Kucinich's End the Fed bill is causing the parasitic banking class and its media apologists to erupt in fits, because, plainly stated, the bill would drive a stake through their blood-sucking hearts. The bill is based on a cogent diagnosis of our current economic problems, and offers a brilliant solution that would positively revolutionize our national finances and government, reviving our national economy and improving our lives. As an opponent of elite financial power and an advocate for citizen rights and quality of life, I strongly support this bill.
The bill's two most important effects, that strike most directly at the heart of the financial elite's unjust powers:
a) The end of fractional reserve banking
b) The end of the national debt
The bill's two most important effects, that would result in a positive return for the average citizen:
c) The funding of full employment
d) The funding of infrastructure modernization
A) End of Fractional Reserve Banking - the source of financial elite power
Imagine your family is in financial trouble, and you have $100 cash in your wallet. So, you write a check for $500 to your mom, a check for $300 to your brother, and a check for $200 to your sister, and on top of that, you get to keep the $100 untouched in your wallet.
Of course, this would be an illegal fraud, UNLESS you are a bank, in which case it is called "fractional reserve lending with a 10% reserve ratio". In other words, under the 10% reserve ratio, you get to create $1000 in loans based on your $100 of cash. With a lower "reserve ratio", you could create more loans on top of your cash reserve.
That would be a pretty cool power, wouldn't it? The ability to create money at will, and charge interest on it, without actually loaning out your own cash. That's right! You even get to charge interest on the money you lend out, even though you never had the money to begin with! This is how banks create money, and thereby, create financial bubbles/bust and inflation/deflation cycles.
Kucinch's bill would end this ridiculous, illegal, and unjust abuse, which is the heart and soul of the power and influence of the financial establishment.
B) The end of the national debt - a yoke of perpetual slavery laid on the neck of the taxpaying public
Think about it: the ability to create a money supply is a sovereign power, meaning, the government does it. Since the government creates the supply of money, why would it need to borrow it? If you could literally create money, you would never need to borrow it, right? Why would you borrow money from someone else, and pay them back with interest, when you could create the money for yourself? It doesn't even make sense! The idea of a national debt is a repudiation of governmental sovereignty.
It is like a tribute payment, a tithe to the banking establishment. It's a line item in every budget that goes directly towards banking profits. It is nothing less than a government subsidy for the banking establishment.
Kucinich's bill would end this outrageous, immoral, and illogical exploitation of the tax-paying public.
C) The funding of full employment - bailing out the worker instead of the banks
The whole reason behind TARP and the other bank bailouts of the last 2 years was to avoid an economic collapse. But the collapse happened anyway, because the banks never "loaned" the money back to the public. Despite receiving interest free money from the government, credit cards continue to charge over 20%, small business loans have dried up, capital financing is limited, loans for the housing market have been heavily restricted, and thus, the economy has contracted leading to perpetually high unemployment.
Instead of bailing out banks, and hoping they loan the money back to the public to get the economy going, why not skip the middle man, and directly pay the public? This is called the funding of full employment. Lots of people need jobs, and there is lots of work to be done, so why not just pay those people directly to do the work?
Some libertarians object to the idea of expanding governmental scope like that, but let's think about the alternatives: government-administered overhead, or banking-administered overhead. It is one or the other, there is no escaping the "inefficiencies" or the "external controls" or "restrictions on freedoms". The way I see it, we either bow to the power of the financial elite-controlled banking establishment, or we use government to reign in their power and be a vehicle to advance the general good.
The idea that there is a "free market" is a total joke, a complete fiction, really. The parasite banking class has completely perverted our rules and laws to their own benefit. Kucinich's bill would seek to fight back and regain our real freedom from the financial oligarchy that currently rules.
D) The funding of infrastructure improvement - modernizing America
Why is China setting records for next-gen bullet trains and laying thousands of miles of new highways, while we are slashing budgets and can't even afford to repair our broken down streets, bridges, water lines, electrical grid, and so on? The answer is keyed to the money supply: we are suffocating from lack of money. We have millions of people able and willing to work, and millions of things which need to be done. A government jobs program is just the trick to meet those needs.
The alternative is what, borrow money to meet spending needs, under increasingly high interest rates? Think about it: either the government creates the money, or private banks create the money through fractional reserve banking!
The fear of hyperinflation is misguided. Either the money gets created to get the work done, or people continue to stay unemployed, and our infrastructure continues to crumble. The only question is: who creates the money. No one is going to print out worthless paper money under Kucinich's bill.
Money would be created only to finance work, which would "spend money into existence". This would lead to a stable money supply, with slight growth as a built-in feature. This is exactly what the Fed Reserve claims to attempt, and completely failed to deliver!
Which is better for a stable and healthy economy: debt-based money created by private banks to their personal enrichment, or a permanent no-interest no-debt money supply maintained by government according to popular will?
Creating the money through government program at least offers the possibility of pubic input, while avoiding the exploitation and injustice of usury. Allowing the parasitic banking elite to continue their control of our money supply simply guarantees more misery and exploitation, as the rich would continue to get richer.
