreen

so they won't turn red and burn.

 

Neices and nephews, children and grandchildren.

They blend in my mind, like a desert Mirage.

I see them merge together.

I see the child in that young mans face.

I see the old man in that young man's strength.

Dancing in and out of the same shimmering illusion.

The thought we could freeze them like that,

merely a delusion.

Change is the only thing constant.

 

But I watch these young children,

grown tall sitting next to me.

And it is their children, not them;

dancing in the waves.

And I sigh thinking one day,

they'll be like me.

 

Christopher H. Holte

Sustainable Economic Policy V

Checks and Balances

For any Economic System to be functional, it needs to have both top down forms and controls. It needs Checks and Balances. And it also needs bottom up forms and controls (Ordinary Courts, Representation, Juries). Key to the success of such forms is a well educated and informed citizenry, and the kinds of checks and balances that prevent people from straying outside their lanes of excellence. Key to the success of an economic system is that it achieves the properties of a commonwealth. It has to serve the interests of all the people living within it, starting with majorities. To make any changes to our national and world economy sustainable they have to be institutionalized in a way that gives the right folks power while limiting the ability of folks to game, usurp or achieve too much power. Thus the issue is how we constitute our economy and how we execute that constitution.

This post is about some of the necessary Checks and Balances.

Issues with Notes as Legal Tender

This Post is wonky, so if you aren't a wonk like me, you might want to skip it.

To me it is obvious that if Congress has the right to regulate all forms of money, it has the right to declare it's "bills of credit" a legal Tender. To me this is obvious under Article II section 8:

To borrow money on the credit of the United States

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States

To me it seems obvious. But SCOTUS has often said "hold your horses Charlie!" This post is about Chase and Grant's courts. Chase, as Treasury Secretary, was pretty much the father of the modern Greenback. But while he believed that the Federal Government had the right to create paper money. It appears he had doubts about whether the Federal Government could compel people to use it. i.e... to make it a "legal tender." It took Grant's court to make our Greenbacks a legal tender.

Sustainable Economic Policy VI

Financial/Engineering Checks and Balances

In the previous section we discussed general principles of checks and Balances. Now we address some specifics.

For our economic system to be sustainable there has to be built in checks on the largess of those who hold funds, coupled with built in checks on those who would spend them. The way we do this is with forms that vet projects and other forms that review them on completion. This is the real reason we need an Infrastructure Bank. The Treasury Department, or the Department of Transportation, can perform these functions, but they need to be done universally and systematically. But to do that fairly and justly an inclusive process must be in place. An Infrastructure Bank, could in theory, just print money, but that would be a disaster shortly after the decision to do so. Bureaucracy, as much as we hate it, is a necessary evil in checking people's ambition and hubris -- when done right. One has to grant certain powers to local persons to develop and execute projects. But those projects must be reviewed for financial, engineering and marketing sanity. The principle problem with a "bridge to nowhere" is that nobody will use it. When executed right projects make sense from the get go. And that requires us to constitute an Infrastructure bank that is well constituted -- so we can't complain later that it built bridges to nowhere, or worse, bridges that fell down.