TULSI GABBARD: PHOENIX (Release the Dove!)

A New Independent Movement

What Bernie Sanders and Tulsi Gabbard have shown is that we need an independent voter movement to weaken corrupt political parties.

The bottom line is this: Tulsi is an independent candidate running in the Democratic Party Primary. So is Sanders. Why are they running in the Democratic Party? Because that's the only practical way they can get on the ballot in all the states.

(See:https://ballotpedia.org/Ballot_access_for_presidential_candidates)

This is what keeps political parties alive, no matter how corrupt they are. In this respect, the United States is still a confederacy.

We all know that the two major political parties are controlled by elites. There is nothing keeping them from being run by elites. Third parties are not controlled by elites, and that is why they are fringe parties that will never be successful. The power resides in the two major parties.

So how did Trump get elected? His platform really wasn't in line with either party and his base was middle class. But, even he found that quallfing in the fifty states was an impossible task and he was from the business world, so the GOP was the natural place for him to avoid having to qualify in the fifty states as an independent candidate. He figured he had the skills to sideline any rivals and turn the GOP in his direction, which he did. But, he ran into the deep state, the security state and the military industrial complex which controls both parties. So he caved in his first term and became a tool of the neocons, possibly because he leaned neocon all along, having close family ties to Israel.

What we need is an independent movement to reduce the power of political parties, which are at their weakest at this point in time. The logical constituency to do this is labor organizations. If they put their resources toward changing state laws to make it easier to qualify for the presidential ballot and by supporting independent candidates, instead of members of political parties, political parties could be weakened to the point where truly independent candidates like Tulsi Gabbard and Bernie Sanders could be elected president as independents. If both Tulsi and Bernie are sidelined by the DNC in 2020, the Revolution organization started by Sanders could supply the necessary organization to promote this. Sanders age rules him out for future presidential politics, but Tulsi is in a prime position to become the first independent presidential candidate if she chooses to run as an independent for congress this year and in 2022 and wins.

Attention independent politicos and journalists: You could be the first voice to promote this approach. I think your subscriber base would rise dramatically. Independents are the largest group in voter registration now, and many voters are disillusioned by the corruption of political parties.

MMT is not a Theory

In this discussion, “currency” is used in a collective sense, that is, paper money, reserves, electronic credits, etc.

MMT, Modern Monetary Theory is not a theory. It’s just an explanation of the way things work in a country that issues a currency that is not backed by a valuable physical asset, enacts taxes that are payable only in that currency, and doesn’t incur debt in another currency. This is the way our federal system operates now.

Unlike individuals, states, and countries that don’t conform to these principles, the US can never go bankrupt. It can issue new currency for any purpose that requires it. It doesn’t need to issue government debt because its needs its own currency. It does so because people holding the currency want a secure place to earn interest on the currency they hold and a way of removing spending power from the private sector when the economy is overheating. Interest rates set by the federal reserve are used to keep the system in balance.

Currency issuance increases demand, so it will stimulate the economy. If the demand for goods and services exceed the ability of the economy to provide them, due to shortages of labor, materials, or infrastructure, prices for these means of production will increase (inflation), so demand must be curtained, until supply can keep up with demand. This is where taxation and federal debt come in, to reduce demand until supply catches up.

The best way to increase demand is to put money in the hands of people who spend it, not into the hands of people who use it to buy up assets beyond what is needed for production of goods and services, increasing the price of assets. When people spend money it creates more demand for goods and services, more profits for corporations, higher wages for employees, etc (demand pull). I makes no sense to keep a substantial portion of the population in poverty, burdened by worrying about their health or survival, depriving them of the education, transportation, or other tools they need to maximize their productivity. The more people that are healthy, motivated, and are producing in the economy, the less likely it will be that shortages and inflation will develop, limiting the growth of the economy.

War

Once the constituency supporting war in a democratic country reaches fifty percent of the voting public, it’s almost impossible to stop. Unfortunately, there are many reasons to support war that can be easily rationalized. Warmongers know this and direct their propaganda to that end. So it might be constructive to enumerate the reasons.

1. Equating war with defending the country
2. Seeing an economic benefit to war
3. Participating in the war, or having family or friends participating.
4. Not realizing there can be future consequences not apparent now (blowback)
5. Viewing other people’s and country’s interests based on your own
6. Buying everything the government and press say
7. Everyone else is supporting it
8. Patriotism
9. Racism
10. Egoism
11. Machismo
12. Long held animosities
13. Being enthralled with the technology (video game syndrome)
14. Not understanding the long term effects of the trauma of war
15. Not fully understanding the meaning of life

The list is endless. Add your own reasons. Realizing that a lot of people fall into at least one of these categories, it’s easy to see why at least half the people of a nation can support war. Ultimately, it’s the people who are responsible for holding their elected leaders accountable for their actions, including decisions to resort to war.