Study the full text of Kucinch's proposal here, and please, help spread the word: http://kucinich.house.gov/UploadedFiles/NEED_ACT.pdf
Showing posts with label Debt Cancellation. Show all posts
Showing posts with label Debt Cancellation. Show all posts
Friday, January 21, 2011
Monday, August 30, 2010
David Knox Barker Recommends Jubilee Cycle
Boxer has a nice consideration of the macro-economic effects of Jubilee (here). He correctly points out that a regular Jubilee cycle would eliminate the long wave Depression cycle, by preventing a toxic build up of debt. As he puts it:
"The Jubilee law was actually crafted astutely to prevent the buildup of excessive debt levels in the economy, and not primarily to justify its cancellation. Debts were only forgiven if banks violated the Jubilee law that prevented the buildup of excessive debt. The Jubilee was not a bank bailout or stick taxpayers with others bad debts. Consider the passage from Leviticus 25: 8-19. This ancient text provides remarkable insight into the current global financial crisis, which is at its heart a global debt crisis."
Barker rightly condemns any attempt to transfer the debts of some, such as mortgage owners, onto the public purse, as some form of dishonest debt forgiveness program.
A Jubilee Year, correctly done today by the federal government, would not violate any contracts, because it would pay all debts in full. The federal government would simply write checks on behalf of private citizens to pay off their debts.
The creditors would be paid, the contracts would be honored, and the end result would be the cancellation of all debt, the resetting of the financial system, and the freeing of the productive economy. As Barker describes the renewal process: "The only way to address a debt problem is to reduce the amount of outstanding debt and create conditions for a booming economy and new long wave spring season..."
"The Jubilee law was actually crafted astutely to prevent the buildup of excessive debt levels in the economy, and not primarily to justify its cancellation. Debts were only forgiven if banks violated the Jubilee law that prevented the buildup of excessive debt. The Jubilee was not a bank bailout or stick taxpayers with others bad debts. Consider the passage from Leviticus 25: 8-19. This ancient text provides remarkable insight into the current global financial crisis, which is at its heart a global debt crisis."
Barker rightly condemns any attempt to transfer the debts of some, such as mortgage owners, onto the public purse, as some form of dishonest debt forgiveness program.
A Jubilee Year, correctly done today by the federal government, would not violate any contracts, because it would pay all debts in full. The federal government would simply write checks on behalf of private citizens to pay off their debts.
The creditors would be paid, the contracts would be honored, and the end result would be the cancellation of all debt, the resetting of the financial system, and the freeing of the productive economy. As Barker describes the renewal process: "The only way to address a debt problem is to reduce the amount of outstanding debt and create conditions for a booming economy and new long wave spring season..."
Thursday, July 8, 2010
Steve Keen Calls for Debt Cancellation, or Does He???
Steve recognizes the solution to our debt-deflation-depression is to cancel debt. However, he seems to dispair that the politicians lack the will to do it.
Darn it, Steve, grow a backbone! Instead of fatalistically resigning yourself to defeat, ADVOCATE FOR CHANGE. Use your prestige and popularity to initiate the process of systematic debt cancellation.
This apathy is soul-death, it disgusts me. If even the man who has identified and quantified the problem, who has built up a world-wide following pointing out that DEBT IS THE PROBLEM, simply lowers his head and licks his own balls rather than speaking out for the positive solution, good lord, what hope is there.
It is clearly not a failure of intelligence on Keen's part. It is nothing short than a failure of COURAGE. The choice is plain: Be a ball-licking dog dragging your head in the dirt, whipped and whining... or stand up to our banking overlords and DEMAND FREEDOM from their debt enslavement trap. Which is it, Steve???
From the latest article over at Steve's blog, http://www.debtdeflation.com/blogs/2010/07/07/naked-capitalism-and-my-scary-minsky-model/:
The motive force driving the crash is the ratio of debt to GDP–a key feature of the real world that the mainstream economists who dominate the world’s academic university departments, Central Banks and Treasuries ignore. In the model, as in the real world, this ratio rises in a boom as businesses take on debt to finance investment and speculation, and then falls in a slump when things don’t work out in line with the euphoric expectations that developed during the boom. Cash flows during the slump don’t allow borrowers to reduce the debt to GDP ratio to the pre-boom level, but the period of relative stability after the crisis leads to expectations–and debt–taking off once more.
Ultimately, such an extreme level of debt is accumulated that debt servicing exceeds available cash flows, and a permanent slump ensues–a Depression.
Its final stage emphasises a message that Michael Hudson, one of the very few others to see this crisis coming, puts very simply: “Debts that can’t be repaid, won’t be repaid”. As Americans now seem to be realising, the financial crisis has not gone away, because the debt that caused it is still there.
Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt–either directly by abolishing large slabs of it, or indirectly by inflating it away. I have very little confidence in the ability of the Federal Reserve to do the latter, while the former will take a level of political fortitude that is far beyond our current politicians.
Darn it, Steve, grow a backbone! Instead of fatalistically resigning yourself to defeat, ADVOCATE FOR CHANGE. Use your prestige and popularity to initiate the process of systematic debt cancellation.
This apathy is soul-death, it disgusts me. If even the man who has identified and quantified the problem, who has built up a world-wide following pointing out that DEBT IS THE PROBLEM, simply lowers his head and licks his own balls rather than speaking out for the positive solution, good lord, what hope is there.
