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Hello Fellow Economic Reformers!
It's been 2 months since the last Economic Reform Newsletter, and there is a lot to cover, both local and national. I expect the next newsletter will come out sooner.
Summary of highlights:
- The biggest bailout in history just got much bigger - $29 Trillion cumulatively, according to a new calculation by economist L. Randall Wray (Univ. of Missouri-Kansas City) and 2 of his Phd students.
- News from Common Ground-NYC
- A new lawsuit against Tim Geithner has been filed for fraudulently stating the false equivalency of U.S. Notes and Federal Reserve Notes, both on Treasury Website and in reports to Congress etc. The author of this Economic Reform Newsletter (ERN), that is, me, advised upon the history of the 14-series issued (http://www.ronscurrency.com/rctype.htm) Greenback (U.S. Notes) and supplied exhibit B, my petition for re-issuing the Greenback (click here).
- Libertarian Presidential candidate Bill Still says why returning the money creation power to the Federal Government and away from a private central bank MUST occur, both here an in Euroland, before true justice and reform can take place.
- CAFR reformer Walter Burien warns of a coming gold crash (Gold just entered an official bear market, down 20% from its recent highs).
- North Dakota may be snapping defeat from the jaws of victory with its plan to abolish all property taxes.
First, the local Common Ground-NYC member news...
Bill reminded them that:
Renegade Economists 23.11.2011 - Scott Baker from Common Ground NY on what Occupy means.
I come on about halfway.
I continue to post to the Occupy forums, here (http://the99delegation.forumotion.com), here (click here) and here (http://www.nycga.net/groups/alternative-banking/). The sprawling plethora of Occupy sites - both physical and virtual - is both a strength and a weakness in that there's lots of opportunities to contribute, but too little coordination and building of a large consensus (the Alternative Banking group, for example, has nearly 300 members, which is great, but there are many other economic groups discussing the same things, and doing it without connecting to each other). One of the major split-off - The 99% Declaration - plans to have a delegation of one man and one woman from every Congressional District meet in Philadelphia this July 4.
They have 20 Declaration items of reform, but I disagree with number 8, to "reduce the debt" per se. As a Greenbacker, I left the following rejoinder:
We have had a fiat monetary system since Nixon took us off the gold standard in 1971. That is a GOOD thing. What is a bad thing is routing virtually all the money to the 1%.
We must retake the Money Creation Power to "coin Money" (Art. 1 Sec. 8 of the U.S. Constitution). The way to escape debt is simply not to create it, by returning Congress to the power to make money, as the founders intended, as Lincoln first did (1862), and as we had -- albeit in too small amount -- until 1996, when Treasury falsely claimed, and still claims, that there is no difference between debt-free United States Notes and Federal Reserve Notes (stay tuned for news of a lawsuit filed for that reason against Tim Geithner real soon).
The power to create the money supply is one of the fundamental powers of any sovereign government. A Government that cannot create the currency, at least for its own needs, is no more sovereign than a government without a military or president.
We do NOT NEED TO BORROW OUR OWN MONEY!
Take this requirement out of the list, or many people will not join. This is Tea Party mantra, and we need to rise above their ignorance."
- Scott Baker
president, Common Ground-NYC, NY Coordinator, Public Banking Institute
Read the rest here: http://www.the-99-declaration.org/8-debt-reduction/
Let's see if we can get our reforms in there.
There's plenty to keep one Occupied...
Still is no ordinary Libertarian, and comes closest to being a Greenbacker Georgist (he's already a Greenbacker - I am trying to persuade him and his policy committee to adopt Land Value Taxation with a 2-page policy suggestion he suggested I write). Right now, Still wants to replace the byzantine income tax with a consumption tax. Still has also worked with State Banking advocate Ellen Brown, and at one point asked her to be his running mate; he supports State Banks as part of a general policy of decentralizing tax revenue management to the states and away from possibly non-people serving private banks. Unlike Greenbacker Stephen Zarlenga, Still does see a way to make both State Banks and Greenbacking work, as do I. This might answer some of the "central-planning" objections to the Kucinich N.E.E.D. Act, HR2990.
By the way, Gold just entered a bear market (20% off its high) - so much for gold as a store of value.
Bill Still "joins" the Republican debate with his own videotaped responses (http://www.youtube.com/watch?v=VjGTaXhpObM&feature=uploademail). What a difference!
"But I'd be wasting my vote on Bill Still!" you say. Well, which is a bigger waste of a vote - a vote for someone who will maintain the unsustainable status quo, or even impose worse solutions like a gold-backed currency, or a vote for a true reformer like Bill Still? Also, if you vote for a minor candidate that only gets a few percentage of the final vote, your individual vote will have had a much greater impact than if you are just one of millions who voted for the mainstream candidates.
That is not news.
However, it is worth reviewing history to see what happened the last time wealth inequity was so high, and economic injustice so great as to keep it that way.
