General Grant and Mark Twain, Greenbacks versus "Solid Money"

Accounting Money and Credit Money

The General purpose of money is to enable trade by creating a currency as a common unit of account that allows agreed on measures of value so that people can more easily exchange goods and services. Where it gets tricky hinges on the question how do you regulate the value of that currency so that it measures the value of commodity and services in a stable manner. Whether a currency is based on "commodity money" (Gold, silver by weight and purity), "fiat money", or accounting money (credits and debits/ mostly debt money); this presents an issues of sovereignty. Without sovereign money, currencies fall into the hands of bankers and speculators, grifters and frauds. When sovereignty over currency is in the hands of a Privateering Central Bank; The same. The People of the world need sovereignty over their currenies in actually sound hands. When money is available in an unsound manner, it;

.... falls into the hands of privateers:

• Money loses it's value as an accurate measure of transactions and relative value.
• It loses connection to the commodities that are supposed to back that value.
• Those with control over that currency speculate with their possessions.
• When they do some get very rich, in money terms, and...
• Suddenly part or all of the currency loses its collateral
• And everyone else gets very poor.

Front Money First then tax the Money Privilege

Sustaining an Economy that has the feature of Commonwealth Via MMT principles

Source: [Levy]

When Hillary talks about balancing the budget without adding to the national debt, I disagree a bit with her. She and her advisors are still under the sway of certain myths about money and economy that are deeply entrenched in American Academia, Business & Finance. Although thanks to the influence of the Post Keynesians and Modern Money Theory (MMT), less so than before. This is a reason for guarded optimism. I hope she'll listen to what he has to say. If Trump wins, heaven help us. If we can develop an economy with sovereign powers over our money we can do everything we want to, within reason, well. This is because most of what we've been taught about balancing budgets is false.

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.

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.

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.

Sustainable Economic Policy IV

Adding to the Federal Reserve "Toolkit"

Janet Yellen is having a meeting at Woods Hole:

"The Fed's annual conference in Jackson Hole, Wyoming, where Yellen speaks on Friday, is due to focus on how to improve central banks' "toolkit," but the unanimous message from the Fed's top policymakers is that those tools are not enough." [Reserve Meeting]

And you hear the usual complaints from the Federal Reserve that:

"Monetary policy is not well equipped to address long-term issues like the slowdown in productivity growth," Fed vice chair Stanley Fischer said on Sunday. He said it was up to the administration to invest more in infrastructure and education."[Reserve Meeting]

It is Up To Congress!

Fischer is expressing the World Banker conventional view. However, if the Federal Government appropriates money for Infrastructure and Education, under current law, it is forced to either borrow money at interest ("deficit spending") or to raise taxes to "offset such spending". Raising Taxes means the government must rob Peter to Pay Paul. Borrowing money means that any profits from infrastructure investment will go to Investors and not to the people "as a whole."

Congress Can Authorize an Infrastructure Bank and Delegate that function!

A Sustainable Economic Policy III

Management for the Public Good

The 19th century economist Henry George, articulated the principles of commonwealth public policy in 1890:

"With respect to monopolies other than the monopoly on land, we hold that where free competition becomes impossible, as in telegraphs, railroads, water and gas supplies, etc., such business becomes a proper social function, which should be controlled and managed by and for the whole people concerned, through their proper government, local, state or national, as may be." [[Paragraph 11 Georgist Plank]

Proper Government

By "proper government", one must understand that local, state and national government all have "proper" roles in regulation and operation of the kinds of goods and systems that tend to become monopolized. Certainly healthcare, most of our infrastructure of all kinds, and many other public goods risk being mismanaged and tyrannically managed when managed of and for private cabals (corporations) -- especially when they involve public monies (bills of credit/paper money) and government function. The record shows a little more than risk, more like severe threat that private management leads to monopoly and exploitation.

These attributes apply to all our national infrastructures to one degree or another: Banks, Healthcare, Defense, Communication, Transportation and Energy. They all require that the US manage them in the public interest. And ignoring Georgist principles has led to these public goods being allowed to become monopolies run for the private, separate Interest.