Power Disparities, Disproportionate Response, and Blowback

If you want to understand why terrorism is increasing in the United States, you might want to read a book published before it all started: Chalmers Johnson: Blowback, The Costs and Consequences of American Empire, published in 2000, the year George W. Bush took office. Apparently, the new president, his vice president, his coterie of appointees, and his successor Barack Obama and his foreign policy team never read it. Because it says what causes the terrorism we now see increasing and what is necessary to contain it.

What is Johnson referring to when he says “American Empire”? An empire is a country whose economy and raw military power is unchallenged in the world. It is logical for such a country to assume that it must be exceptional, since it achieved this status. It follows that it may also assume that the system it uses must be superior to that of other countries who haven’t achieved similar status. And it may further assume that if other countries would only adopt their system, they would be better off. Continuing this scenario can become very hubristic to the point where the assumptions don’t conform to reality due the different development paths, and ethical, cultural and religious norms adopted by other countries throughout their history.

So what happens when an empire decides to use its economic and military power to change other countries toward the goal of making everything better for them. In such an endeavor, the justification is usually righteousness. We know what will make the country better. Selfish reasons like accessing the country’s resources and controlling commerce by various financial schemes are usually presented as being necessary for the good of the country. Making political changes is a logical next step. Get the people in power who will agree with what we are trying to do. These moves usually result in resentment that the country being “helped” is losing its autonomy. Factions within the country that share this resentment are the first to rebel in some way, first in a diplomatic way, progressing to protest, and ultimately to violence. The “rebels” eventually look for a way to get back at the empire. When the empire faces this, they consider such rebels as troublemakers, interfering with benevolent actions the empire is trying to implement, and who must be rooted out. Eventually, disproportionate force is used by the empire against the rebels to suppress them. As we have seen in many instances in history, the end result is a coup that installs a government sympathetic to the empire.

But, the problem doesn’t end there. If rebels are successful by sheer numbers, or receive aid from another strong power as the case was in Vietnam, the empire is kicked out. If the empire triumphs, blowback starts. Rebel actions turn to terrorism on the empire’s assets abroad, such as the bombing of the USS Cole, or attacks on the empire’s embassies abroad. The last rebel resort is to attack the empire homeland, as was the case in 9/11, and finally inspire rebel elements in the empire’s homeland toward indiscriminate violence, which is what we are seeing now.

So what are specific acts by the empire that inspire the most violent rebel response? On top of the list is asymmetric response. Using an air force or drones, which impact the people of the country in question greatly, but hardly affect the empire are major sources. Financial sanctions and trade embargoes are just war by other means that strangle the country, but cause little harm to the empire. All of these measures are viewed as being extremely unfair and inspire rage.

As these activities escalate, destabilization eventually results. When a country is destabilized and survival is paramount, religion, ethics, and morality are secondary considerations to the suffering people and brutality increases dramatically. If the livelihood and security of the people in the country are threatened, and hope for a solution is lost, extreme blowback to the empire may even lead to destabilization of the empire. The bottom line is, when people have little to lose by losing their life, they will do whatever causes the most damage to the empire that is causing their problems.

The only logical solution is for empires to get out of other countries where they are not wanted and let whatever happens, happen unless an international body not dominated by empires sanctions a solution. Empires should not pick winners and losers. International bodies have a role in such disputes, and should not be dominated by empires. The more countries are allowed to solve their own major problems with help from international institutions, the less likely they are to have an interest in causing trouble in an empire.

The focus of empires should be getting along with other strong countries that could become empires that could challenge them. If empires challenge each other with force, or sanctions that lead to force, what results is world war, as we have seen twice in one century. For the survival of the world, it is imperative for empires to resolve their differences diplomatically and work together and with international organizations to solve the many problems to world faces, and give weaker countries the non-military help they ask for, not what empires want, without any carrots or sticks.

The 2016 Election

I would invite anyone trying to decide how to vote in the general election to visit the sites of all the candidates to actually see the detail in their proposals posted there. You won't find much but a wish list from any of them.

As I see it, the main problems that need addressing are correcting inequality, reducing foreign wars, and reducing the burden on the middle class and small businesses. Correcting inequality boils down to shifting the tax burden to higher income people and increasing wages for working people. Eliminating duplication of government services should also be a top priority, along with eliminating old government programs aimed at problems which no longer exist, like expensive defense programs for aircraft and ships that were designed to fight the last war, not the current conflicts.