For a boots-on-the-ground Georgist-oriented analysis of how one of the world's leading tyrants came to power, it's worth reading Australian Journalist Brono Heilig's account (1938) here: click here; Leaders like Hitler can only come to power in supportive environments. Heilig tells us:
SPECULATION IN LAND VALUES
This is as true today as it was then. You can read the rest here: click here; Then see if you can find any reason why the same result will NOT happen again. I couldn't.
This is the wrong time to abandon the best tax of all: property, er, Land Value Taxes. A speculator class is forming in North Dakota. The bubble will follow, and no amount of oil revenues will stop it. The solution is to tax the land, not the producers.
Like the article above, I couldn't find a reason why we won't go down the same way as Rome unless we change our ways. Ominously, Hudson warns us that the "solutions" to our self-imposed debt crisis comes only from the banking class that is only interested in getting paid back, not in social workability. He says they are encouraging a drift away form democracy(!) and towards austerity combined with appointed so-called technocrats, who will enforce the wishes of the Economic Hitmen (http://www.economichitman.com/)
Yet a bold new report, written by 2 PhD candidates under the supervision of University of Missouri economist L. Randall Wray comes out which forces a different conclusion as to the true nature of money upon us, claiming a full $29 Trillion cumulative was issued by the Federal Reserve, mainly to purchase Mortgage Backed Securities (MBS) from member banks - 85% of it ! The full report my be found here ( http://www.economonitor.com/lrwray/2011/12/14/the-29-trillion-bail-out-a-resolution-and-conclusion/ ).
Now, again, this is cumulative , not outstanding at any one time - and the Fed itself has made a quick rejoinder (click here) to this and to a recently published Bloomberg article that quoted 7.7 Trillion (click here), also involving rollover loans. The Fed has stated that no more than 1.2 trillion was ever outstanding even in the depths of the crisis - this seems low, and may disregard many facilities mentioned in this report.
Whatever the true figure, if there was still any doubt about the Fed's ability to produce money at will under our fiat system, take a look at this new academic report, especially this paragraph on page 4:
Figure 1 depicts the weekly composition of the asset side of the Fed's balance sheet from January 3, 2007 to November 10, 2011. As is clearly indicated in the graph, the Fed's response to events of that fateful autumn of 2008 resulted in an enlargement of its balance sheet from $905.6 billion in early September 2008 to $2,259 billion by the end of the year--an increase of almost 150 percent in just three months! This initial spike in the size of the Fed's balance sheet reflects the coming online of a host of unconventional LOLR programs, and depicts the extent to which the Fed intervened in financial markets. The graph also depicts the winding down of unconventional tools starting in early 2009. However, the decrease was of short duration, as the focus of the Fed shifted from liquidity provisioning to the purchase of long-term securities--which, as of November 10, 2011, comprise approximately 85 percent of the Fed's balance sheet.
Figure 2 shows the structure of Fed liabilities over the same period. Casual inspection of the graph indicates the expansion of the Fed's balance sheet was accomplished entirely through the issuance of reserve balances, creating liquidity for financial institutions."
Whatever the true amount, it is now as clear as it could possibly be that there is no such thing as a shortage of money in a fiat monetary system.
If the Fed can create an amount of money twice that of the American GDP at will in a matter of months, then so can Congress. Let's hope they only reissue a fraction of that amount in U.S. Notes, or we'll have rip-roaring inflation! Right now we only have asset inflation from this unprecedented infusion of money; i.e. the Fed pumping up the mortgage market - 85% of the Fed's balance sheet! - and indirectly into the commodity markets, inflating commodities (oil was $35/barrel in the winter of 2009, now it is close to $100, again. The oil traders are well into new margin accounts...for now). Very little of this FRB generosity has made its way to Main Street.
It's not hard to see why; what lender would want to bother with messy loans that take years or decades to repay, if they are repaid at all, when they can get a guaranteed profit from the spread in Treasuries, yielding 2-3%, vs. the near zero rate of borrowing by the member banks. And, of course, the worst of the Mortgage Backed Securities were generously bought from the banks already.
So, how long can the Fed keep this up?
Well, we got a partial answer in the last few weeks as the European Union's ECB used new funds to loan to banks, who then bought European country debt, often from the same countries where the funds originated! The snake is eating its own tail now. How long can that last?
Also remember, the Fed has resisted disclosing its actions mightily, even against Congress. It took a subpena by Sen. Bernie Sanders to uncover this, and yet, even Sanders seems to have missed the full magnitude of the Fed's actions worldwide (click here). Slightly less than half of this money went to America-based (albeit international in scope) banks.
So, why doesn't Congress pump, say, a couple of trillion into infrastructure, as the Greenbackers and the Kucinich bill, HR2990 recommends? Why don't they alleviate our taxes as they say must be done? Well, to do that would be to admit the whole monetary system is based on a complete fraud of scarcity , cooked up by the Money Power to benefit the 1%, and the politicians who service them. None of this debt , as Bill Still points out, is necessary. It's not unnecessary because we don't have needs, it is unnecessary because we don't need to create money form debt.