It is clearly not a failure of intelligence on Keen's part. It is nothing short than a failure of COURAGE. The choice is plain: Be a ball-licking dog dragging your head in the dirt, whipped and whining... or stand up to our banking overlords and DEMAND FREEDOM from their debt enslavement trap. Which is it, Steve???
From the latest article over at Steve's blog, http://www.debtdeflation.com/blogs/2010/07/07/naked-capitalism-and-my-scary-minsky-model/:
The motive force driving the crash is the ratio of debt to GDP–a key feature of the real world that the mainstream economists who dominate the world’s academic university departments, Central Banks and Treasuries ignore. In the model, as in the real world, this ratio rises in a boom as businesses take on debt to finance investment and speculation, and then falls in a slump when things don’t work out in line with the euphoric expectations that developed during the boom. Cash flows during the slump don’t allow borrowers to reduce the debt to GDP ratio to the pre-boom level, but the period of relative stability after the crisis leads to expectations–and debt–taking off once more.
Ultimately, such an extreme level of debt is accumulated that debt servicing exceeds available cash flows, and a permanent slump ensues–a Depression.
Its final stage emphasises a message that Michael Hudson, one of the very few others to see this crisis coming, puts very simply: “Debts that can’t be repaid, won’t be repaid”. As Americans now seem to be realising, the financial crisis has not gone away, because the debt that caused it is still there.
Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt–either directly by abolishing large slabs of it, or indirectly by inflating it away. I have very little confidence in the ability of the Federal Reserve to do the latter, while the former will take a level of political fortitude that is far beyond our current politicians.
Tuesday, January 12, 2010
Using Reserve Requirements to Decrease Liquidity
Raising reserve requirements is a key component of the modern Jubilee plan. The idea of directly using reserve requirements does not occur to most Americans, simply because the Federal Reserve uses only open market operations to change liquidity levels.
But this week, China demonstrates the utility of reserve requirements as a tool to fight inflation (read more here).
In fact, China is demonstrating the real-world success of the Jubilee plan. After flooding the country with stimulus in the past year, the government is now counter-acting potential inflation by requiring banks to stockpile more money.
The Jubilee plan is slightly different, in that it would not randomly disburse stimulus. Rather, would unleash stimulus across the board by direct payoff of debt, simultaneously requiring banks to soak up the extra money by raising reserve requirements.
The total amount of money (currency and credit) in circulation would remain the same, but all debt payments would be eliminated, allowing the economy to restart itself without central government control.
But this week, China demonstrates the utility of reserve requirements as a tool to fight inflation (read more here).
In fact, China is demonstrating the real-world success of the Jubilee plan. After flooding the country with stimulus in the past year, the government is now counter-acting potential inflation by requiring banks to stockpile more money.
The Jubilee plan is slightly different, in that it would not randomly disburse stimulus. Rather, would unleash stimulus across the board by direct payoff of debt, simultaneously requiring banks to soak up the extra money by raising reserve requirements.
The total amount of money (currency and credit) in circulation would remain the same, but all debt payments would be eliminated, allowing the economy to restart itself without central government control.
Thursday, December 17, 2009
Ellen Brown Calls for National Debt Cancellation
Excellent article published yesterday by Ellen Brown, detailing the positive side of national debt cancellation. The banking class everywhere at all times attempts to load the commoners with heavy debt burdens. The commoners are starting to wake up.
Jubilee means freedom from exploitation!
http://www.truthout.org/1216097
Europe's small, debt-strapped countries could follow the lead of Argentina and simply walk away from their debts. That would shift the burden to the creditor countries, which could solve the problem merely by a change in accounting rules.
Local Currency for Local Development
Issuing and lending currency is the sovereign right of governments, and it is a right that Iceland and Latvia will lose if they join the EU, which forbids member nations to borrow from their own central banks. Latvia and Iceland both have natural resources that could be developed if they had the credit to do it; and with sovereign control over their local currencies, they could get that credit simply by creating it on the books of their own publicly-owned banks.
In fact, there is nothing extraordinary in that proposal. All private banks get the credit they lend simply by creating it on their books. Contrary to popular belief, banks do not lend their own money or their depositors' money. As the US Federal Reserve attests, banks lend new money, created by double-entry bookkeeping as a deposit of the borrower on one side of the bank's books and as an asset of the bank on the other.
Besides thawing frozen credit pipes, credit created by governments has the advantage that it can be issued interest-free. Eliminating the cost of interest can cut production costs dramatically.
According to a German study, interest composes 30 percent to 50 percent of everything we buy. Slashing interest costs can make projects such as low-cost housing, alternative energy development, and infrastructure construction not only sustainable but profitable for the government, while at the same time creating much-needed jobs.
Government-issued money to fund public projects has a long and successful history, going back at least to the early 18th century, when the American colony of Pennsylvania issued money that was both lent and spent by the local government into the economy. The result was an unprecedented period of prosperity, achieved without producing price inflation and without taxing the people.
The key is to use the newly-created money or credit for productive projects that increase goods and services, rather than for speculation or to pay off national debt in foreign currencies (the trap that Zimbabwe fell into). The national currency can be protected from speculators by imposing exchange controls, as Malaysia did in 1998; imposing capital controls, as Brazil and Taiwan are doing now; banning derivatives; and imposing a "Tobin tax," a small tax on trade in financial products.
