The Right Wing in this country learned to rip out a page from the strategy of progressives. If they take their abusive agenda's, call them "reform" and throw in words like "reform", pay lip service to the programs "service needs", and use big words, they can fool most people reading their articles into thinking they are talking about the real thing and not simply privateering on a source of public revenue. It all sounds good until you dig into the reality of their proposals.
At least when you shoot a zombie in the brain it finally stops coming at you. Not so with RW economics.
Alternet has a fun little article on Krugman's Friday Column: http://www.alternet.org/economy/paul-krugman-demolishes-zombie-ideas-have-eaten-republican-brains. I'd cite the column directly but I used up my freebie quota at the NY Times and am too broke to pay them.
And besides Janet Allon does a better job of contextualizing his comments anyway. Krugman is too polite to take the argument where it needs to go. These are Zombie ideas that never die. The notion of Zombie came from lurid stories of Voodoo and New Orleans Witch Doctors, so calling these ideas Zombie economics follows from years of economists (even sometimes former hucksters) calling them "Voodoo Economics." They were voodoo when they were new ideas. But they won't die!
When I wrote "Disambiguating Capital from Simple Wealth" I looked at the confusing definitions of capital and realized I would have to use the term "actual capital" when talking about the sort of Capital that is valuable and to distinguish it from simple wealth. I realized that I was dealing with various newspeak definitions resting on sometimes deceptive moral arguments. When "productive capital" is extolled as the engine of "job creation", it is to defend an order of "capital" that is simply ownership of natural resources, raw materials, land properties and simple wealth. I realized soon on that this "deliberate confusion matters" because "capitalist" polemicists use the productive definition of capital to sell the notion of "capital" while in practice simply trying to justify a rentier economy where ownership of wealth guarantees rents from loaning money, property, business empires and monopolies.
Re-reading "Capital" I realized this confusion is deliberate. The nice thing about Piketty's book is that he dispenses with the gobbledy-gook and defines Capital as pretty much synonymous with non-labor compensation. He dispenses with the moral arguments and uses the definition of capital favored most by capitalists anyway. Piketty explains, explicitly, on page 49:
"To be clear, although my concept of capital excludes human capital (which cannot be exchanged in any market in nonslave societies), it is not limited to 'physical' capital (land, buildings, infrastructure, and other material goods). I include 'immaterial' capital such as patents and other intellectual property...financial assets ... capitalization"... "as priced in common stock and other corporate financial assets." [Page 48]
Yet as I noted in my "Disambiguating Capital from Simple Wealth" post, Actual Capital is only that part of wealth that is actually in use to fuel more production. Piketty is right to exclude "human capital" from that definition but, if he didn't, then there would be no national income belonging to labor as he:
By this definition, he has to admit that:
"To simplify... I use the words 'capital' and 'wealth' interchangeably, as if they were perfectly synonymous." [Page 47]
He admits that it would be better to "exclude land and natural resources." The problem he notes is that "it is not always easy to distinguish the value of buildings from the value of the land on which they are built." He also excludes the "actual capitalism" of wealth employed in the process of creating more wealth from his definition. It seems like he's abandoning all the moral definitions of Capital;
such as the Georgist argument as "[that] part of wealth—that [is] devoted to aid production" ... Capital is "wealth in the course of exchange." [Actual Capital]
So much for Georgism. But Piketty isn't talking about actual capital or any advertised meaning of capital anyway. He's talking about the power of wealth versus the power of labor. And this definition allows him to analyze what is actually happening with Capital. He admits he's talking about what the wealthy are talking about when they call themselves capitalists. He admits that it would be better to "exclude land and natural resources." The problem he notes is that "it is not always easy to distinguish the value of buildings from the value of the land on which they are built." And this is how modern "capitalists" describe their own wealth.
This allows him to lay out the math, intranational and international:
"National Income = Capital Income + Labor Income" [page 45 of Piketty's book "Capital"]
Which tells us that we can measure both capital income, Labor income, production and also measure inequality by measuring the disparity between wealth going to "capitalists" and other powerful rentiers who earn "capital" and the trickle reaching everyone else.
For Piketty, the result is that he lumps together all kinds of wealth, only making a distinction between "national capital" versus "net foreign capital:"
"National Wealth = national capital = domestic capital + net foreign capital"
For Piketty's analysis capital is simply the "total wealth owned at a given time." This lets him reduce it to a formula, where the capital ratio is called "beta" [β] which is the ratio of Capital / Income:
"β = Capital / Income"
Income is a stream of production and products. A country with a high ratio such as "beta" [β] = 5, would be a country where the Capital Wealth of the country is 5 times the annual production. It can also be seen as a country with high savings of wealth.
He then calls National Income "alpha" [α];, and gives it this formula, where r is the rate of return on capital:
"β = r x α"
His analysis then ensues, and he masterfully shows the link between modern capitalism and feudalism as he talks about "return on capital" throughout History. From Ancient times to Modern Times and from the Third World to the United States. He captures inequality in chart after chart that graphically describes the disparities between growth of economies and the rate of return of capital. And how that "r" dominates both labor and arrogates growth (g).
For example he shows how the "r" in economies has always commanded more than labor. For example he notes how in the times of Balzac or Jane Austen the rate of return on land capital was about 5%. To get a rent of 50,000 Francs a person had to invest a million franks. [page 53] If the return on capital doesn't generate inequality, than even the capitalists also have to labor. Since inequality is as much a matter of social hierarchy, class and status -- inequality is necessary to the socially dominant in order to maintain their power. Later in the book he demonstrates that a person had to make 20-30 times the average wage income, which was 400-500 francs during that period -- in order to not live in misery [page 106]. To live in minimal comfort a person had to have an income of at least 15,000 francs. And to get that income they had to have "capital" (mostly in the form of rentable property or business property) in excess of about 450,000 francs. People assumed that most folks would live in misery. His charts show how rapidly we are returning to those times. They also show how national and international policy is driving "r" and that in turn is creating increasing inequality in most of the world, not just the United States.
Piketty goes on to describe in graph after graph the role of "return on capital" and policies favoring capital over labor in inequality around the world. Piketty talks about how wealth gets concentrated, and describes that concentration in chart after chart after chart.
Henry George and Marx were using "moral" analysis of labor and capital. By stripping off all the academic definitions Piketty used the definition of capital most comfortable to the capitalists. In the process, he shows that "r" or "return on capital" is mostly economic rent; interest, rents, even production - wage compensation; all are means to earn rents. Which means that "r" is really mostly unearned income derived from the power and privilege of wealth and it's monopolies and control of properties. So his material can feed back into Marxian, Georgist or any Post Keynesian moral argument. The problem with Marxist arguments is they tend to eschew the property rights of workers.