A Sustainable Economic Policy II

Asserting Sovereignty over our finances

To have a sustainable economic policy for the USA, we have to assert sovereignty over our finances. Warren Mosler writes:

"the government’s interest is the public interest. The government is there to provide for the general welfare, and there is no correlation between this interest and a position of surplus or deficit, nor of indebtedness, in the government’s books." [Galbraith/Mosler]

Mosler is talking about the Federal portion of our Federated Government. Of course, such a correlation is IMPOSED on subsidiary governments, as if they were subjects rather than coequal and vital parts of a sovereign entity. In the United States, local government is relegated to the role of competing for funds as if it were just another private enterprise, and has almost zero sovereignty over it's own finances and this hamstrings it's efforts to pursue the public interest. States are under less constraint, largely because of their relationship with the Federal Government, but they too deal with internal, external and artificial constraints that oppress their ability to serve the Public Interest.

Yet:

"the government is sovereign. This fact gives to government authority that households and firms do not have. In particular, government has the power to tax and to issue money. The power to tax means that government does not need to sell products, and the power to issue currency means that it can make purchases by emitting IOUs. [Galbraith/Mosler]

And to be fully functional a Federated Democratic Republic should extend the benefits and privileges of that power to the whole of the country, including its parts, as well as to be able to exercise it for itself. Henry George Recommended in the 1880s that the money power be exclusively with Government [On Greenbacks]

"the power to issue money is a valuable privilege which, to secure the best circulating medium and to put all citizens on a footing of equality, ought to be retained by the general government, and to be permitted to no one else, either individual or corporation. The greenbackers, who have insisted that national bank notes should not be permitted, and that all money should be the direct issue of the government , are in the right." [Greenbacks]

At the very least our Federal Reserve should be an agency of the Government rather than protecting bankers. Unfortunately our pirates have had more influence on the Government than reformers.

Current System Privatizes Rule over Money

While this is true, Around the world centralized financial centers give responsibility to local government and then impose artificial constraints on their power to deliver service by stripping this IOU money power from them, or by privately taxing it by imposing artificial compounding interest, fees, penalties. Instead our system gives the power to emit IOUs, collect interest on them, and essentially put a lien on public and private property, to privateering banks. Essentially the International banks, through exercising this power over the money supply, act as if they were pirates. This infuriates both left and right, and it is a main driver of worldwide economic inequity. But something can be done about it if folks can avoid the over drama. This system is an outgrowth of feudalism, international chaos, warfare, trade and colonialism and of Private Government. To fix it requires an assertion of Governance in the public interest. It is not the product of diabolical conspiracies. To fix a thing one must understand it.

A Sustainable Economic Policy I

The Problem

I was reading someone calling for Quantitative Easing, but Quantitative easing has little effect on the economy. The Banks will only loan to folks who aren't underwater, owing more than they are worth -- and to folks who have the surety to provide something the bank can take if the business fails. The term for an economy that is over-leveraged is a "liquidity trap." Quantitative easing is a waste of public money when banks won't lend to the people the Fed claims it intends to be helping. We saw that in 2009-2012 when the banks foreclosed like crazy on ordinary people -- and bought each other out -- instead of helping those people get a job.

1. To borrow money on the credit of the United States
2. To regulate Commerce
3. To coin Money, regulate the Value thereof, and of foreign Coin,

Emitting bills of credit (money) is a power implied from the power to borrow money and the prohibition of that power to the States in Section 10. Rather than our country passing a constitution to make that power explicit, the USA has let the courts define whether the Federal Government can print money, and the result has been a 200 year fight, which is ongoing. The Federal Reserve is the latest "Missouri Compromise" on this subject in the battle between centralizing bankers and local financial interests. At this point the centralizing bankers have pretty much won their war and thus we have the Fed, which does a dance between a which privatizes and privateers on the ability to "emit bills of credit" as money and to which Congress has delegated almost all the powers just listed.