Jubilee means freedom from exploitation!
http://www.truthout.org/1216097
Europe's small, debt-strapped countries could follow the lead of Argentina and simply walk away from their debts. That would shift the burden to the creditor countries, which could solve the problem merely by a change in accounting rules.
Local Currency for Local Development
Issuing and lending currency is the sovereign right of governments, and it is a right that Iceland and Latvia will lose if they join the EU, which forbids member nations to borrow from their own central banks. Latvia and Iceland both have natural resources that could be developed if they had the credit to do it; and with sovereign control over their local currencies, they could get that credit simply by creating it on the books of their own publicly-owned banks.
In fact, there is nothing extraordinary in that proposal. All private banks get the credit they lend simply by creating it on their books. Contrary to popular belief, banks do not lend their own money or their depositors' money. As the US Federal Reserve attests, banks lend new money, created by double-entry bookkeeping as a deposit of the borrower on one side of the bank's books and as an asset of the bank on the other.
Besides thawing frozen credit pipes, credit created by governments has the advantage that it can be issued interest-free. Eliminating the cost of interest can cut production costs dramatically.
According to a German study, interest composes 30 percent to 50 percent of everything we buy. Slashing interest costs can make projects such as low-cost housing, alternative energy development, and infrastructure construction not only sustainable but profitable for the government, while at the same time creating much-needed jobs.
Government-issued money to fund public projects has a long and successful history, going back at least to the early 18th century, when the American colony of Pennsylvania issued money that was both lent and spent by the local government into the economy. The result was an unprecedented period of prosperity, achieved without producing price inflation and without taxing the people.
The key is to use the newly-created money or credit for productive projects that increase goods and services, rather than for speculation or to pay off national debt in foreign currencies (the trap that Zimbabwe fell into). The national currency can be protected from speculators by imposing exchange controls, as Malaysia did in 1998; imposing capital controls, as Brazil and Taiwan are doing now; banning derivatives; and imposing a "Tobin tax," a small tax on trade in financial products.
Thursday, October 8, 2009
The Necessity of the Jubilee Cycle in the Modern Economy
As detailed in my last article, the modern economic condition of primarily credit money creates a new economic dynamic:
Under traditional paper money schemes, the excessive issuance of money results in hyperinflation.
Under modern credit money schemes, the excessive issuance of money results in Minski moments of economic collapse because of unsustainable debt levels.
The ancient Jubilee cycle, extinguishing all debt every 50 years, is perfectly suited to this new modern condition. The Jubilee cycle would be the perfect restrictor and regulator of the Minski debt-collapse cycle, and is thus a necessity for economic stability in the modern world.
Many monetary theorists and reformers are looking backwards, and recommending that we reign in the Minski cycle by eliminating the fractional reserve banking system. However correct this proposal is on the theoretical level, it is impractical because time and knowledge cannot be undone. A similar critique faces those who would return us to the gold standard: it was tried, and abandoned, time has moved on. As much as we would like to return to a Constitutional system of limited government, Pandora's box has already been opened.
A debt-cancellation Jubilee is the best solution to our current economic situation, which was caused by excessive debt. The Jubilee system of periodic debt cancellation is the only way to keep it from happening again and again. The Jubilee cycle would be the bedrock of sustainable economic development, which is yet another long-range necessity which must be faced by forward-looking economic leaders.
Under traditional paper money schemes, the excessive issuance of money results in hyperinflation.
Under modern credit money schemes, the excessive issuance of money results in Minski moments of economic collapse because of unsustainable debt levels.
The ancient Jubilee cycle, extinguishing all debt every 50 years, is perfectly suited to this new modern condition. The Jubilee cycle would be the perfect restrictor and regulator of the Minski debt-collapse cycle, and is thus a necessity for economic stability in the modern world.
Many monetary theorists and reformers are looking backwards, and recommending that we reign in the Minski cycle by eliminating the fractional reserve banking system. However correct this proposal is on the theoretical level, it is impractical because time and knowledge cannot be undone. A similar critique faces those who would return us to the gold standard: it was tried, and abandoned, time has moved on. As much as we would like to return to a Constitutional system of limited government, Pandora's box has already been opened.
A debt-cancellation Jubilee is the best solution to our current economic situation, which was caused by excessive debt. The Jubilee system of periodic debt cancellation is the only way to keep it from happening again and again. The Jubilee cycle would be the bedrock of sustainable economic development, which is yet another long-range necessity which must be faced by forward-looking economic leaders.
Friday, October 2, 2009
Steve Keen Proves the People's Bailout Works Best
As I have been arguing all along, the only effective solution to debt deflation is cancellation of debt, and stimulus needs to go directly to the people, not to the banks. Perhaps Steve Keen cogitated over the comments I left on his blog, as he created a computer model to test the theory. Low and behold, his model proved the People's Bailout is correct: money given to banks is far less effective, even in theory, than money given directly to citizens.
As he puts it at his post http://www.debtdeflation.com/blogs/2009/09/19/it’s-hard-being-a-bear-part-five-rescued/:
I’ve recently developed a genuinely monetary, credit-driven model of the economy, and one of its first insights is that Obama has been sold a pup on the right way to stimulate the economy: he would have got far more bang for his buck by giving the stimulus to the debtors rather than the creditors.