I'd suggest that folks read Piketty's Book Capital in the Twenty-First Century"" if they are interested in understanding capitalism in some depth. But for an idea of what to do about it, even more important is to acquire a copy of "Rewriting the Rules of the American Economy" by Joseph Stiglitz. That book refers to some of the charts in Piketty's book.
"Skyrocketing incomes for the 1 percent and stagnating wages for everyone else are not independent phenomena, but rather two symptoms of an impaired economy that rewards *gaming the system* more than it does hard work and investment."
I've got a lot more to quote from and say from Piketty's "capital", but I think this summarizes what we have so far.
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In the final chapter of James Galbraith's book "The Predator State", titled "Paying For It", James Galbraith talks about Bretton Woods, how the United States opened itself up to becoming an open economy by turning over it's money supply to becoming the reserve currency of the "free world." The context of that was that the two previously dominant World Powers; France and Britain had failing economies during World War II. Their vast colonial empires had done as little for their masses as the previous vast colonial powers of the Spanish, Dutch, Portuguese and Belgians; while the USA had emerged triumphant from World Wars. We agreed to save those countries, their economies and the "free world" from complete collapse.
The Washington Post printed an article: "Poorer tenants fear being pushed out by planned Congress Heights complex"
"To build the project, the developer would have to raze four rent-controlled apartment buildings where residents already feel they are no longer welcome. The tenants are largely poor, elderly and live on fixed incomes. They said they believe they are being pushed out by two politically connected developers, who have failed to make improvements to the four apartment buildings even as many residents live in squalor."
Walter Rybeck, Silver Spring wrote:
"The Oct. 15 front-page article “Tenants in path of D.C. renewal” might instead have had the headline “Affordable housing remedy missing in action.” It told a sadly familiar tale: tenants in wretched dwellings unable to afford decent housing elsewhere, and slumlords given a green light to oust their tenants and proceed with lucrative real estate projects. This classic gentrification scenario cannot be fixed with housing subsidies or rules requiring developers to offer dwellings at below market rates, as many housing advocates urge. These approaches at best help a tiny portion of those in need."
In our modern "market" heresy the Bull of "markets" reigns supreme over common sense, common-wealth, common properties and our politicians. Admittedly one:
"...problem is high land costs — the sites that housing sits on."
High land costs aren't the only problem here. But it is a start. And as Rybeck notes:
"Officials and their advisers ignore the one tax that, unlike others, lowers the selling price of what is taxed: The more you tax the value of land, the lower its price. The less you tax it, the more its value rises, making housing unaffordable. Thus, shifting the property tax off the value of homes and apartments and onto the site value spurs slum upgrading and new housing at lower prices, as over a dozen Pennsylvania cities have demonstrated."
What he's talking about is a tax that ignores capital properties and home values and focused on the unearned value of property and taxes that. He's also right that:
"By modernizing its property tax, the District could lead the nation in easing the housing crunch."
But it won't do it by itself and simply changing the tax system may alleviate the problem, but won't eliminate it. Especially if it is sold as a tool for Development.
By capital George meant:
"Capital is ... [that] part of wealth—that [is] devoted to aid production." and Capital is "wealth in the course of exchange." [Georges Definitions]
So the LVT tax was a means to get to unearned incomes and unearned rents. It wasn't meant as a tool for slum clearances, gentrification, or even "new housing at lower prices" -- it was meant to break the power of monopoly over land ownership. So, yes a LVT tax is a great idea -- but not by itself. Without tax reforms that exclude wage compensation and hit at unearned wealth -- it is a shadow of what George Had in mind. Indeed George called folks who advocated the LVT for the wrong reasons as "unsound followers." As long as taxes "fall on users of land as users, and ....add to the cost of production or increase prices" the tax solution is a Kludge and not what George Had in mind. Indeed the history of the Tax was that it was struck down by the Supreme Court as a Direct Tax and so George's followers started pushing it as a reform of the Real Estate tax, and when the 16th amendment was passed in 1913, they were already set in their ways.
The other side of this is that home ownership should be a right - though not necessarily the right to a house or mansion, wages should be a right and wage compensation not taxed. This is something that American's have affirmed since the beginning of the country. And FDR put it in writing:
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The benefits of a right to a home. Of "property in land," which includes tenants and renters. If tenants have a property right in their apartments, they'll take care of them themselves. Deny folks power over their own neighborhoods and this is what you get.
If home ownership were the right -- then the takings clause would apply to renters and tenants too. The District, or unscrupulous developers, or other authorities should not be able to take people's homes without compensating them -- with a new home. If one's home is a right they can't offer just money so that the person can move to another substandard neighborhood, they'd have to protect their right to home, livelihood, etc... And it would thus be more expensive to stiff people than to do right by them. Yes, if a person lost all their money or is a drug addict, and is poor as a result; a "home" doesn't have to be the mansion or a giant house they once lived in. But it also be a "Decent Home." It has to be a home that their wages can afford.
None of that will eliminate speculation. But certainly taxing unearned income, unearned rent, is a start at taking the smoke and gas out of the gasbags of repeated bubble swindles.
You wouldn't think that anyone would argue with FDR's Four Freedoms:
But believe me they not only did, but they do. To the Right Wing wannabe oligarchs who gathered around Ronald Ronald Reagan, the "four Freedoms" were the enemy of their arbitrary power and their dreams of unmeasurable loot. Especially the last two. Rentiers depend on fear-mongering, war-mongering and keeping resources scarce, for their power. And oligarchs get and keep power by scaring people and providing scapegoats for that fear. A system that has equity may have it's wealthy and it's poor, but the poor have a decent life, and the rich aren't so rich. In my last post:
A friend of mine and some folks from the Roosevelt Institute keep the ideals FDR expressed late in life alive. Because these freedoms need to be re-emphasized in our constitution. The first two of them are implicitly in the first Amendment. But we all know how adept corrupt legislators and judges are at subverting them, from their history. But the last two "freedoms" have not only not been in our constitution but have been a recurring fact of life for most people in this country, and around the world, for many years. The first two can be secured mostly by negative laws that say "Thou shalt not infringe on free speech" or "impose a religion on the country. But the last two require a commonwealth. They require a project. Because they require positive law. Roosevelt sought to implement them through his "Second Bill of Rights:"
More: http://holtesthoughts.blogspot.com/2014/04/six-basic-rights.html
Who can argue with these either? These rights, though they are "positive rights" and thus require institutionalization, policies, programs, projects - to become reality -- Are important to implementing the Four Freedoms. Without them the rich get richer and the poor live lives of insecurity and privation. What is freedom without the resources to pursue happiness? What does it require for most people to do that? A decent living, access to health care, and some help when things go south. You'd think this would be obvious. But it's not. To the right the Second Bill of Rights evoked horror and anger. Secure people do things like growing their hair long or demonstrating against wars. The Right Wing Term for that was "permissiveness". Like all Righties "freedom" either is a 1984 newspeak term, or their own privileges, and not for the "hoi poi."
