“I want to see people get money.” – Donald J. Trump, U.S. President, September 17, 2020
“Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet.” – Steven Mnuchin, U.S. Secretary of the Treasury, September 14, 2020
Money for the People
The real viral contagion that has infected the American populace is not an illness of the body. It’s something far worse than COVID-19. The American populace is suffering from an illness of the mind.
The general malady, as we diagnose it, is the unwavering belief that the government has an endless supply of free money, and the expectation that everyone, except the stinking rich, has claim to it. Why pursue self-reliance and independence when a series of stimulus acts promises the more abundant life? This viral contagion’s really ripped through the population in 2020.
For example, just a year ago, the American populace thought they could all live off the forced philanthropy of their neighbors. That to pay Paul you had to first rob Peter. The CARES Act proved to Boobus americanus that, without a shadow of a doubt, there’s free ‘money for the people’ in Washington. Sí se puede!
This week the Congress did its part to further the greatest show on earth. The people want stimulus. Congress intends to get to them, in good time.
Of course, the need to sprinkle the Country with printing press money was already a foregone conclusion. There was no discussion of the wisdom of not having a stimulus bill. The debate at hand was centered on how much.
Crazy Nancy wants $3.4 trillion. Senate Republicans want $500 billion. Something called the House Problem Solvers Caucus wants $2 trillion.
President Trump wants Republicans to “go for the much higher numbers.” His rationale: “it all comes back to the USA anyway (one way or another!).”
There are only 12 days left in the U.S. 2020 fiscal year. The budget deficit’s already well over $3 trillion – more than double the previous $1.4 trillion record deficit set in 2009. With a little luck, the March to Common Ground stimulus agreement will not be reached.
Fiscal year 2020 finances are a disaster. Why start FY 2021 with another massive stimulus bill? What good would it do? The longer Congress dithers the better.
In the meantime, the Federal Reserve’s fully committed to extreme intervention in financial markets. By this, the Fed promises to keep credit cheap and abundant forever.
On Wednesday, following a two day Federal Open Market Committee (FOMC) meeting, the Fed released new projections showing the federal funds rate would remain near zero through 2023. The Fed, via quantitative easing (QE) also promised to buy more Treasuries and mortgage-backed securities; at least $120 billion per month.
We’ll have to wait several weeks for the FOMC meeting minutes to confirm. But we presume there was no discussion of the wisdom of ending QE, reducing the Fed’s balance sheet, and raising the federal funds rate. Such contrary measures are off the table until at least 2024.
The unwritten objective of this now endless QE is to further inflate stock prices in the face of economic catastrophe. Once again, Wall Street and the big banks are being given an endless supply of cheap and abundant credit. Where does this all lead?
How to Tackle the Depression Head On
By and large, the challenges facing the economy have everything to do with central government. Over the last 40 years, as the Fed and the Treasury colluded to rig the financial system in totality, wealth has become ever more concentrated in fewer and fewer insider hands. The effect over the last decade has been a disparity that’s so magnified few can ignore it.
Obviously, something has gone horribly wrong. The main cause, as best we can explain, is the near total abandonment of the rules of common sense in the dealing of money and credit. Old standards, old principles, and honest thinking have given way to quack economists, shameless political swindlers, and a burgeoning citizenry of dependents.
Indeed, we live in a world of deception. A world that will only become more deceitful as policies of desperation are rolled out in earnest to keep the price of money cheap, the price of assets high, the government swindlers in Washington flush with printing press money, and the masses of dependents well supplied with bread and circuses. But make no mistake, deceit will lead to greater deceit.
More bread is needed. The masses have grown sick and tired of wealth being concentrated at the top of the wealth spectrum. Moreover, they’re sick and tired of having their noses rubbed in the mud.
To be clear, these are not failures of capitalism. They’re failures of America’s brand of a centrally planned economy. The tertiary impediments of fake money, regulatory insanity, and government dependency cannot be overcome.
However, there is another way. Steve Forbes, in a January 22, 2014 article, offered an alternative to the current paradigm:
“Vibrant economies, not central banks, create real money, and wealth is abundantly created when tax rates are low, money is stable and regulations are reasonable.”
Stop the deceit. Stop the stimulus. Stop the QE. Stabilize the money supply. Let markets determine the rate of interest.
No doubt, an epic depression would be immediately upon us. But the depression will come regardless. In fact, it’s already here. Better to tackle it head on, with honesty, than to attempt to shirk it with deceit and pretense.
for Economic Prism
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Where to start. The more things change the more they stay the same. I agree with Prof. Richard Wolff. Today’s employer/employee relationship replaced lord/serf which replaced master/slave. Again not much difference. There will always be powerful people ruling over the masses. What is important is the mindset of these rulers. Are their interests with benefiting the nation and the people or only the state that serves them and themselves. Self interest is human nature. But is being selfish in one’s self interest? Everyone wants freedom and free markets so they can have choices. But how to keep this freedom? The natural tendency towards consolidation by the most efficient must be moderated to prevent monopoly which crushes competition, the life blood of free markets. This is the fatal flaw that Marx pointed out about capitalism. Do you want a libertarian wild west darwinian survival of the fittest style capitalism that ends in oligarchy state controlled capitalism (like we have now)? Do you want a BLM or bolshevik “marxist” revolutionary Soviet style proliteriet oligarchy state controlled capitalism (what the neoliberals are trying to establish)? I don’t want either one. The best solution is if “we the people” would educate ourselves sufficiently enough to vote intelligently in our own “long term” best interests. Anyone notice if hell has frozen over yet? The founders knew the masses could not be trusted which is one reason why they set up a Republic and not a democracy. The People’s Republic of China has probably the best currently operating system to serve the true needs of the Chinese people. It would be better if educated people had more ability to express themselves so long as it was in a way to really improve the best interests of the nation and the people. Again, how to achieve this? A proposed system of selecting candidates through a process of elimination sounds interesting. Groups of ten people (not including those who wish not to be candidates) vote (secret ballot) to choose one from their group to move on to the next round for each position they are campaigning for (president and on down). The key is to get the “money” interests out of the process. Only if people can really and intelligently vote for what is really in their long term best interests will there be any hope for lasting improvement in our state of affairs.
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“The few who could understand the system will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”
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I worry having read your use of the descriptive verb “sprinkle” referring to
the modus operandi of our rulers …
If this is sprinkle, what is our future as the dam bursts…