I think we can forget about any new initiatives until until the country comes back economically and the middle class is rebuilt to where it can sustain a healthy demand for good and services, particularly those which can be produced domestically. The most promising course to accomplish this is repairing our crumbling infrastructure and passing a living wage. Forget about balancing the budget until demand exceeds our capacity to produce, since only then will inflation become a problem. Right now we are in greater danger of deflation. I'm afraid we're going to have to put major changes in health care and education off until we solve these immediate problems. Of the current candidates, Sanders program has the most detail but is a bit too ambitious, Clinton and Trump the least and the most stuff that goes in the wrong direction. Check it out for yourself.

I think we will be relying mainly on the current government staffing to carry on. All of these candidates lack the experience to address our immediate problems, including Clinton, who will likely continue what we've been doing wrong all along. Sanders knows what needs to be done, but lacks the executive experience to carry it out. Trump is promising some of the right things in the area of trade and jobs, but the way he is proposing to do it will make things worse. If he continues just blowing smoke like he is now it's hard to see how he will accomplish any of the reasonable things he is proposing, and other things he is proposing will be a disaster. Forget the other three. They're either living in the past, governed by ideology, or lack any understanding of political economy.

The Dynasty Disease

The whole thing started when Clinton put a monkey wrench in the Bush’s plans for a dynasty in 1992, with a little help from Ross Perot. Once in office the Clintons started planning for a dynasty of their own, as Howard Zinn has documented in chapter 23 of his “Peoples History of the United States” entitled, ”THE CLINTON PRESIDENCY AND THE CRISIS OF DEMOCRACY”.

This lasted as long as it took the Bush’s to gear up for the next challenge in 2000 where eldest son, “W” ousted the Clintons VP choice, Al Gore, with a little help from the Supreme Court.

In 2008, the Clintons were ready for the next round, with Hillary in the drivers seat to pick up where Bill left off. But, a funny thing happened on the way to the nomination. An upstart one term African American Senator promising  “A Change We Can Believe In (Yes, We Can)” was too much for the Dems to pass up as a real chance to put a cap on the civil rights struggle. It was such a world wide hope and promise that Obama was awarded the Nobel Peace Prize before he had really done anything.

The only problem was, the promised change never materialized, starting with the appointment of Clinton as Secretary of State, keeping on the Republican Gates as Secretary of Defense, and appointing neocons and Wall Street big wigs to other key administration positions. Unfortunately, Howard Zinn died one year into Obama’s administration. I would have loved to have read what he would have written about it.

Most of the Obama administration was spent continuing the wars “W” started and adding to it, surveillance of the entire citizenry, arming police department with military equipment, maintaining a kill list of undesirables the US should assassinate (along with others who were considered “collateral damage”) Little was accomplished domestically, since the GOP had identified as its main mission, stopping anything Obama proposed. While the Dems still had the Congress, a health care bill, first developed by the Heritage Foundation and implemented in Massachusetts by GOP governor Romney, was passed and pilloried by the GOP as Obamacare. But progress was made in minority rights, sometimes with Obama and Clinton coming late to the party.

Now we face the next dynasty challenge, this time with both a Bush and a Clinton competing. Clinton immediately became the anointed Dem, serving in the Obama administration to burnish her credentials for the next run.

But, at this point, things look a bit foggy in both parties. When Bill Clinton moved the Dems to the right, coopting the GOP welfare reform and corporate deregulation to assure the Dems of future election victories, the GOP moved even further to the right, to the point where they went off the edge into never-never land, advocating pre-depression era plutocracy and total destruction of New Deal programs. The GOP is so frustrated with their inability to get any of their agenda enacted that they have fallen for the uber-persuasive TV personality and business empire mogul, Donald Trump. In the Dem camp, Bernie Sanders, an independent self avowed democratic socialist, with a life long history of consistency has captured the imagination of the disowned progressives in the Democratic Party, many independents, and even a few main street types on the right, He’s decided to run as a Democrat and challenge the slickster waffling Clinton magic.

So what are we in for? If Sander can ignite the Dem progressive base to come out in 2016, there is a good chance he could roll back the control of the Party from Wall Street, and put it back into the hands of masses. If he doesn’t, the Clinton dynasty will likely continue the Wall Street and neocon influence to keep winning elections. In this case there will be a lot of hope, but don’t expect any change you can believe in.

On the other side, the Bush dynasty looks to be in real trouble. It seems the GOP doesn’t like dynasties as much as the Dems. They’re looking for change at all costs, and don’t appear to be seeking a move back to the center. Instead, they seeming willing to follow anyone that will let them enact their extreme right wing agenda.