For that reason the Right Wing searched and found a Hollywood actor, who having been a spokesman for New Deal Policies at one time, couldn't resist the honors, money and fame, promised him for becoming a spokesman for the right. Reagan was familiar with New Deal policies through and through. But he was recruited by millionaires to go after communists, paid handsome sums to speak for the wealthy and large businesses and with the initial excuse of being offended by the dishonesty and unpatriotic attitude of some folks on the left and made himself a willing tool of the right -- first in their efforts to shut up the left wing in Hollywood. He became, literally the face of the Right Wing. But he went beyond shutting down Communism, he took aim at his erstwhile colleagues in Hollywood, at the people he once served as a Union Organizer and at the New Deal he'd once spoken for eloquently. He used his silver tongued voice to subvert the New Deal
He wasn't just a puppet. On the contrary the things he articulated, in retrospect, seem the work of an evil genius. And he started by substituting his own list of Rights for the ones that FDR articulated. He had a convenient memory even before his Alzheimer's kicked in, but only someone sharp could have picked the following list of "freedoms" to oppose FDR's Four Freedoms:
His list was:It is only when I begin picking away at them that the nastiness of them begins to to show. These display an intimate knowledge of the new deal and a degree of cynicism that is astounding. Everything in this list was designed to subvert Roosevelt's concept.
Incidently he started his political career attacking the notion of affordable education. For more on this read:
In German the expression "Work Makes Free" "Arbeit Macht Frei" was cynically posted over Auschwitz. Access to jobs and a decent pay makes people free. Work itself produces things, but unless there equity in control of the distribution of the resources of enterprises and industries, work doesn't make free, as folks laboring in Auschwitz found out. When Reagan visited the Nazi Cemetery in Bitburg in Germany, he had to know that history. This "freedom" formulation is as cynical as that of the Nazis.
And this "Freedom to Work" is in direct contravention to the first two of Roosevelt's "Second Bill of Rights" (the Right to a job and to a decent wage." It was a well thought out subversion.
They talked about "freedom" but their idea of freedom includes the choice to become enslaved to others. They were explicitly against notions such as Democracy, which they rebranded as "collectivism" or notions such as common good, which they huffed at with perfect Social Darwinian logic while trying to ban the teaching of Charles Darwin's theories. So to the ideological and elitist far right defeating "communism" was as much about restoring the proper place of economic royalty, ending "permissiveness" and protecting unearned wealth - as about stopping the spread of communism. So Reagan did a masterful job:
Thus the very first of Reagan's Four Freedoms is aimed at replacing the security from want or fear, with the insecurity of a system that forces people to compete with each other.
And the "Right to Work" gives some kind of sense to "right to [not] work laws." Right to work laws are aimed at preventing people from forming Unions, making people free to free ride on any Unions that do exist while opting out of paying dues, and "At Will employment". Going along with that is the complete impunity of companies to "outsource" to either outside the United States or to "contractors" who can often skirt any laws or regulations aimed at large enterprises. "Right to Work" laws and "at will employment" end any pretense of workplace democracy. Again without security in employment and pay, "right to work" is the opposite of any kind of security, freedom from fear or want.
Similarly the "freedom to enjoy the fruits of one's labor, equally cynically means that working people are intended to enjoy their minimal labor compensation for their energy expenditures and the wear and tear on their bodies. And wealth/Capitalist the rest. Without workplace democracy, consent of the managed or the right to bargain employers get to enjoy the fruits of their employees labor and to drive wages down to subsistence levels. For a time our country masked this trend with a push to let workers borrow money, which eventually at compound interest, means complete slavery. For the Far Right this was a slogan, never truly even intended to be paid attention, even by those uttering it.
Piketty's book "Capital" pretty much divides Production into Capital, and Labor compensation, with the bulk of compensation going to Capital and Capital pretty much synonymous with Wealth.
The right to own and control one's property was often sold as an "ownership society." But for most of the laws used to implement the notion, the notion didn't apply to everybody. An ownership society that includes the right to own someone's labor, to extract rents from property and to own property absolutely, means a right for the few over the many. "Every man should have the right to do as one pleases with one's own property." And "Every man who owns a castle should have the right to be King." And every man who can't should, rightly be a serf with the perfect freedom to choose between serving his (or her) master and suffering prison, starvation or homelessness. In a commonwealth such kings are forced to deal with a parliament. For the RW that claim that is "socialism." Between abusive labor laws and abusive lending, our "capitalists"/"wealthy" now own something like 80% of the property in the country.
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And of course with the ability to mortgage everything and borrow on personal credit at usurious levels, the freedom to participate in the market meant the freedom for owners to buy and sell people's lives and the "right to shop" for those not yet maxed out on their credit limit or evicted from their homes. As James Galbraith explains in his book "The Predator State", Market Freedom is about the "Freedom to choose" for those who have choice, but not for everyone!
And as people max out credit cards, are not allowed to use bankruptcy to get out of debts, lose their homes and find themselves with Job insecurity, the "Freedom to Shop" becomes a cruel joke, even for those who still can find enough unused credit to buy things.
Indeed markets became the "God" of many cons, at least in their propaganda. Thus many cons claim to be both Christians and anti evolution – which comes from Charles Darwin – while preaching Social Darwinism. These people worship the Bull of the Market in a way that would have pleased ancient Minoans or Canaanites.
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This convenient attitude towards freedom was accompanied by some very unrealistic notions of Markets. Market Democracy? Can that even be real? Freedom of Choice? Sounds good, but it implies a freedom to become a slave based on bad choices. Absolute right of property -- does that include owning people? Does that mean that those who lose out the property game of music chairs have no rights? Conservatives talk about freedom, but their ideas usually involve religious views that they want to impose on people too, so that and
....Their desire to "protect" "Property" from the 99% also means that they could be so happy about the outcomes of brutal regimes such as that of Pinochet, or machiavellian machinations and warfare if it worked to achieve their ends. To the Right the funding of dirty wars against ordinary folks and social activists through selling illegal arms and drugs was a case of the ends justifies the means.
Thus Reagan's Four Freedoms was a set of banners, talking points, tropes, propaganda that worked well to subvert the ideals and doctrines of the progressive movement. It helped them replace FDR with Reagan as the 20th centuries hero.