The petitioner alleges several falsehoods have been made on both the Treasury website, and in reports to Congress by Treasury under Geithner. Specifically:
It's the Fed's account, not the taxpayer's account, that gains from the stoppage. One cannot blame the Fed for stopping the irritating $1 per coin payments to the taxpayer, for more coins than its banks can or could care to put in circulation. But one can blame the Fed for collaborating in the misrepresentation of taxpayer savings. By curtailing coin deliveries in this false fashion, it would seem the Fed has succeeded, for the foreseeable future, in burying the coin-swap question.There are several references in the brief to GAO reports, which also drastically under-report savings by replacing Federal Reserve Notes with Coins, discounting the seigniorage face-value savings, and allowing the Treasury to swat aside such minor savings as stated by claiming the GAO wasn't being "holistic" enough in its findings (for example, people would rather carry paper money than coins. True, but people would rather not have the government accumulate hundreds of billions in debt they don't need to, without cutting services. What about that? Huh, huh?).
This is major news and a new assault on the Tower. Yes, of course the Government will attempt to dismiss, deflect and otherwise discourage the petitioner. He expects that and is ready for the appeals process. However, these are questions as to statements of fact, not opinion, and as such ought to be subject to judicial ruling.
My petition to re-issue United States Notes (click here) - already issued 14 times in our history (http://www.ronscurrency.com/rctype.htm#USN) may be found as exhibit B in the filing just now assigned a judge here (http://dockets.justia.com/docket/california/candce/1:2011cv06684/249618/)
Let's get behind this in any way we can.
Also, the MMTers seem to believe taxes are nothing more than a means to control inflation - raise taxes and lower inflation, lower them to encourage growth.
First of all, no one outside of MMT understands taxes in this odd way, not those who pass our laws to collect taxes, nor those who spend them, nor those who pay them.
Second of all, controlling the money supply is a much better way to control inflation.
Third, a Georgist tax would be a way of controlling speculation and hoarding and waste, not inflation/deflation, so not all taxes work the same way - this cannot be stressed often enough.
The MMTers seem, like CAFR Reform Theorist Walter Burien for slightly different reasons, to be aiming towards eliminating taxes altogether. This I cannot agree with - I wouldn't agree with it even if we actually had all the 10s of trillions Burien says we do and could institute a Tax Retirement Fund so no one would have to work anymore. If no one had to work anymore, everyone would become a singer, dancer or, gasp, blogger! Then we'd really see the cities crumble and the environment get fouled up. There are simply jobs that need to be done, which people won't do, unless they are paid to do them. I've held all sorts of jobs in my life - from busboy to I.T. Manager; I can't think of one I would do if I made the same amount of money, regardless.
I actually don't think we have that kind of money, and even if we did in the 184,000 CAFRS, it would soon lose its worth as the real economy deteriorated and we become Zimbabwe. Post-Columbus Spain tried something similar by relying on its loot of gold from the New World. They wound up losing both the New World and their place in the old one.
There's one other thing: money gets its legitimacy by its acceptability to pay taxes. If you eliminate taxes entirely, our currency could cease to exist - not good unless every other country does the same thing at once. Unlikely.
I have enough qualms with MMT that I wrote them in the margins of my digital version of Mosler's book, and will soon be sending it to him for his comments. He has answered me before, so I'm hoping he finds my criticism, as well as my positive reviews, constructive.
Burien is an ex-commodities trader and probably knows a thing or two about manipulated markets.
What if he's right?
We don't necessarily have to return to an official gold standard to find out, like Burien fears and Ron Paul suggests , to experience the effects of a crash; we just have to have a big market for gold, perhaps expanded via ETFs like the GLD, which often trade 1/7th of the daily volume in gold. Then, the commodity hoarders can unload their horde. Remember, gold, like any other natural commodity, is Land under classical economic terms (it is, like silver, a precious metal that cannot be created nor easily destroyed - it won't rust, chip or deteriorate), and can be accumulated and speculated upon just like actual land, then dumped on an unwary public. This may already be happening, as the collapse of gold seems to be occurring outside the general stock market. Is this the beginning of a rotation, or just part of a total selloff of all asset classes?
Subject: SO YOU WANT A GOLD BACKED CURRENCY - THE 50-YEAR PLAN IS COMING TO A CLOSE..
Is China Facing a Housing Collapse?
China bubble a global concern click here
Until next time, remember:
1. The Land belongs to all of us and those who use it should pay rent to the rest of us.
2. Money should exist in sufficient quantity to meet the productive capacity of the nation, and be created by a sovereign government.
3. De-centralize power wherever possible, and where it must be centralized, make it answerable to the People, the ultimate Board of Directors.