So what if it’s Bush, or any establishment sanctioned Republican vs Clinton. More of the same. “fagetaboutit”. Suffer for another term, no matter who wins. Both parties will be looking ahead to 2020. We’re in one term territory. No more dynasties to worry about. The next generation will be voting and things will likely be moving in a more progressive direction.

What if it’s Clinton vs. Trump. The progressives have the wind at their back. This will probably be last of the Wall Street Dems no matter who wins. If Clinton wins, expect Clinton 2 or Obama 2 and more obstructionism. Should Trump win, it’s anybody’s guess. He could be the disaster the GOP crazies have been waiting for, or he could tell them to go jump and do what he really wants. In any case It’s the end of the GOP dynasties. But, if you like change at all costs, he may be your man.

So what if it’s Sanders vs. Trump. We’ve already said what’s going to happen if Trump wins. If Sanders wins, it likely won’t lead to quick changes, but the table will be set for the next generation to take over and return the country to a democracy.

Why the level of private debt is important

Those who spend beyond their income (spenders) owe those whose income exceeds their spending (savers). If net savings is greater than the need for capital to expand production to meet demand, i. e. savings is too high compared to spending, that means lower demand for goods and services resulting in recession and ultimately depression. This excess of private debt is important. The concept of a Debt Jubilee (periodic cancellation of all debts) was used in past economies to fix this situation. In the current era, redistribution of debt, wealth, and income through living wage laws, progressive tax policy, inheritance tax laws, and relaxed bankruptcy laws could accomplish the same thing.

The converse is also true. If the debt is too low to finance production to meet demand, i. e. spending is too high compared to saving, inflation results and must be controlled by the reverse of the measures prescribed above for excess debt.

Social Networks vs Blogging/RSS

Social networks like Facebook and Google+ are a mixed bag. It’s a way to expose your thoughts to the world or just friends and family. But, the price you pay is being subjected to a constant stream of promotions and suggestions from the hosting service that don’t interest you. Plus it is sometimes difficult to screen out information you don’t want to see, from that you do.

A better way, if only more people would adopt it is the combination of a blog and an RSS reader. With a blog you see only information from the person you want to follow without commercial interruption. You also get an indexed history of post titles instead of a cluttered timeline. The format is set by the author of the blog, rather than the host service.

To easily follow blog posts from multiple sources, and be alerted to new posts, you need an
RSS reader. You just enter the URL of the blog or site you want to follow and you are alerted to new posts from all the sites you follow in one convenient place. It’s easy to scan the titles to see which ones interest you, and then click on the ones of interest to go directly to the post.

Currently, I blog here at Blogspot.com and use Inoreader.com as my RSS (Real Simple Syndication) service. There are many others available to suit your preferences. Just do a search on Blog Services and RSS Services.

A Tale of Two Countries

Suppose there is a world consisting of only two countries, one rich and powerful and the other relatively poor and not very powerful, but with many natural resources. The powerful country has been calling the shots for some time due to its power and wealth. All trading has been done in the currency of the powerful country, but most of the consumer goods produced are made in the poor country where they can be produced much more cheaply. The rich country also has a sizeable gold hoard which used to back its currency, but not longer does. The poor country has accumulated a lot of the currency of the rich country, which it has used to buy bonds issued by the rich country in their currency. Along with the consumer goods purchased from the poor country is a sizeable quantity of natural resources needed to support the lifestyles of the people in the rich country.

Things seem to be working out okay, the poor country is prospering from the trade and the interest on the bonds and slowly getting richer, while the rich country enjoys the cheap goods manufactured by the poor county and its natural resources power the lavish lifestyle in the rich country. But, then the bottom drops out of the interest on the rich country’s bonds. So the poor country decides to take the payments for its resources and goods in gold rather than currency, gold being a very thin market, but nevertheless required for some critical manufacturing processes and is highly sought after by affluent people in the rich country for jewelry and art objects. All of a sudden gold becomes the medium of exchange (indirectly, see how below) rather than the currency of the rich country. The demand for the rich country’s currency tanks relative to the demand for gold. Over time the gold hoard in the rich country diminishes and piles up in the poor country. So how does this scenario end? Is war the only alternative for the rich country? Maybe the rich country only slaps sanctions on the poor country. Or do the countries stop trading with each other and become isolated? Or do they develop a mutual respect for each other and work something out?