Tropes are truisms and these are tropes that were cynically offered as recruitment to a "hierarchy enhancing ideology" by folks who live off of rents and arbitrage between production and labor. There were some truths, but on the whole it all was a con
Indeed we'll see that Reagan's revolution and the ideas of Neo-Liberalism and pseudo-conservatism are Zombie ideas with faulty premises, fail when applied, and faulty logic. Yet, we can't seem to kill them. Even when we shoot them in the head. Super Zombies.
To the modern wealthy, as Piketty notes, [See Capital Versus Unearned Wealth] all wealth that is not paid in labor compensation is Capital. Effectively, and in modern Newspeak this is true. But the reality is that Actual Capital as a moral and effective mover of general prosperity is not synonymous with all wealth. This conflation of arrogated wealth in the hands of an elite and actual capital is...
The economics of the Federal Reserve is backwards and has been since it's creation. Probably everyone working there knows this. But they still use the rhetoric of controlling inflation to justify interest rate rises and falls. They think that raising interest rates will prevent bubble economies to this very day. The Wall Street Journal Reports:
Somehow it is important to her to control the economy by raising the interest rates charged banks. Somehow the whole world thinks that the way to prosperity and economic survival is:
"Fed chief says ‘gradual pace of tightening’ expected to follow first rate hike." [Yellen]
But she repeats the old chestnut anyway. It's now dogma:
"Central to the argument she set out to establish is a belief that slack in the economy has diminished to a point where inflation pressures should start to gradually build in the coming years. Ms. Yellen argued those pressures aren’t asserting themselves yet, because a strong dollar and falling oil and import prices are placing temporary downward pressure on consumer prices. As those headwinds diminish, she predicted, inflation will gradually rise." [Yellen]
But raising interest rates doesn't control inflation. Interest is what drives inflation!
We must restore progressivity to our tax system. But before we can do that without getting conned and distracted by the faux libertarian and other Con arguments we have to understand what the word "progressivity" in taxation means and what the issues are and are not.
To some wealthy, "fairness" means preserving (conserving) wealth and passing wealth and power to their progeny. Which happens to be the definition of hereditary aristocracy. Such people call themselves conservatives because they are trying to conserve their wealth and power. Because such people are often in positions of trust, we tend to trust them. But their idea of "fairness" is not always very fair.
To the rest of us, unless we've been conned by such people, fairness means preserving one's wage income from excessive rents and taxes and saving enough surplus (individually or collectively) to be able to survive illness, disaster and live a dignified old age. To the young it means eating, having shelter and affording a decent education, clothes and transportation so they can pursue happiness through productive employment. A person is poor if these abilities are burdened through excessive charges by those with power and privilege -- or by folks locking the gates to productive opportunity. Our concerns emerge from the "pursuit of happiness" which is a basic right. Theirs emerge from power and privilege and the need to justify it. It's not a natural state, a "common-wealth" system is win/win for everyone.
This blog is a follow on to the Posts; Common Property and the Commons and Locke Talked of the Importance of the Collective. It also is one of a series looking at what Henry George actually had to say about taxation, what modern Georgists say about the subject and what non Georgists have taken from the unsound arguments they've picked up from the Georgists!
I run into libertarians who claim to be followers of Henry George. Some talk about the "single tax" as a special property tax that exempts capital investments and helps developers efficiently use property by kicking "speculators" out and preventing farmers from squatting on land that properly should be redeveloped. But Henry George is one of my heroes. He would never be for taking property from old people or the poor. Yet that is what our current property taxes do. So why would anyone want to merely reform property taxes?
Worse this apparent confusion about the meaning and purpose of Land value taxes leads to misappropriation and misunderstandings of what the tax is about in Left and Right circles alike:
For example the writer Peter Orzag writing at Bloomberg shares a garbled version of Land Value Taxation ideas in his article: "To Fight inequality Tax Land" [http://www.bloombergview.com/articles/2015-03-03/to-fight-inequality-tax-land]. In that article he notes that the largest increment of wealth increases [he calls them capital increases] takes the form of Land value increases and then referring to Joseph Stiglitz notes that:
"Stiglitz also argues for imposing a land value tax, to directly address this source of increasing wealth inequality. Economists have long favored such a tax, because it does little or nothing to distort incentives: Since land is roughly fixed in supply, there's little one can do to escape a land tax. Indeed, from the perspective of economic efficiency, a land value tax scores higher than even a value-added tax, which is typically seen as the most efficient form of taxation." "Tax Land Article" [fight-inequality-tax-land]]
Stiglitz is either directly or indirectly echoing Henry George here. And knowing how brilliant he is I suspect he's read Henry George at some time and understood him.
But in the hands of Peter Orzag LVT becomes about "Economic efficiency," which is "A broad term that implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one person would harm another." I'm not sure what measures Orzag is using for "economic efficiency" but I have to assume he's fine with the kind of economic efficiency where one person's gain is another's loss. He like some other LVT enthusiasts have seem to have no trouble with this, or it's intended consequences such as illustrated in this Washington Post Article from 2013 about the vicissitudes of ordinary Property Taxes:
If that is economic efficiency we are all in trouble. But the notion of LVT as an "efficient Tax on land" isn't just the interpretation of Peter Orzag or hucksters for whom LVT is both a social panacea and a "Single Tax" yet somehow is primarily a tool for efficient land development. I guess if everyone is a renter then the economy is optimized for the rentiers. Many people translate Henry George's "Single Tax" proposal into something like the way Milton Friedman represents it:
“In my opinion, the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago” (Mark Blaug. Economica, New Series, 47, no. 188 [1980] p. 472). Econ Library Bio:[http://www.econlib.org/library/Enc/bios/George.html]
Because of understandings and statements like these, LVT is actually pretty popular in the developer community and they advertize the benefits. For example this page here explicitly touts the benefits of "Land Value Taxation as follows:
But then:
This sounds good until you realize the ads are targeting the poor, the widow, the laborer, the retiree, all potentially to be dispossessed by LVT when it's used as a tool for development. If they can't avoid the tax, they'll be evicted. Thus too many LVT enthusiasts are offering a bait and switch proposition. They think of LVT as a direct tax. But as my friend;
"All direct taxes on property ownership are abusive and prone to tax tyranny"
And Land Value Taxes are not supposed to be tax tyranny! Indeed all these other BS reasons for LVT are things that Henry George warned about:
"Nothing is to be gained by having the Single Tax advocated for wrong reasons. Men brought over by erroneous arguments can never be relied on in a cause that rests on truth."