The model shows that you get far more “bang for your buck” by giving the money to firms, rather than banks. Unemployment falls in both case below the level that would have applied in the absence of the stimulus, but the reduction in unemployment is far greater when the firms get the stimulus, not the banks: unemployment peaks at over 18 percent without the stimulus, just over 13 percent with the stimulus going to the banks, but under 11 percent with the stimulus being given to the firms.
The time path of the recession is also greatly altered. The recession is shorter with the stimulus, but there’s actually a mini-boom in the middle of it with the firm-directed stimulus, versus a simply lower peak to unemployment with the bank-directed stimulus.
When a credit crunch strikes, the pipes pumping the bank reserves to the firms shrink dramatically, while the pipe going in the opposite direction expands, and all other pipes remain the same size.
If you then fill up the bank reserves reservoir—by the government pumping the extra $100 billion into it—that money will only trickle into the economy slowly. If however you put that money into the firms’ bank accounts, it would flow at an unchanged rate to the rest of the economy—the workers—while flowing more quickly to the banks as well, reducing debt levels.
So giving the stimulus to the debtors is a more potent way of reducing the impact of a credit crunch—the opposite of the advice given to Obama by his neoclassical advisers.
Obama has been sold a pup by neoclassical economics: not only did neoclassical theory help cause the crisis, by championing the growth of private debt and the asset bubbles it financed; it also is undermining efforts to reduce the severity of the crisis.
This is unfortunately the good news: the bad news is that this model only considers an economy undergoing a “credit crunch”, and not also one suffering from a serious debt overhang that only a direct reduction in debt can tackle. That is our actual problem, and while a stimulus will work for a while, the drag from debt-deleveraging is still present. The economy will therefore lapse back into recession soon after the stimulus is removed.
As he puts it at his post http://www.debtdeflation.com/blogs/2009/09/19/it’s-hard-being-a-bear-part-five-rescued/:
I’ve recently developed a genuinely monetary, credit-driven model of the economy, and one of its first insights is that Obama has been sold a pup on the right way to stimulate the economy: he would have got far more bang for his buck by giving the stimulus to the debtors rather than the creditors.
The model shows that you get far more “bang for your buck” by giving the money to firms, rather than banks. Unemployment falls in both case below the level that would have applied in the absence of the stimulus, but the reduction in unemployment is far greater when the firms get the stimulus, not the banks: unemployment peaks at over 18 percent without the stimulus, just over 13 percent with the stimulus going to the banks, but under 11 percent with the stimulus being given to the firms.
The time path of the recession is also greatly altered. The recession is shorter with the stimulus, but there’s actually a mini-boom in the middle of it with the firm-directed stimulus, versus a simply lower peak to unemployment with the bank-directed stimulus.
When a credit crunch strikes, the pipes pumping the bank reserves to the firms shrink dramatically, while the pipe going in the opposite direction expands, and all other pipes remain the same size.
If you then fill up the bank reserves reservoir—by the government pumping the extra $100 billion into it—that money will only trickle into the economy slowly. If however you put that money into the firms’ bank accounts, it would flow at an unchanged rate to the rest of the economy—the workers—while flowing more quickly to the banks as well, reducing debt levels.
So giving the stimulus to the debtors is a more potent way of reducing the impact of a credit crunch—the opposite of the advice given to Obama by his neoclassical advisers.
Obama has been sold a pup by neoclassical economics: not only did neoclassical theory help cause the crisis, by championing the growth of private debt and the asset bubbles it financed; it also is undermining efforts to reduce the severity of the crisis.
This is unfortunately the good news: the bad news is that this model only considers an economy undergoing a “credit crunch”, and not also one suffering from a serious debt overhang that only a direct reduction in debt can tackle. That is our actual problem, and while a stimulus will work for a while, the drag from debt-deleveraging is still present. The economy will therefore lapse back into recession soon after the stimulus is removed.
Wednesday, July 15, 2009
Teleb and Spitznagel Call for Debt Cancellation
Taleb and Spitznagel have an excellent grasp on the problem of high debt, and getting people thinking about debt cancellation is a good thing. They also point out the folly of current economic modeling, and the failure of the economists in general. But their proposal to convert debt to equity is highly problematic.
The idea is taken straight from corporate finance: Corporate debt holders, rather than receiving cash payment, will sometimes receive ownership shares in the company. Debt holders can often be forced into this conversion against their will, as the article suggests.
However, this article is the perverse opposite of that process. Rather than debt holders being forced to accept equity, he is suggestion that owners be forced to give away shares to debt holders! The idea that we should support a system in which debt holders forcibly acquire an ownership stake is highly objectionable, in fact, it is outrageous.
The proposal would benefit one group: the debt holders who are seeing their debt-generated wealth evaporate on a large scale. Now that debt payments are defaulting like crazy, these parasites are trying to get hold of the underlying assets. It is an outrage! And an example of the priveleged elitist attitude which sees the entire world as a bunch of cattle to be milked and butchered for their profit and convenience.
Taleb and Spitznagel are speaking for the parasite class, and as far as I am concerned, they should be told to go to hell. There will be no forcible debt to equity conversions.