Now consider that the rich country is the West and the poor country is the BRICS, led by Russia and China. So how could this happen? The US will only pay for what it buys in its own currency. So that’s what the BRICS accept. But they turn around and buy gold with it on the open market, driving up the price of gold and driving down the price of the dollar. China has already said they’re not going to buy any more US bonds. The BRICS have already come to some agreements to trade in their own currencies, possibly using their values in gold to arrive at an equitable exchange rate. Russia is already replacing purchases of Western goods with purchases from other BRICS countries. China has worked out an agreement to buy oil and gas from Russia. If the West were to refuse to buy oil and gas from Russia the price of these commodities would skyrocket since the Russian supply is absolutely needed to meet world demand.

So, in the long run, who is in the drivers seat here, the countries with the natural resources and a pile of gold or the consuming West with their paper currency. This is already happening. See the link below. I’ve posted or sent this link before, but no one in the West seems to get it. Or, they do get it and keep quiet about it, realizing their jeopardy, hence their sabre rattling and attempts to destabilize Russia and eventually China and the rest of the BRICs.

http://futurefastforward.com/images/stories/financial/GrandmasterPutinG%C3%87%C3%96sGoldenTrap.pdf

Inequality, Why and How to Fix it

When most of the rewards of productivity go to a few people they control the economy for their own benefit. They create a labor surplus to drive to wages down by offshoring and mechanizing production. There would be nothing wrong with offshoring and mechanization if the benefits were not going to just a few people. With wages down for the great majority of people, demand is reduced and the economy tanks. With excess wealth at the disposal of capital owners and managers, and little wealth available to the great mass of people, the owners and managers of capital can buy the government through lobbying and campaign financing. It’s a vicious circle that can only be turned around by direct steps to reduce inequality.

So, how can this be done? Right now the efforts to make changes are thwarted by too many different proposals: increased government regulation, changes in the structure of taxation, subsidizing low wage and impoverished people, etc. There are too many ideological elements in all of these proposals.

Instead, only two simple proposals need be implemented initially: increase the minimum weekly wage and shorten the work week. Raising the weekly minimum wage would put more money in the hands of working people and shortening the work week will employ more people, creating a greater demand for labor.

Once the demand is up, more money will flow into the pockets of labor and less into the pockets of the capitalists, reducing inequality and providing more resources for the great mass of people to influence their government, taking power away from the owners and managers of capital.

This solution is largely market driven, taking subsidies, welfare, and government size out of the argument. The only thing that must be recognized is that government has a role in protecting the general welfare of the people.

Once the people again have control of their government, changes can be made in other aspects of government, like balancing domestic and military spending, creating a fairer tax system where taxes on labor and capital are more uniform, etc. It’s just a matter of giving the great mass of the people a larger voice in their government through increases in their wealth relative to that of the owners and managers of capital.

Are Americans losing control of their country?

After watching a president I voted for twice, I have to conclude that Obama is the Democrat's version of George W. Bush. Both are weak presidents who don't have the experience or temperament for the job. Both have knuckled under to entrenched Washington interests that have been around through several administrations, Bush to Cheney and his neocon crowd who are bent on the US dominating the world, and Obama, first to the Wall Street and corporate oligarchs determined to increase their stranglehold on the control of the economy, and now to the same neocons supported by the guy he defeated to become president, John McCain.

Not much has changed and there is not much hope that it will.

The US still opts for military might as a foreign policy cudgel to throw its weight around in the world and domestic surveillance and militarizing of the police to ensure that any attempt by the populace to counter its moves is kept in check. The use of drones and sanctions is war by other means to send a message to the world about who is in charge. Sanctions only work for a country whose currency is the world reserve currency, and use of them is an abuse of the trust the world has placed in the dollar as the world reserve currency.

We truly are living in troubled times where the government is no longer responsive to rule of the people. It has taken on a life of its own to serve the interests of an elite few who are consolidating their hold on the countries resources and an entrenched old Washington guard that has been around through several administrations urging the use of covert subterfuge and military power to achieve hegemonic ends. I see nothing on the horizon that will restore the country to the greatness it achieved in the fifties and sixties when inequality was at a minimum and people pulled together to land a man on the moon.

What is “MMT”?

In some of my posts on Facebook, Progressive Policy Digest, The Soap Blog, or in my emails I have referred to "MMT". I usually get no questions or inquiries about it, which seems to reflect a lack of knowledge of the subject. Basically, MMT prescribes a path that would have had us at full employment long ago, and from a federal debt perspective, is the exact opposite of the austerity currently being pushed by both political parties, so it's very important. In spite of it's name, it's not modern, not exclusively monetary, and certainly not theory. It's an explanation of how economics and banking works in a country with it's own currency. It's understood by all good economists at the Fed and think tanks around the country that are not wedded to an ideological agenda. But, it can't seem to penetrate the Washington Consensus, the mainstream media, or the lay public, who continue to think the federal government must operate like an individual or a state that only uses the currency, which is the exact opposite of the way it works.