Indeed Henry George feared folks advocating LVT for the wrong reasons more than he feared outside enemies:
"The unsound supporter is, in fact, more dangerous than an opponent."
And George was right to fear the consequences of misunderstanding as demonstrated a few short years (1893) after his stroke rendered him weakened:
"Unless he sees that taxes on Land Values or economic rent which is what we mean by the Single Tax must be borne by the owners of the valuable land from which it is collected, and that it cannot fall on users of land as users, and cannot add to the cost of production or increase prices, no one can appreciate the moral side of our argument or the full weight of the fiscal side."
My friend includes wages in the definition of "property", which only makes sense because what makes our 'income tax' so unjust is that it is figured on and taken from Net Incomes that are often far less than the expenses and survival needs of workers -- and is thus equally unfair to what the authorities are doing to property owners in DC, Md & Virginia (and around the country).
Which is why the constitution forbids the Federal Government to levy direct taxes! Moreover, if you are going to levy direct taxes there is no reason to be punishing people for being elderly, poor, or not privileged. As my Friend notes:
"The government could easily have waited till these elderly people passed away, or voluntarily sold their property, before collecting any unearned income gains generated by the parcel, but apparently some vultures wanted the land right away."
Property taxes may be "efficient" but without humanity they are efficiently abusive. The rights we need to enshrine in our law are the rights to "home" and "livelihood" because "efficient taxation" is often a euphemism for ruthless taxation.
But fortunately for my estimation of Henry George, he didn't actually teach Land Value Taxes as a Direct tax, nor as a property tax. He wanted it to be on "unearned rent." He wanted it to be a tool to protect workers, and producers, the elderly and ordinary families:
As this biography notes that his LVT proposal was found on the reality that:
"rent tends to increase not only with increase of population but with all improvements that increase productive power, Mr. George finds the cause of the well-known tendency to the increase of land values and to the decrease of the proportion of the produce of wealth that goes to labor and capital, while in the speculative holding of land thus engendered he traces the tendency to force wages to a minimum and the primary cause of paroxysms of industrial depression." H. george Bio: [http://www.sfmuseum.net/hist9/hgeorge2.html]
His tax was NOT intended to evict small farmers or householders from farm and livelihood.
"The remedy for these he declares to be the appropriation of rent by the community, thus making land virtually common property, while giving the user secure possession and leaving to the producer the full advantage of his exertion and investment." H. george Bio: [http://www.sfmuseum.net/hist9/hgeorge2.html]
Henry George was after "unearned rents" and was talking about progressive taxation:
"the single tax is NOT a tax on land. It is a tax on what in the terminology of political economy is styled rent---that value, which . . . attaches to SOME land with the growth of population and social development; that premium which the user must pay to the owner as owner in one payment (purchase money) or in annual payments (rent), for permission to use land of superior excellence."
Thus the people that think of LVT as a tool for real estate development or have no regard for labor, or are confused about what Capital is are what Henry George Called "Unsound Followers."
Originally published 3/3/2015
And:
This was originally one slightly rambling long post. I've split it into two.
In a paper by Joseph E. Stiglitz titled; "Towards a General Theory of Deep Downturns" [GenTheory], Joseph Stiglitz lays out what is right and what is wrong about most of current Neo-liberal (Friedmanista) and Neo-Keynesian (he calls it "New" Keynesian) thinking about current economics.
he writes:
"deep downturns have marked capitalist economies since the beginning. It took enormous hubris to believe that the economic forces which had given rise to crises in the past were either not present, or had been tamed, through sound monetary and fiscal policy."
Continuing:
"Those who attempted to defend the failed economic models and the policies which were derived from them suggested that no model could (or should) predict well a “once in a hundred year flood.” But it was not just a hundred year flood—crises have become common. It was not just something that had happened to the economy. The crisis was man‐made—created by the economic system. Clearly, something is wrong with the models." [Stiglitz GT]
Modern Neo-Georgists (my term for them) have a principle called "All Taxes Come from Rent (ATCOR). It is an assertion derived from interpreting what Henry George had to say in his book "Wealth And Want." It's my contention that this principle is an invention of Mason Gaffney not Henry George and reflects a drift in ideation from what Henry George actually said. Even so the principle is true, but not necessarily the way that its proponents try to claim it is.
Third Way is incredibly influential with establishment Democrats. Rank and File Democrats don't always feel the same. So I wanted to critique their articles so people I know can make an intelligent decision.
In an Article titled "Losing Ground in Asia: Why the U.S. Export Market Share Has Plummeted" by Third Way the authors note that despite the Obama's efforts to do an "Asian Pivot" - that includes his push of the Trans Pacific Partnership treaty - we have not only not gained ground, we've lost ground on exports. They claim:
"Despite this policy shift, when it comes to economic performance in Asia, America is failing." [3rdWay]
They then provide a report:
"This report examined 26 entities (25 countries, including the United States, as well as the combined rest of world) and their share of the Asian import market from 2000 to 2014." [3rdWay]
They claim:
They then use this decline in Market share as an argument:
"Over the next several months, the United States and 11 nations are expected to conclude negotiations on the TPP. This is a sure fire way to increase U.S. market share in these important Asian economies. The global economy is projected to grow by over $60 trillion in the next 15 years, and almost 90% of that will occur outside of the United States, making global commerce an even larger part of future American success.4 By tapping into these lucrative markets, the United States can retake its lost share of these expanding economies, which means more wealth and prosperity for the middle class and the U.S. economy." [3rdWay]
But is that, in fact, true?
This post is designed to analyze an excerpt from Henry George's writings
Henry George wrote on the Income Tax in 1887:
"The world calls on me to abandon my absurd theory of taxing land values and to support instead an income tax as a means of relieving working people of unjust burdens"
He didn't reject it outright. But he did have caveats:
"If the world sees me further, and is prepared to advocate an income tax in lieu of other means of raising public revenue, or any considerable part of it - as for instance, that now collected at our custom houses by onerous duties upon the bringing into the country of things the people want - it would give me much pleasure and would do a great public service."
Here he's advocating the core principle of progressive taxation. It's not about punishing people, but it is about equity, "fairness or justice in the way people are treated." When the Income tax was first created it's primary goal was "unearned income", which included income from "other people's money", the money privilege and other forms of privilege, and did not normally apply to ordinary wages. Such a tax was far superior to the existing taxes which burdened workers, farmers and other ordinary people.
Nobody was surprised by what is happening to the Greeks. It's happened in one way or another to country or state after state, around the world. Since the end of official colonialism, the central powers may be less likely to send in troops everywhere, but the use of central banking, exchange rates, and trade power has been used over and over again to shift the debts of corrupt officials and corrupt bankers to the general publics of the countries they are looting. The Germans, the Japanese, the Chinese and even the Russians have, mostly, traded their military Uniforms for Uniform Suits. It's not outright war anymore. It's "just business" -- with the model as the Godfather.