The solution to a high debt depression is a Jubilee renewal, freeing the people from their debts, not a bail out for the parasite class. The government can directly pay off debts, and simultaneously raise bank reserve requirements to absorb the excess money to avoid inflationary effects. This is the People's Bailout, and we could do it right now, without violating any laws or contracts.
http://www.ft.com/cms/s/0/4e02aeba-6fd8-11de-b835-00144feabdc0.html
The idea is taken straight from corporate finance: Corporate debt holders, rather than receiving cash payment, will sometimes receive ownership shares in the company. Debt holders can often be forced into this conversion against their will, as the article suggests.
However, this article is the perverse opposite of that process. Rather than debt holders being forced to accept equity, he is suggestion that owners be forced to give away shares to debt holders! The idea that we should support a system in which debt holders forcibly acquire an ownership stake is highly objectionable, in fact, it is outrageous.
The proposal would benefit one group: the debt holders who are seeing their debt-generated wealth evaporate on a large scale. Now that debt payments are defaulting like crazy, these parasites are trying to get hold of the underlying assets. It is an outrage! And an example of the priveleged elitist attitude which sees the entire world as a bunch of cattle to be milked and butchered for their profit and convenience.
Taleb and Spitznagel are speaking for the parasite class, and as far as I am concerned, they should be told to go to hell. There will be no forcible debt to equity conversions.
The solution to a high debt depression is a Jubilee renewal, freeing the people from their debts, not a bail out for the parasite class. The government can directly pay off debts, and simultaneously raise bank reserve requirements to absorb the excess money to avoid inflationary effects. This is the People's Bailout, and we could do it right now, without violating any laws or contracts.
http://www.ft.com/cms/s/0/4e02aeba-6fd8-11de-b835-00144feabdc0.html
Monday, April 27, 2009
The Jubilee Solution to the Economic Crisis: the People’s Bailout
The worldwide economy is unraveling because of high debt. High debt is destroying the economy not only because businesses are forced to liquidate in the face of unpayable debt, but also because consumers won’t spend when their debt load gets too high. The high debt load is made worse by deflation, which makes older debt harder to pay off.
Jubilee means the forgiveness of debt, but can the principle of Jubilee debt forgiveness be applied to our current economic situation? Yes, it can. In fact, debt cancellation is the only solution to the problem, other than letting the problem run its course through a long period of economic depression, which cancels debt the slow and painful way.
The central governments of the world are currently attempting to inflate the money supply, through quantitative easing, to counter the deflation and stimulate growth. However, this approach is failing for a number of reasons. The basic disconnect is in giving the stimulus to banks, rather than directly to citizens.
Stimulation only works if the cash is spent. If the government prints a billion dollars only to bury it under the ground, obviously, no stimulus and no inflation will take place. Giving the cash to the banks is roughly equivalent to burying the new money under the ground. For one, the banks are using it to shore up their balance sheets, for two, consumers are already buried in debt and facing mass layoffs, so taking on more debt is not an option, so the money just sits in the banks.
The Jubilee economic solution would combine cash stimulus with debt cancellation. However, rather than bailing out the banks, and encouraging the people to go into greater debt, the government will give cash stimulus directly to the people. People will be targeted according to their debt, receiving cash payment equal to their debt level, payment going directly to the debt holder. In effect, everyone’s debt will be cancelled.
In order to prevent runaway inflation, the government will at the same time raise the banks’ cash reserve requirement in equal proportion to the cash stimulus. Thus, the cash will pass through the citizens, paying off their debt, and get soaked up back into the vaults of the banks.
The net effect will be a reset of the financial system, as all debts get fully paid off. Without the crushing weight of credit cards, mortgages, car payments, and student loans, people will be free to spend and invest again. The debt deflation will be totally defeated, and unemployment will quickly shrink as the business liquidation cycle ends and the economy takes off, with the desired upward effect on wages. The stage would be set for a new economic expansion as investments, inventions, and innovations are freed up to work their wealth-creating magic.
This is the Jubilee solution to our economic crisis. The beauty of the plan is that it would not require any new laws nor a Constitutional Amendment, and would not require the abrogation or violation of any contracts. Essentially, it could be done by executive action, but obviously, widespread Congressional support would be ideal as well.
What can you do to help make it happen? Spread the word however you can: tell your friends and family, blog it, forward it, provide the plan to your political representatives, run for office yourself, the possibilities are endless.
This is the Jubilee solution to our economic crisis, the people’s bailout. God bless us all.
note: by cash, I do not imply actual paper script to be printed and distributed; electronic credit money would actually work much better.
Jubilee means the forgiveness of debt, but can the principle of Jubilee debt forgiveness be applied to our current economic situation? Yes, it can. In fact, debt cancellation is the only solution to the problem, other than letting the problem run its course through a long period of economic depression, which cancels debt the slow and painful way.
The central governments of the world are currently attempting to inflate the money supply, through quantitative easing, to counter the deflation and stimulate growth. However, this approach is failing for a number of reasons. The basic disconnect is in giving the stimulus to banks, rather than directly to citizens.
Stimulation only works if the cash is spent. If the government prints a billion dollars only to bury it under the ground, obviously, no stimulus and no inflation will take place. Giving the cash to the banks is roughly equivalent to burying the new money under the ground. For one, the banks are using it to shore up their balance sheets, for two, consumers are already buried in debt and facing mass layoffs, so taking on more debt is not an option, so the money just sits in the banks.