The macroeconomic literature provides the evidence for the validity of MMT, but is beyond the understanding of lay people. "What is Modern Monetary Theory, or “MMT”? by Dale Pierce is a lay explanation by a non-economist of the basics of MMT. For background and an historical perspective explore the three part series on MMT at New Economic Perspectives by the same author.

Here’s where I stand. Where are you?

Have you noticed that the MMTers (Mosler, Wray, Kelton, etal) are getting more exposure in interviews on the internet and some main stream media? By the time the next election rolls around the jig will be up for the austerity dummies. I've digested all the MMT (Modern Money Theory) stuff and am convinced that most of the other economists are in a time warp, or just being outright political to maintain their research funding. It's so simple, we just need the government to get a jobs program enacted and start spending again on infrastructure, education, and research like we did in the fifties. 

In the long run we should have government health insurance, public financing of infrastructure, education and basic research, and publicly funded retirement programs for all, so people don't have to worry about these things and can spend their income to maintain demand and enjoy life. That is a legitimate role for government as demonstrated by most enlightened developed countries around the world. We need to catch up.

We also need to harness the corporations and the few that own and run them, so they can do what they do well, and not run the country into the ground to satisfy their own greed. But, it's very hard to do when all the politicians and the electorate are acting like we're still on the gold standard. Guys like Pete Peterson, Simpson, and Bowles are engaging in false advertising. They're totally in the pockets of the oligarchy.

Beyond that we need to stop the warring, snooping, and international belligerence and join the community of nations instead of trying to sanction or rule them, while agitating for another cold war. And, that includes dissolving the dependent relationships with the Saudis and Israelis and their lobbyists in Washington.

It will be up to the Democrats to do all this, because the Republicans are at present a hopeless cause. They are trapped in the Ayn Rand propaganda. Democrats will have to start discovering what is important and what is not and re-prioritize their objectives and actions. Rehashing Republican ills is just free advertising for Fox News. Keeping issues in the limelight is what gets the public started thinking about them. And, in my opinion, the important issues are the ones I've just enumerated. The Dems won't be successful until they ditch the alliance with Wall Street and corporate America. We already have one party that is totally dedicated to that bunch. We don't need two. We need one party that is smart and is the champion of the people, so the people have a voice in what legislation gets enacted. It may take a couple election cycles to accomplish it, buts it has to be done to get the country back on the right track.

The one thing individuals you can do is keep these talking points alive in the circles they travel in, and vote for what is right, not what is expedient or compromising to win elections. That will only maintain the status quo.

And, this is not being negative! It's positive. Being negative is going along to get along, while half the country suffers in poverty or near poverty.

Do your part and tell your family and friends to do the same!

Reconciling MMT and the Current Legal Finance System

Modern Money Theory (MMT) explains the way finance works in a country with its own currency, when many self imposed legal constraints are removed. Currently existing legal constraints in the United States include the following:

1) a national debt limit

2) the Treasury can only mint coin

3) the Federal Reserve bank (Fed) can issue paper money and credit Treasury and private reserve accounts in payment for notes, bills and other Treasury and privately issued financial assets it buys in the open market. The Fed cannot buy Treasury securities directly from the Treasury.

3) the income earned on assets the Fed purchases is paid to the Treasury

4) the members of the Fed Board of Governors are appointed by the President and approved by the Senate.

In these legal constraints we see and attempt to make the Treasury and Fed somewhat independent, but also subject to government action in the final analysis. This is probably due to the time period when these laws were enacted, when the country was on the gold standard. We are no longer on the gold standard now,  so some no longer apply, as we are now a country with a fiat currency. If held strictly to the current legal constraints, the country is treated like an individual or state which must use tax collections or borrow in it’s own currency to finance its operations.

The contention between MMT advocates and its critics largely revolves around the independence of the Fed from the Treasury. In practice, over the years the Fed and Treasury have acted jointly on the vast majority of matters, for example, in Fed provided loans to bring reserve accounts up to the required level and in purchasing Treasury notes and bills from member banks to lower the interest rate the Treasury needs to pay on them. MMT economists tend to treat the Treasury and Fed as a consolidated unit. Critics sometimes do not. Both have a point and the difference is not likely to be resolved any time soon.