I started reading the Article "5 Billionaires Who are Making Life Miserable for Ordinary Americans," by Dave Johnson from Alternet, and I thought I'd see the usual suspects. But from the looks of it there are a lot more than 5 billionaires trying to turn the USA into an Oligarchy. His article points to 5 people who are not the Walton's or the Koch Brothers. The article demonstrates that we have hundreds of Billionaires whose idea of our Republic is an oligarchic Republic. It looks like Billionaire Tom Perkins is speaking for his fellow Billionaires!:
“The Tom Perkins system is: You don’t get to vote unless you pay a dollar of taxes,” Perkins said. “But what I really think is, it should be like a corporation. You pay a million dollars in taxes, you get a million votes. How’s that?”
And it seems like these Billionaires are working to make this a reality. The list of Miscreants in the Salon Article are:
There are a lot more than 5 persons. It seems like venal and perverse billionaires have become legion. Hundreds? They seem to be in every State of the Union, and their gatherings with the Koch Brothers or the other factions are chauffeured events; usually secret. It's no wonder our Democracy is in trouble. They seem to have taken the Powell memo as a declaration of war on the USA. Essentially they are running their own revolution. The Salon Article gives detail on only 5 of them, but it has links to more information. So when we talk of the Koch's takeover, we are really talking about a group of sometimes aligned oligarchs pushing different issues for self aggrandizement using politics to buy power and influence.
Here are some highlights for those who might not click on the link:
Pete Peterson is the pointman on the effort to privateer and eliminate social security:
"Leading every list of billionaires pushing an issue is billionaire Pete Peterson and his forever war on government doing things to make our lives better, especially Social Security. Peterson leads the list because of reports of his pledge to spend $1 billion on his pet issue."
And that is one billion this year. Think of it! The Koch's have pledged to spend a billion electing candidates across the country who reflect the beliefs of this group. But you can better believe that Pete Peterson's ads will coordinate with those of the Kochs and the others. They all share hostility to the idea of democracy. They really are disciples of Tom Perkins. The article continues:
"Have you ever heard anywhere that the budget deficit and national debt are a problem? You can’t pick up a newspaper or magazine, turn on the radio or TV, or listen to any politician from the so-called “center” to the far right without hearing that, and the reason is Pete Peterson and his money."
The Salon Article includes a video of Pete Peterson in video:
But what Pete Peterson is running a hoax. Social Security's only threat is from Pete Peterson.
Some of the front groups in the Pete Peterson list is;
And the article notes:
"As Michael Hiltzik worded it in Unmasking the most influential billionaire in U.S. politics at the LA Times, “The shame of Washington… comes from the fact that almost every organization promoting the grand fiscal bargain in which those programs will be on the table has accepted, somewhere and somehow, money from Pete Peterson.”
At least Pete Peterson doesn't hide his numerous front groups like Koch brothers and their "kochtopolis". His looks more like a pyramid:
http://www.salon.com/.../5_billionaires_who_are_making.../ and
And Source Watch
Meanwhile our real debt problem is in our trade deficit and war-mongering. As the Salon Article also notes:
"Meanwhile the country’s real deficit problem is our trade deficit, especially with China. The trade deficit is the measure of jobs and factories moving out of the country. Fixing this deficit just happens to create jobs, lift wages and repair our economy."
"If you are hearing about how terrible the budget deficit is and how it is so important that we all make sacrifices in order to bring that deficit down, it’s Pete Peterson ‘s money talking. Too bad there is no billionaire pushing us to fix the trade deficit."
Too bad they are all exploiting it using Wall Street Arbitrage tricks and offshoring.
If the Kochs are point people for stealing elections and the Tea Party/GOP takeover of State after state, and Pete Peterson is the point man on cutting Public Pensions, John D. Arnold runs point on the Far Right's attacks on the pension system. They've already systematically looted private, University and public pensions across the country but it seems Arnold sees his mission as to end the rest. David Sirota has done work on this one. "David Sirota showed how the Pew Charitable Trusts was working in partnership with (and funded by) Arnold." The findings in Sirota’s report included this:
"Finding: Conservative activists are manufacturing the perception of a public pension crisis in order to both slash modest retiree benefits and preserve expensive corporate subsidies and tax breaks."
The primary source for the money and movement on this is Arnold.
"David Sirota showed how the Pew Charitable Trusts was working in partnership with (and funded by) Arnold. The findings in Sirota’s report can be read at this link "Plot against Pensions" [http://ourfuture.org/wp-content/uploads/2013/09/Plot-Against-Pensions-final.pdf]
So if you were expecting a pension from your police or fire job. If that gets done away with you can thank John D. Arnold. Remember that name, friends, especially if you are in law enforcement.
They are attacking every single source of information and influence in the country. Even Sesame Street!
As Dave Johnson notes:
“These corporate/conservative organizations are very good at manipulating the media and public opinion — it is their purpose. Their “experts” are well paid and always available to talk to reporters, appear on TV and radio shows and write articles and opinion pieces for newspapers, blogs and for their network of similar organizations. Their “reports’ and “studies” reach the conclusions that fit the strategy, and are crafted to sound just right. And there are so many of them! The result is development of “conventional wisdom” about what is going on in our society. This is why that conventional wisdom more and more reflects the corporate/conservative line.” [Also: discover-the-network-out-to...]
I hadn't heard of Munger (He's mostly California's problem). I think that Dave profiled him because he's typical of those billionaires who are based in their home cities and have a perverse loyalty to the GOP and country club of those places. There are a lot of local politically active billionaires whose focus is more local politics, like Munger.
What Matters about Perkins is that his statement might have sounded like a Joke, but when you take these billionaires in tandem it's not funny anymore. Indeed they could be cutting their own throats in the long run. David quotes Igor Volsky from Think Progress:
“The nation’s growing gap between the rich and poor has become a full-blown crisis, with the top 1 percent of families experienced a 278 percent increase in their real after-tax income from 1979 to 2007, while families in the middle 60 percent saw an increase of less than 40 percent. A large body of research suggests that high inequality leads to lower levels of representative democracy and a higher probability of revolution, as poorer citizens become convinced that the government is only serving and representing the interests of the rich." [http://www.alternet.org/economy/how-one-billionaires-idea-give-rich-people-more-votes-already-works]
Another recent study showed that our elected officials pretty much ignore public opinion. What they do pay attention to are campaign donations. And the poor can't donate anything so the strategy of the rich is to eliminate the middle class that the features of Democracy depend on. Perkins is "already getting what he wants." And we arent':
And the reason is that politicians do as their campaign donors do. And the country does as the media tells them to do. And the media is influenced (if not outright slaves to) these billionaires and those citizens who pay them. For a few hundred bucks a local crook can buy a politician. For a few billion our billionaires have decided to buy out the country.
