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Uncle Sam and Brer Rufus

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Headlined to H3 9/29/12

             Conservatives' analogy of the United States to a debt -- ridden family is false. Because of the national debt, they argue, Social Security, Medicare, etc. must be cut. But the national debt is sucker bait; used in false analogies, it yields a lousy argument. An old lyric is racist but accurately represents the ignorant misunderstanding this analogy passes off on accounting naifs. "Rufus Rastus Johnson Brown, Whatcha gonna do when the rent come "roun?'" Rufus will be evicted. Uncle Sam isn't Rufus! He's like the self-financed owner of Rufus's building! The US is the world's wealthiest country. Our national debt is an accounting artifact. The struggle over whether money and credit should be controlled by private profit making banks or government ended with a decisive victory for private banking.   That victory is now embedded in the Federal Reserve Act of 1913.   It requires the Treasury to get dollars from the Federal Reserve by exchanging bonds (debt) for them.   Money, created electronically and allocated as credit, is no more naturally scarce than paper money is scarce. Consider: during the collapse of 2007 -- 2010, our Federal Reserve created trillions of dollars and made thousand of loans and swaps to banks, including foreign central ones. Depending on what's counted, this money creation totaled $7.7 trillion (Bloomberg News) or $16.1 trillion (GAO Report 11-696 7/11) or $29.6 trillion (Levy Economics Institute, Working Paper 698.)

Bankers' "economists" intone that "money creation" is taboo: surely hellish inflation will follow.   It's taboo except when the irresponsible banks gamble so much on fraudulently overvalued mortgage securities that they destroy their own solvency as well as Main Street's. During all this money creation and lending, did the national debt escalate $7.7, or $16.1, or $29 trillion? Did hellish inflation result? Neither. This money creation was credit allocated by keystroke directly deposited to banks non spendable reserves. That's the real political choice made by Republicans and Democrats. Home prices deflated through early 2009. Millions more workers were laid off. The Consumer Price Index rose from November '07 to Jan. 08, then deflated through July '09.   As the world's wealthiest nation, our Treasury easily refinances the national debt even at very low interest rates. Congress could choose to authorize a program like the Fed's, of low interest loans directly to American individuals, restricted to refinancing home mortgages, college loans, and to businesses to subsidize new hiring. Bankers would oppose it, and have corrupted major parties to prevent it.

The Collapse of 2007 -- 2010 destroyed at least $12.8 trillion of household wealth. The two stimuli, together, only totaled about $1 trillion and weren't aimed directly at housing and mass re-employment to create effective demand. The Roosevelt era   government responded to the Market Crash of 1929 with stimuli -- like New Deal programs. But not with a massive refinance that would have helped   millions of households with mortgages and employment. And the Crash of 1929 turned into the Great Depression of 1929 -- 1939. It only ended in preparation for World War Two. The incomes of we 99 percent-ers were already being ground down for thirty years before the Collapse of 2007 -- 2010. It's now 4 years since September 2008, when stock market indexes took their most sickening dives.   America is stagnant. European banks are in big trouble and austerity is bringing on riots. Growth is slowing even in China. I see no evidence that anything will just "come along" to boost growth (except another enormous war.) Unless Americans wise up and replace all of the most bank -- bribed Republicans and Democrats, it looks like history may repeat itself.

The author, born 1940, is a white male American retired college professor of philosophy raised as a secular Jew by professional parents. He is a long-time minor activist in the civil rights, anti-war, profeminism movements and taught critical (more...)
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In a life of 60 - 80 years our children or som... by Robert Cogan on Saturday, Sep 29, 2012 at 11:34:06 AM
How the narrative of "the National Debt of Mass De... by Robert Cogan on Monday, Oct 1, 2012 at 8:33:17 AM