The downside of the current stalemate serves to reinforce the commonly held premise that the federal government needs to be treated like and individual or state that is a user of the currency and not like the issuer to the currency that it is, which leads to policies that are the exact opposite of what is needed when the country is in a recession or near depression and unemployment is high. The current emphasis on cutting spending and limiting debt, when fiscal stimulus or reduced taxes are needed to increase demand is an example of this case. When the country is prospering and at full employment taxes need to be increased or federal debt repaid to avoid inflation. These necessities, and the need for changes in the law to accommodate them, are obscured by the lack of understanding of the underlying principles that MMT  seeks to reveal .

Government has a Role in the Economy–Get Over It!

The mindset of the right is wrong. The federal government is not like an individual or a state. It is the issuer of the currency. Individuals and states are just users. They must borrow to spend beyond their means. The government doesn’t. When the private sector saves, but the savings are not invested, the government must run deficits to provide the vehicle to absorb the savings, i. e. government bills and bonds. It’s a mathematical identity that many economists, politicians, and think tanks don’t understand.

The public must understand that the federal government has a major role to play in providing infrastructure, in the form of roads, bridges, power grids, research, education,  health insurance, retirement benefits, and a living wage job guarantee to eliminate unemployment.  Worker skills and attitudes deteriorate when workers are unemployed. When the individuals and private businesses have to provide for these benefits through savings, it reduces spending, which sustains demand and maintains a healthy economy.

To harness the capitalistic drive for innovation, entrepreneurship, and monetary success reasonable government regulations are required to prevent an unequal distribution of the rewards of productivity growth, maintain a healthy middle class, and keep people from falling into poverty and becoming a drag on the economy.

If we continue to think that capitalism is a self regulating wonder and people are self sustaining individuals that don’t need to cooperate in their endeavors we will continue to be a society struggling for answers and living with cycles of economic bubbles that destroy the spirit and will of the country.

Restoring the 1950s Economy as a Solution to the Financial Crisis

The economy needs demand and investment to produce goods and services. Demand and investment come from the same source, income. If more income is saved, there is less available to create demand and vice versa.

At this time savings need to be reduced to increase demand. The usual means to do this would be to lower interest rates. But rates are already near zero, and this hasn't caused savers to start spending. So what is the mechanism to do this? Tax the savers, and reduce the taxes on spenders, to zero if necessary. If need be, let the government issue the funds to provide the infrastructure, free health care, education, and retirement benefits to the spenders, so more of their income can go to spending.

This is essentially what was done in the decades immediately after WWII, when the highest marginal tax rates were near 100% and the government was spending on roads, education, the GI Bill, and Social Security and Medicare had been implemented.

Instead, what we have done since the 1980's is reduce the highest marginal tax rates and taxes on capital gains, allow offshore tax havens, privatize education, let our infrastructure deteriorate, bust unions, and deregulate business to allow almost all of the rewards of productivity to go to savers. And, now the austerity advocates are on a path to destroy Social Security and Medicare.

Isn't it clear that we have to restore the balance between spending and saving that existed the fifties and sixties?

Simplifying Econospeak

The following paragraph is an example of how to talk to the average voter about how the economy works, could work, or should work without resorting to economic jargon.

“The federal government is the people's agent, and they have authorized it to issue money so they can have a convenient way to buy things and pay their taxes. Taxes can be viewed as reimbursement for infrastructure, education, research, and defense projects the government has undertaken on behalf of the people. If the economy is so weak that people cannot find employment or resources are being underutilized, the government can either lower taxes or issue more money. If the economy is so strong that production of goods and services cannot meet demand, the government can increase taxes or stop issuing money. That's how the economy can be stabilized.”

Implicit in the above description of the economy, but not required to get the point across, is the fact that government is the sole issuer of money, taxes are not collected and then used, but instead the government can issue money to pay for what has been legislated to be done and then collect taxes after the fact to reflect what goods and services the people have received. In times of a weak economy the government can reduce taxes and defer reimbursement for services rendered, or in times of an overheating economy, the government can accumulate taxes it will need for future projects to take some steam out of the economy.

The federal government is not like an individual, a company, or a state. The federal government is the exclusive issuer of money. Any other entity is only a user of the money. To get money they have to engage in economic transactions, or borrow the money from an entity that has money to lend or grant. If they borrow, it results in debts that must be paid off later.

Any money the government issues increases the money available to the private sector to save or spend. If the private sector elects to spend, it will increase demand for goods and services, which could exceed the economic resources of the country. This will result in a rise in the prices of assets, consumer goods, or labor. At this point the government must increase taxes or stop issuing money to bring demand back into line with supply.