Then there are Silicon Valley billionaires Steve Jobs, Eric Schmidt and others pushing low wages for people who work for them. This one frosts me because I worked "figuratively" in the extended silicon valley and the Government heavily subsidized it's creation. Then the moguls who took advantage of Wall Street money to monopolize key pieces of software and connectivity started working on us. Pensions? We never had them. We had 401K's and IRAs, and initial promises of employer matching that were never kept. And now these folks have the stones to go to Congress and say they have to hire abroad rather than tap into the pool of unemployed software engineers and skill in this country. It's a transparent effort to enslave all of us. And taken together, it's pretty clear we are fighting oligarchy.
And this article didn't even include the Koch Brothers, Adelson or the legions of other folks in Florida and Nevada, Chicago and New York -- and scattered throughout the country, who are pursuing similar agendas.
Wonky warning
Hamilton was trying to solve an impossible problem. On page 62 of "Washington's Circle" the author notes:
"Finances were the government's biggest problem as trickling revenue allowed an already mountainous public debt t ogrwo while accumulating interest, all in arrears. The amounts were terrifying. The States owed a total of $21 million...country owed almost $12 million in foreign loans. The central government owed it's own citizens a whopping $42.5 million." ... "In sum, the total of $75 million could be calculated in modern worth at about $2 trillion in purchasing power but as much as $30 trillion in labor value." [page 62, "Washington's Circle"]
And this with a national population less than a tenth of what it is today the USA had a deficit that in modern money wouldn't be much different from our entire GDP. The problem Hamilton had to solve was greater than what we face.
In Hamilton's collected works, he was applying an expertise he'd developed from shortly after he retired from the military when he wrote a bank plan and sent it to Robert Morris. The problem he identified then had only grown since then (see Hamilton's Bank Plan from 1781). This article presents his writings on money:
Communicated to the House of Representatives, January 28, 1791. [From Volume 4 of his collected works]
Hamilton broke his arguments down into 6 parts:
Hamilton's vision couldn't be any clearer. He was ahead of his time. Of the founding fathers his understanding of the subject of finances was unparalleled. In answering basic questions he is setting for guidance for this country that we've done well to follow.
He starts his exposition by discussing the history and weights of the standard "dollar" "piece of 8" from Spain and it's evolution into the money used by American Colonies. He starts by noting that the dollar reflects the relative scarcity of Gold in relationship to Silver:
"The difference established by custom in the United States between coined gold and coined silver has been stated upon another occasion to be nearly as 1 to 15.6."
And this also answers question two. He suggests that neither Gold nor Silver be established as the "standard". But he makes an almost surprising statement on whether one or the other should be preferred. He is famous for preferring the Gold Standard, where Congress preferred the more abundant silver standard. He then makes a surprising statement:
"Contrary to the ideas which have heretofore prevailed, in the suggestions concerning a coinage for the United States, though not without much hesitation, arising from a deference for those ideas, the Secretary is, upon the whole, strongly inclined to the opinion, that a preference ought to be given to neither of the metals, for the money unit. Perhaps, if either were to be preferred, it ought to be gold rather than silver."
Again he's referring to Gresham law. If we make an internal standard of gold coins (or silver coins) those gold coins become reservoirs of value and get driven out of circulation. He's been quoted by gold bugs as wanting a gold standard over a silver standard. But his opinion is more nuanced than that:
"The inducement to such a preference is to render the unit as little variable as possible; because on this depends the steady value of all contracts, and, in a certain sense, of all other property. And, it is truly observed, that if the unit belong indiscriminately to both the metals, it is subject to all the fluctuations that happen in the relative value which they bear to each other. But the same reason would lead to annexing it to that particular one, which is itself the least liable to variation, if there be, in this respect, any discernible difference between the two."
If the dollar is tied to either Gold or Silver, then fluctuations in the price of those commodities will affect the value of the dollar, and not in a positive way. But more important than the circulation of coin was it's value as a backing for notes circulated:
"But bank circulation is desirable, rather as an auxiliary to, than as a substitute for, that of the precious metals, and ought to be left to its natural course. Artificial expedients to extend it, by opposing obstacles to the other, are, at least, not recommended by any very obvious advantages. And, in general, it is the safest rule to regulate every particular institution or object, according to the principles which, in relation to itself, appear the most sound."
Hamilton was not advocating exclusive use of coins.
"In addition to this, it may be observed, that the inconvenience of transporting either of the metals is sufficiently great to induce a preference of bank paper, whenever it can be made to answer the purpose equally well."
Bank Paper is a term that includes paper money.
He wants sound money, yes, but he's talking about something more advanced than money as a precious commodity. He explains
"But, upon the whole, it seems to be most advisable, as has been observed, not to attach the unit exclusively to either of the metals; because this cannot be done effectually, without destroying the office and character of one of them as money, and reducing it to the situation of a mere merchandise; which, accordingly, at different times, has been proposed from different and very respectable quarters; but which would, probably, be a greater evil than occasional variations in the unit, from the fluctuations in the relative value of the metals; especially, if care be taken to regulate the proportion between them, with an eye to their average commercial value."
The Key to Sound money is whether the money is backed by goods and services.
But Hamilton understood the importance of providing sufficient currency for trade and commerce rather than focusing too much on Gold versus Silver. In this sense he anticipated issues that would come up years later as "Gold Standard" advocates bitterly contested "Silver Standard" advocates. He understood, long before Friedman became famous for it, the importance of using money and notes to make sure people have enough currency to buy and sell and engage in commerce:
"To annul the use of either of the metals as money, is to abridge the quantity of circulating medium, and is liable to all the objections which arise from a comparison of the benefits of a full, with the evils of a scanty circulation."
Hamilton is talking about universal weights and measures. He doesn't seem attached to any particular solution. But he advances that the values be uniform. When answering the question of how much seignorage the government ought to receive. And he notes:
"It is sometimes observed, on this head, that, though any article of property might, in fact, be represented by a less actual quantity of pure metal, it would nevertheless be represented by something of the same intrinsic value. Every fabric, it is remarked, is worth intrinsically the price of the raw material and the expense of fabrication; a truth not less applicable to a piece of coin than to a yard of cloth."
