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Fiscal Cliff: Time to Call Their Bluff

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 4.  Borrow interest-free from the government's own central bank.  If the government refinanced its entire debt through the Federal Reserve, it could save nearly half a trillion dollars annually in interest, since the Fed rebates its profits to the government.  The Fed's newly-announced QE4 adds $45 billion monthly in government securities purchases to the $40 billion for mortgaged-backed securities declared in QE3, and no time limit has been designated for ending the program.  Forty-five billion dollars monthly is over half a trillion yearly.  Added to the federal debt already held by the Fed, the whole $16 trillion federal debt could be bought back in 28 years. 

This is not a wild, untested idea.  Borrowing interest-free from its central bank was done by Canada from 1939 to 1974, by France from 1946 to 1973, and by Australia and New Zealand in the first half of the 20th century, to excellent effect and without creating price inflation.       

5.  Decommission some portion of the military.  When past costs are factored in, nearly half the federal budget goes to the military.  The data speaks for itself.  I wrote about it here.

6.  Debt forgiveness.  Economists Michael Hudson and Steve Keen maintain that the only way out of debt deflation is debt forgiveness.  That could be achieved by the Fed by buying up $2 trillion in student debt and other asset-back securities and either ripping them up or refinancing the debts interest-free or at very low interest.  If the banks can borrow at 0.25%, why not the people? 

7.  Publicly-owned state and local banks.  Municipal governments are facing cliffs of their own.  Ann Larson, writing in Dissent Magazine, blames predatory Wall Street lending practices, which have inflicted deep and growing suffering on communities across the country. 

Predatory Wall Street practices can be avoided by establishing publicly-owned state and local banks, which leverage the public's funds for the benefit of the public.  The profits are returned as dividends to the local government.  German researcher Margrit Kennedy calculates that a whopping 40% of the cost of public projects, on average, goes to interest.  Publicly-owned banks slash borrowing costs by returning this interest to the government, along with many other advantages, detailed here.

Unshackle the Hostages and Let the Good Times Roll

The fiscal cliff has been said to be holding Congress hostage to conservative demands, but the real hostages are the debt slaves of our financial system.  The demand for "fiscal responsibility" has been used as an excuse to impose radical austerity measures on the people, measures that benefit the 1% while locking the 99% in debt. 

The government did not demand fiscal responsibility of the failed financial sector.  Rather, Congress lavished hundreds of billions of dollars on it, and the Fed lavished trillions more.  No evident harm from these measures befell the economy, which has fared better than the austerity-strapped EU countries.  Another couple of trillion dollars poured directly into the real, productive economy could give it a serious boost. 

According to the Fed's figures, as of July 2010, the money supply was actually   $4 trillion LESS than in 2008 .   ( The shrinkage was in the shadow banking system formerly reported as M3.)  That means $4 trillion could be added back into the money supply before general price inflation would be a problem.    

The self-induced austerity crisis is a diversion from the real crises, including unemployment, the housing crisis, a bloated military, and unrepayable debt.  Slashing services, selling off public assets, and raising taxes won't cure these ills.  To maintain a sustainable and productive economy requires a visionary leap into the new.  A new economy needs new methods of public financing. 

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Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling WEB OF DEBT. In THE PUBLIC BANK SOLUTION, her latest book, she explores successful public banking models historically and (more...)
 

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"Fiscal cliff" means austerity, means making ordin... by Ernie Messerschmidt on Thursday, Dec 20, 2012 at 11:25:23 AM
I agree Ernie.  A huge part of the total volu... by Derryl Hermanutz on Thursday, Dec 20, 2012 at 10:43:28 PM
Thanks Derryl, well said!... by Ellen Brown on Thursday, Dec 20, 2012 at 11:09:35 PM
Most of the other proposed solutions have aspects ... by BFalcon on Friday, Dec 21, 2012 at 11:58:51 PM
Yes, well put, Derryl. We should be doing the indu... by Ernie Messerschmidt on Thursday, Dec 20, 2012 at 11:38:30 PM
und Gott mitt Angela Merkel!... by Nelson Wight on Friday, Dec 21, 2012 at 4:50:13 AM
Ben will print and make interest loans to the fede... by Lance Ciepiela on Thursday, Dec 20, 2012 at 7:22:28 PM
and landing safely (apologies in advance for the d... by Daniel Geery on Thursday, Dec 20, 2012 at 7:30:59 PM
Yikes! Thanks for sharing.... by Ellen Brown on Thursday, Dec 20, 2012 at 11:15:02 PM
The plutocrats who are behind the "fiscal cliff" h... by Derryl Hermanutz on Thursday, Dec 20, 2012 at 10:55:19 PM
fly. Buy into the fear, paranoia, and schizophreni... by Tommy Wright on Thursday, Dec 20, 2012 at 11:51:37 PM
However, you stubbornly overlook the glaring fact ... by Paul Repstock on Friday, Dec 21, 2012 at 10:20:58 AM
Are workable and they are far more just than the c... by Paul Repstock on Friday, Dec 21, 2012 at 10:27:12 AM
and a vision of what can be. Ellen has presented t... by Daniel Geery on Friday, Dec 21, 2012 at 12:46:30 PM
Agreed, but that's my point in writing.  Thes... by Ellen Brown on Friday, Dec 21, 2012 at 11:31:35 AM
"The Fed allows Congress to spend all they want ... by Lance Ciepiela on Friday, Dec 21, 2012 at 12:57:21 PM
It is import... by coyote on Friday, Dec 21, 2012 at 10:37:52 AM
Aren't we, the liberal-progressives, the good guys... by Nelson Wight on Saturday, Dec 22, 2012 at 4:49:12 AM
The only difference why today is particularly bad ... by coyote on Friday, Dec 21, 2012 at 10:38:16 AM
"Today", is specifically worse, because it is the ... by Paul Repstock on Friday, Dec 21, 2012 at 10:59:17 AM
Agreed.  The stock market is heavily manipula... by Ellen Brown on Friday, Dec 21, 2012 at 11:14:08 AM
Not to mention that Wall Street and the fat cats f... by Textynn N on Friday, Dec 21, 2012 at 8:37:33 PM
Generations of wealthy families moving through the... by Textynn N on Friday, Dec 21, 2012 at 8:26:55 PM
Before this fake crisis is over, they may go over ... by Robert Cogan on Friday, Dec 21, 2012 at 2:56:14 PM
Photo from blogspot.com"It is well enough that peo... by Deborah Dills on Friday, Dec 21, 2012 at 4:07:23 PM
To the US Congress, and the President, the Federa... by Lance Ciepiela on Saturday, Dec 22, 2012 at 8:54:32 PM
But they have to take a chunk of the old people's ... by Textynn N on Friday, Dec 21, 2012 at 8:07:55 PM
is the only answer.  State banks NOW... by Textynn N on Friday, Dec 21, 2012 at 8:42:54 PM
Brilliant.   As we have come to expect ... by Tom Hagan on Friday, Dec 21, 2012 at 10:02:47 PM
Brilliant.   As we have come to expect ... by Tom Hagan on Friday, Dec 21, 2012 at 10:05:04 PM
Love the visuals! Thanks Tom!!... by Ellen Brown on Friday, Dec 21, 2012 at 11:44:52 PM
What about the human cliff? Humans are being pushe... by Tommy Wright on Saturday, Dec 22, 2012 at 1:07:01 AM
What about the human cliff? Humans are being pushe... by Tommy Wright on Saturday, Dec 22, 2012 at 2:35:23 PM
Pursuing your point that a debt ceiling may run in... by Siegfried Othmer on Saturday, Dec 22, 2012 at 3:00:04 PM