The fact that federal deficits and debt are not mentioned reflects their lack of importance in the scheme of things. The "national debt" is not a debt owed to anyone. It can be viewed as the net amount of money the government has issued over time. It may fluctuate up and down, but it is not something that needs to be paid off or compared to GDP. To think of it that way is to think that football teams need to pay back the scores they have run up in a game.

Over time, the population increases and the economy grows. This requires more money in circulation so it is up to the government to provide it. If it doesn’t, the economy will stagnate.

To the extent that the government issues money to further foreign interests or which results in foreign claims, the amount of money issued in that way could arguably become an important issue.

The average voter doesn't want to hear about economic theories or jargon that only an economist or economic analyst would understand. They just want to know how the economy is supposed to work. If economic concepts are explained in a simple, but factual way, people will start to accept them and turn away from the propaganda and misinformation that currently pervades the national economic conversation, much of which is only applicable to countries that don’t have their own money, or whose money is backed by a commodity like gold or silver.

Occupy Should Work Within the Democratic Party

Trying to work around the two major parties in the US is a fools errand. The grassroots effort of Occupy should be directed at informing workers where their interests lie and organizing them to change the government.

The Democrats under FDR used to represent middle and lower class workers. Since the advent of the DLC and the Clinton administration, the Democrats have moved into Republican territory by accepting Wall Street influence. That is not their natural constituency. They have been able to do it only with the help of the main stream media, which is driven by money. The great mass of the electorate resides in the middle and lower classes. Now they rely mainly on the main stream media for their information, which is selling them a bill of goods on behalf of the 1% and the Washington consensus. To organize them around their real interests requires a door to door and internet media campaign to take over the Democratic Party and move it back to where it was under FDR.

The Republican Party is in disarray, and there is already a strong progressive element in the Democratic Party that is for reducing inequality, single payer health care, minority rights, environmental protection, a safety net, and a place for government in the economic landscape. People like Bernie Sanders and Elizabeth Warren are examples of the type of people that can be elected to national office. People like them can be recruited to local and state offices. The only problem now is voter reliance on the mainstream media and the political advertising propaganda it presents. A sustained grass roots effort on a personal level can turn that around. It's just a matter of personal contact to educate workers where there interests lie. This is the only way to overpower money in politics.

The demonstrations in the seventies around civil rights and the Vietnam war were ruthlessly handled by police and the military, which do what the government tells them to do. The same happened to the current Occupy movements in New York and elsewhere. The only way to give the middle and lower class workers a voice is to inform them of their real interests and organize them to change the government.

What if all the money disappeared tomorrow?

Consider the case where everyone woke up tomorrow and all money in all forms, coin, currency, bank account balances,  etc had disappeared? No one would be able to buy food, farmers would not be able to grow food since they wouldn’t have the money to buy seed or fuel for their tractors. All production would stop because no one would have money to buy the goods produced or to pay for the raw materials and labor that went into the goods. It would be a matter of once again living off what nature provides, bartering with the goods available, or introducing some form of money as a way to hasten the recovery.

Clearly, reintroducing money would be a faster means of recovery than the other two. It would boil down to everyone starting to print their own money (IOUs) or the government printing coin or the Fed printing currency to prime the pump and get economy back on track. Most people would feel safer taking government money they had always used rather than personal IOUs in exchange for purchases.

To get the money into circulation the Fed could simply restore the balances everyone had in their accounts at their banks or the Fed the day before the money disappeared.

Since the Fed printed the money, what form of debt did it incur doing so? None. The balances held in treasury notes and bills at the Fed could simply be replaced with reserve account balances of the same amount. So the national debt would disappear unless the government decided to accept reserves for government issued notes and bills again.

So what is this national debt we keep talking about? What’s to keep the Fed from printing all the money it needs to buy up the national debt? All the interest accrued on the government debt the Fed holds is remitted back to the government treasury anyway.

The national debt is nothing more than the government providing a secure way for the private sector to save and for foreign governments to supply goods to Americans. Foreign businesses selling those goods to Americans convert the dollars they get for the goods into the local currency to pay for the labor and materials that went into them. The dollars the foreign government receives from the suppliers in exchange for the local currency it provides ends up in it’s reserve account at the Fed. They usually buy treasury notes and bills since they pay interest.

The only way for foreign governments to cash in their dollars held at the Fed is for them to buy American goods or assets, and we can decide if we want to sell those goods and assets to them depending on what we want our balance of payments and exchange rate to be.

At this point in time the only threat from the national debt seems to be that it can be used by a minority of Americans to blackmail the majority into accepting their ideology as the governing mandate.