He then notes that the value of money is related as much to the wealth and good name of the country, it's government and its ability to pay its bills. Thus money is not to be considered raw material/bullion but analogous to "fabric":
"The fact is, that the adoption of them as money has caused them to become the fabric; it has invested them with the character and office of coins, and has given them a sanction and efficacy, equivalent to that of the stamp of the sovereign. The prices of all our commodities, at home and abroad, and of all foreign commodities in our markets, have found their level in conformity to this principle."
This was a step along the way to fiat money. But most importantly money should have a standard measure so that it can be relied on:
"The foreign coins may be divested of the privilege they have hitherto been permitted to enjoy, and may of course be left to find their value in the market as a raw material. But the quantity of gold and silver in the national coins, corresponding with a given sum, cannot be made less than heretofore, without disturbing the balance of intrinsic value, and making every acre of land, as well as every bushel of wheat, of less actual worth than in time past."
There are some who would argue with this position, but the principle is incontrovertible. Money is used for trade and as such it has to measure the value of the thing it is traded for. And this is especially true if a country lives in trade with it's neighbors:
"If the United States were isolated, and cut off from all intercourse with the rest of mankind, this reasoning would not be equally conclusive. But it appears decisive, when considered with a view to the relations which commerce has created between us and other countries."
Fiat money in the context of the revolution would have had trouble surviving without the ability to trade for gold and silver.
Following from his argument, he wanted to keep the US Dollar approximately equal to money already in circulation. To make it easier to use, more familiar to use and to regulate value. He concludes money should:
"continue to represent in the new coins exactly the same quantity of gold and silver as it does in those now current; to allow at the mint such a price only for those metals as will admit of profit just sufficient to satisfy the expense of coinage."
Of course:
" withdrawing it from those of foreign countries, and suffering them to become, as they ought to be, mere articles of merchandise."
He suggested the following coins:
Man that would be cool.
Hamilton escoriated bills of exchange, paper money, on the grounds that it was usually used as a means to avoid paying bills and favor debtors over creditors. For example he wrote how:
"Rhode Island, New Jersey, North Carolina, and Georgia, making paper money a legal tender for the debts of those creditors; which, it is known, sustained a very great depreciation in every one of those States. These very serious and compulsory interferences with the rights of the creditors" [Vol 5]
So his opposition to paper money, was based more on the basis of the soundness of the underlying sureties and quality of the money produced.
That is enough for this post.
I started this post months ago and had to pause due to other concerns. I'm glad I put it on pause because I didn't like my introduction. Now the post makes more sense because I was able to find another source to quote for the introduction and put the piece in the context of the year that he wrote his Report on Manufacturers. I'm also finding discrepancies between people's writings. Someone gave credit for the 1781 bank proposal to Robert Morris, but it's in Hamilton's hand then and so the biographer skipped over Hamilton's service to Morris. It's a minor discrepancy, but a similar one I just discovered on the subject of fisheries as Jefferson and Hamilton seem to have exchanged letters on the subject. Possibly they read each other's letters and might have acted on them had they not started squabbling like they did more and more as Washington's first Term finished. By the Second Term Jefferson left government and Hamilton soon followed. Hamilton won his arguments with Jefferson because he'd done his homework and because the Republicans were reacting to a scapegoat. Hamilton was not a saint. He was an elitist. But so were they. And he was not a monarchist and he cared about this country more than he cared for his personal aggrandizement.
Reuters reports that "Global banks admit guilt in forex probe, fined nearly $6 billion". Loretta Lynch, the new Attorney General announced today that:
“Today’s historic resolutions are the latest in our ongoing efforts to investigate and prosecute financial crimes, and they serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers,” said Attorney General Lynch. “The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct. It is commensurate with the pervasive harm done. And it should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare.” [http://www.justice.gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas]
Except it's not. If Loretta Lynch really wants to do something about Banker Fraud she has to start prosecuting individuals. And if we want some permanent changes we need to hold individuals and their management accountable for their actions. As someone said on the Ed Show today [paraphrasing] if we start frog marching management the rank and file will stop breaking the law. I believe that all bonuses, stock options, etc... should be put up against a Bond for Good Behavior for all officers of company doing business with the Government or having government powers over other people's money. Then when something like this happens the Taxpayer gets back his and her money from those bonuses instead of the thief conning the Government to give him/her more bonuses to fix the fraud he or she had committed. An article in US News notes:
“The sheer volume of contracts based on LIBOR defies the imagination. Estimates vary, but $500 trillion seems reasonable. Even if the banks lied by as little as one-tenth of 1 percent, that percentage applied to $500 trillion multiplied by the six years of the fraud comes to $3 trillion stolen from customers. Cutting that amount in half to allow for the fact that some customers benefited from the fraud while others lost still gives implied damages of $1.5 trillion, greater than the combined capital of all of the too-big-too-fail banks in the United States. Taken to the full extent of the law, these damages are enough to render a large segment of the global banking system insolvent. These damages will be pursued not by regulators, but in private lawsuits by class action lawyers.” [http://www.usnews.com/opinion/blogs/economic-intelligence/2012/07/23/libor-fraud-may-be-the-mother-of-all-bank-scandals]
5 Billion to settle 3 Trillion in damages is that "cost of doing business" that the Banksters talk about openly when they are telling their employees to commit fraud and break the law. They will continue breaking the law until they start being frog marched. And some of them will continue to do so until we stop rewarding them for their fraud and letting them pocket profits they never earned.
Every person with a job that gives them control over Other People's Money, or supervisory power over such people, should be bonded for the amount of money they are handling. They should pay an insurance premium based on the risk of their portfolio. That bond should be owned by an organization (company or agency) with power to make good any losses from their behavior from that bond and to raise or lower the premium on the bond. Every one of those bonds should be secured by any promises of bonuses, stock options, etc.... and the bonding agency have the power to freeze, seize or put a lien on those securities. And when that person breaks the law unless the supervisor reports the infraction to the bonding agency and takes disciplinary action both the employee and the supervisory should be subject to action from the bonding agency. Want a safe secure system? That would do it as long as the bonding agency isn't "owned" by the executive wall street body handling people's money but is owned by the people of the country and/or the customers of the Financial Industry. A law can be crafted to that effect. It would be one that finally would have real teeth. Every employee or supervisor involved in the Financial Industry would sign an agreement binding him or her to the terms of this oversight and to pay premiums based on the risk of their portfolio. And the bonding agency would arbitrate disputes between investors and consumers, etc... If customers don't agree they can take them to court. Only the employees and supervisors would be bound by such arbitration agreements, not the customers. This is the reverse of how they operate now where they mostly stiff their less powerful customers -- such as pension plans.