Economic, Democratic Subsidiarity and local democracy

Greece in 2015, Puerto Rico Now, What to do?

Almost a year ago I blogged a series on the Eurozone and what was happening to the Greeks and what that means for us:

"The privateers give a Broadside to the Greeks",

Privateering through Banks and the EuroZone and

Going Greek on the Whole World

And I showed that neo-liberalism is not Bill Clinton, us Democrats and Company. It is our Republican movement:

Neoliberalism versus Economic Policy that Really works

Principles of Federalism

Federated principles are concerned with uniting people and getting them to work together in solidarity. Federal Government is general government that spans multiple centers of population and subdivisions and links people who might otherwise be at war with one another. Thus all the principles of Federal Government derive from two basic concepts: "E Pluribus Unum" -- out of many one and the notion that we are stronger when we work together; "United We Stand, Divided We Fall." The notion of "Union" as better than disunion is central to all of them. For a Federation to work it has to recognize the rights and responsibilities of both central authorities and local authorities, subsidiarity and replication of republican forms to the local level.

Workforce training and Employment

We have some abysmal numbers of unemployed people in some sectors of the economy no matter what the statistics say. Unemployment in the 20-24 year old component of our population is at 9% nationally [see http://www.bls.gov/cps/cpsaat03.htm] even where it's lower on average. For minorities the rates are much higher. Overall the Washington Area unemployment when including surrounding areas is 3.8% while for the District proper it 6.3% [http://www.bls.gov/news.release/metro.t01.htm]. Not having an income or productive employment is bad for people's psychological, civic and spiritual health. I've been volunteering with my friends at GABIDDC and other organizations to do something about this. Two of FD Roosevelt's envisioned rights in his "Second Bill of Rights" were:

	Decent Employment
	And:
	An Adequate wage and decent living (living wage) from that employment

There can be no fair and equitable society (equity = a fair society) unless people can use their creativity, be employed at something useful and get compensated for their labors. But these are positive rights; they require institutions, programs, resources and efforts to become reality. My friend Mike Jackson is devoting Herculean efforts to getting workforce training and development programs stood up and supported in the District of Columbia and around the Country. I've been doing what I can to support his efforts.

ISDS as an agency of Neo-colonialism

Investor State Dispute Settlement (ISDS) Tribunals are now starting to bite what used to be known as the first world, in the rear. Recently the threat of an Investor Suit in the World Trade court instigated Congress to rescind point of origin labeling laws. And another lawsuit was filed even more recently seeking damages for a ruling that the Keystone XL pipeline was too great a risk to the US water supply to be built. [see Washington Post: "TransCanada is suing the U.S. over Obama’s rejection of the Keystone XL pipeline. The U.S. might lose."]

The Hoodoo about Varieties of Voodoo

Varieties of Voodoo by Paul Krugman February 19 2016, he writes;

"America’s two big political parties are very different from each other, and one difference involves the willingness to indulge economic fantasies." [Krugman Voodoo]

No We Democrats indulge in self flagellation and let the Cons use their not so "innocent frauds" to bully us around. We also have a habit of eating our own -- and letting the Cons, Con us. So we do their work for them.

As James K. Galbraith notes in his own rebuke:

"For the record, in case you're curious, I'm not tied to Professor Friedman in any way. But the powerful – such as Paul and yourselves – should be careful where you step." [Galbraith]

And it looks like a lot of folks have stepped in it.

The Trouble with Capitalism

http://web.stanford.edu/~chadj/piketty.pdf

The trouble with capitalism is that it tends to lump together "capital" with rental opportunities and create an aristocracy of wealth and power that has the ability to take the first cut on production and starve labor. This can't be good for anyone. Not all capital is the same, and when capitalists are disinvesting from actual production that increases inequality and eventually collapses the economy.

1. All Capital is not equal
2. Much of what is labeled capital is not "actual capital" but rental wealth.
3. Much capital results from converting public goods to club goods.
4. Or from converting common goods to private goods.
5. Who owns and controls capital matters.