The Jubilee economic solution would combine cash stimulus with debt cancellation. However, rather than bailing out the banks, and encouraging the people to go into greater debt, the government will give cash stimulus directly to the people. People will be targeted according to their debt, receiving cash payment equal to their debt level, payment going directly to the debt holder. In effect, everyone’s debt will be cancelled.
In order to prevent runaway inflation, the government will at the same time raise the banks’ cash reserve requirement in equal proportion to the cash stimulus. Thus, the cash will pass through the citizens, paying off their debt, and get soaked up back into the vaults of the banks.
The net effect will be a reset of the financial system, as all debts get fully paid off. Without the crushing weight of credit cards, mortgages, car payments, and student loans, people will be free to spend and invest again. The debt deflation will be totally defeated, and unemployment will quickly shrink as the business liquidation cycle ends and the economy takes off, with the desired upward effect on wages. The stage would be set for a new economic expansion as investments, inventions, and innovations are freed up to work their wealth-creating magic.
This is the Jubilee solution to our economic crisis. The beauty of the plan is that it would not require any new laws nor a Constitutional Amendment, and would not require the abrogation or violation of any contracts. Essentially, it could be done by executive action, but obviously, widespread Congressional support would be ideal as well.
What can you do to help make it happen? Spread the word however you can: tell your friends and family, blog it, forward it, provide the plan to your political representatives, run for office yourself, the possibilities are endless.
This is the Jubilee solution to our economic crisis, the people’s bailout. God bless us all.
note: by cash, I do not imply actual paper script to be printed and distributed; electronic credit money would actually work much better.
Tuesday, April 14, 2009
The Economic War against the Common Man
What really happened
Exerpts of a brilliant economic analysis follows, read the full essay here: http://www.marketoracle.co.uk/Article9986.html
Iceland’s financial crisis today is less an issue of international law as of outright lawlessness perpetrated by the purveyors of so-called free market democracy. Nations pressing Iceland for payment impose one set of laws for others while following quite a different set for themselves. Preaching to Iceland about international law, the United States and Great Britain themselves have broken the clearest of international laws – those against waging aggressive war. Their propagandists are skillful at using the language of capitalism and morality, yet they are neither capitalist nor moral. Their financial strategy is to play an ages-old psychological game. Make countries like Iceland feel guilty about being debtors rather than recognizing they have been victims of an international Ponzi scheme. In a nutshell, the game is to lay down “laws” for debtors in the form of destructive austerity programs fashioned by irresponsible and indeed, parasitic creditors. This “aid advice” ends in outright asset stripping, both public and private.
Asset stripping to pay debts has caused collapse time and again in history, but is strangely downplayed in today’s academic curriculum as an “inconvenient truth” as far as vested financial interests are concerned. Income is siphoned off by a scheme that is elegant and simple. Hapless victims – and now entire economies, not just individuals – are maneuvered onto a debt treadmill from which there is no escape. Creditors pile on credit and let the debts grow at the “magic of compound interest,” knowing that their loans cannot be repaid – except by asset sell-offs. No economy’s productivity can keep pace with exponentially compounding debt. Whatever was owned (and indeed, financed originally by public debt but now paid off) is stripped away for interest payments that never end. The aim is for these payments to absorb as much of the surplus as possible, so that the national economy in effect works to pay tribute to the new global financial class – bankers and money managers of mutual funds, pension funds and hedge funds.
The product they are selling is debt. They build up their own wealth by indebting others, and then forcing sell-offs to buyers who take on their own debt in the hope of making asset-price gains as property prices are impossibly inflated relative to the wages of living labor. This has become the new, euphemistically dubbed post-industrial form of wealth creation – a strategy that is now collapsing economies throughout the world.
The second important principle is how radically today’s post-capitalist order has inverted traditional ways of making money. Instead of making profits on new capital investment, the easiest path to quick riches in today’s global financial system is to foreclose at pennies on the dollar, and make a “capital gain” by flipping property onto world financial markets that are being inflated by central banks. While financial spokespersons promise that “there is no such thing as a free lunch,” today’s hit-and-run financial bubble, fraud and insider privatizations culminating in public-sector bailouts (“socializing the risk” while privatizing the profits and capital gains) – has become all about obtaining a free lunch.
But it is a zero-sum gambling game, with losers on the other side of the table from the winners. One party’s gain is another’s loss – and indeed, this kind of game ends up shrinking the economy by diverting resources away from real investment in tangible capital formation. Unlike industrial capitalism, which employs labor and invests in capital equipment to turn raw materials into salable commodities, today’s post-industrial financialized system only offers the virtual (and temporary) wealth of asset bubbles. Its financial managers claim to be acting in the tradition of classical economists and share their concept of free markets, but in actuality they have been part of an intellectual fraud that depicts their system as something other than the financialized wealth extraction on the real economy of production and consumption that it is. Financialized wealth is extractive, not productive. That is because loans, stocks and bond securities are claims on wealth, not real wealth itself.
Fortunately, this need not happen in countries that do not impose debt leveraging on themselves, but only in countries that let the public utility of money and credit creation be privatized in the hands of a cosmopolitan financial class.