Transformation or half loaves -- A Debate

I still wish for an in person debate between Paul Krugman and Robert Reich. In a way we have one between their newspaper columns. Krugman in the times: http://www.nytimes.com/2016/01/22/opinion/how-change-happens.html and Reich in his blog: http://robertreich.org/post/137882162570 I think they both are making valid points. But I disagree fundamentally with Krugman's attack on the value of “transformative rhetoric”

The Rise of the Predator/Parasite State

How con artists turned the New Deal into a Predator State Part II

In a previous post "The sabotage of the New Deal" I shared some observations, mostly gleaned from James Galbraith's book "The Predator State" talking about the resilience of New Deal Institutions and how that resilience derived from their mixed private and public character. I then segued into discussing how the cons realized they couldn't repeal the New Deal because they had no alternative that worked. The cons decided instead to corrupt them. In this post I want to share some broader concepts. But it starts with a simple fact. James Galbraith was talking about Roosevelt, but could just as easily be talking about our incipient Oligarchs when he said:

"private economic activities supported, leveraged, guaranteed, and regulated by public power," coupled with "public institutions aided, abetted and buttressed by private money."

When folks call what is going on socialism for oligarchs, they aren't kidding. To acquire fortunes in the Billionaires one has to have to factors going. One is "de-regulation" -- and the other is private control (ownership) of public resources. Socialism is supposedly public ownership of private resources. But what is private ownership of public resources? It is not just oligarchy, it is aristocracy. And when carried to it's logical extreme it is Monarchy.

Two kinds of One Percent

Piketty's book "Capital" talks about not one, but two kinds of inequality. One; wealth inequality and two; income inequality. He demonstrates through his pages that of the two wealth inequality is the more pernicious. Wealth inequality begins with income inequality, or simple colonization, but then rapidly becomes inherited wealth. Income inequality represents the power of status and position, capital and market power to favor some professions and capital control over other trades or simple labor.

How the Democratic Party was Bamboozled

Third Way and The New Orleans Declaration from Al From

Al From Takes credit for the birth of the "Third Way", which was a movement of Democrats exemplified by Bill Clinton that aimed at stealing thunder from the Right Wing while preserving the Democrats and allowing them to make a comeback against the Reagan revolution. The Democratic party had been in a hole for years, losing elections, losing "market share", legislators and local government, and worst of all for the insiders - losing patronage from big business and wealthy donors. Third way allowed politicians to continue to claim to champion populist and new deal policies while getting access to all that money.

Neoliberalism versus Economic Policy that Really works

We are seeing that some really horrible ideas are having predictable effects on economies around the world. They are horrible, they are counter-productive and they hurt people. Yet they are Zombie economic ideas that won't die. Why?

The reason that this happens is that people who have an agenda invent narratives to support that agenda. If it is convenient enough and it's not challenged those narratives become myths, and myths can be very, very bad and very persistent. Especially when those myths justify hierarchy and bullying. See [http://holtesthoughts.blogspot.com/2015/01/why-myths-are-bad.html]

In Bill Moyer's Article The Libertarian Delusion he talks about these horrible consequences of neoliberalism. But first let's define what "neo-liberalism" is. A Website called "Corporate Watch" lists some 6 main points about Neoliberalism and what their core tenets are:

1. The Rule of the Market
2. Attacking Public Expenditure for Social Services
3. Deregulation allowing all sorts of rent seeking and abuses
4. Privatization shifting public capital (wealth) to private hands (privateering)

And at the core of all this:

5. Eliminating the very concept of "the public good" or "community" and replacing it with "individual responsibility." Pressuring the poorest people in a society to find solutions to their lack of health care, education and social security all by themselves -- then blaming them, if they fail, as "lazy."

Or as I've observed, these pirates eliminate the notion of "public good" or "commonwealth" and replace it with a buccaneering spirit; Pirates

For more on this read: http://www.corpwatch.org/article.php?id=376