Consider the role of banking in this neo-feudal order. Banks do not create credit to finance manufacturing – that is done mainly out of retained earnings and equity. Banks create credit primarily to lend against collateral already in place – loans that simply extract money from the economy. This is an inherently destructive act, one that is anti-capitalist in the sense that it undercuts industrial growth in favor of interest extraction and short-term speculative gains.
The trick is to get this policy welcomed as if it were progress, as “post-industrial” rather than a lapse backward. Only today is it becoming apparent that the collateral-based lending of banks “creates wealth” mainly by inflating asset-price bubbles, especially in real estate. Bankers calculate how much debt a given flow of residential or commercial real estate income can support, and create enough credit to make a loan large enough to absorb this surplus revenue. Bankers do the same with industry by lending corporate raiders enough money in take-over “junk” bonds to turn profits into a flow of interest payments for themselves, and with capital gains for the raiders. Central banks fuel this process by swamping economies with easy credit (that is, debt) that keeps the financial sector fat while impoverishing the increasingly indebted nation.
Finance thus is the historical antithesis of property, sanctifying its own right to expropriate indebted property owners. Originally denounced by Christianity, Judaism and Islam, interest-bearing debt has sanctified itself as the predominant form of wealth. This is not what the classical economists and democratic political reformers expected to see. They explained how to avoid this economic dystopia by appropriate government tax policy and regulation to minimize the economic role and political power of post-feudal bankers and rentiers. (Rentiers are people who live off interest and rents, that is, off absentee incomes paid on a regular basis.)
Bankers managed to convince ambitious fortune-seekers that the way to wealth and economic growth lay in debt leveraging, not in staying free of debt. Selling debt as their product, banks and speculators at the world’s financial core needed to prepare for what they must have known would lead to economic collapse and destroyed economies throughout history. They prepared the path to ruin by ideological engineering aimed at shaping how populations think about history, so as to accept debt pyramiding as a good economic strategy.
Turning economic power into political power - Creditors in most countries have been able to turn their economic power into political power with the aim of shifting the tax burden off themselves and onto labor and industry. The final coup de grace occurs when they get the government to bail them out from their losses on bad loans. In the United States, Congress has tripled the national debt in less than a year to bail out creditors with little thought of helping debtors, or even of prosecuting the massive financial fraud involved in its subprime real estate bubble and the sale of junk mortgages to gullible foreign buyers.
Allowing economies to be crippled with interest payments was unthinkable until recently. To achieve so radical a break in the public’s idea of prosperity and self-reliance, it has been necessary for creditors to wipe out knowledge of how legal systems have been amended to put creditor interests above those of debtors over the past eight centuries – and how the leading classical economists and Enlightenment cultural and religious leaders sought to subordinate creditor interests to those of growth and prosperity for the economy at large. But the new banking class has been clever enough to hire the best propagandists money can buy while remaining blind to the havoc they are wreaking with people’s lives.
The trick is to fool debtors into thinking that “free markets” means paying one’s debts. Creditors can succeed in letting debt leveraging and “the magic of compound interest” empty out economies only by diverting attention from what Adam Smith and other classical economists warned against. For them, a free market was one free of debt – especially foreign debt. In The Wealth of Nations (especially Book V, chapter 3), Smith warned against creditors becoming “free” enough to disable the ability of governments to protect citizens from creditors – especially the Dutch, who were the major investors in British monopolies created to be sold to pay for that nation’s seemingly eternal wars with France. The problem was that creditors sought to extract the wealth of nations for themselves, not to create wealth. Their greed was destructive to society as a whole, because it was easier to simply strip assets than to create real capital.
The tacit assumption is not that bankers’ exorbitant greed is achieved at the expense of the economy at large, but that the financial sector’s prosperity is a precondition for the economy to grow. The bankers try to cap matters by trotting out poor retirees (like the widows and orphans of old – presumably those living on “fixed incomes” in the form of trust funds) whose meager savings should be supported. Doing so just happens to save the financial oligarchy of billionaires at the top of the economic pyramid, but not the proverbial victims.
The use of human shields such as union members concerned about the investments of their pension funds to protect the wealth of the kleptocrats is likewise shameless. Wall Street sages in the United States, for example, shed crocodile tears over the fate of the working people suffering from the stock market collapse, knowing full well that financial assets are heavily concentrated at the top of the economic pyramid, with workers having, only a meager share of those stocks and bonds. Ignored is the fact that the government could bail out failing pension funds (like Social Security) directly at just a small fraction of the cost of propping up the assets of the affluent.
The best path for nations is to put their own economic growth before the interests of creditors. For many generations this ethic supported a set of political checks and balances that kept the growth of international debt in terms considered to be tolerable – much too heavy by the free-market standards of Smith and John Stuart Mill, but not so high as to prompt widespread defaults and debt repudiation.
This ethic has changed in recent years. Countries have accepted creditor propaganda that debts are a “point of honor,” much as the poor believe that paying their debts – even when they are in negative equity – is the “honest thing to do.” Obviously this ethic is not self-applied to the world’s largest financial institutions or real estate speculators. But Iceland accepted it in what is a characteristic of small, closely-knit communities where the word of neighbors is their bond. The root of Iceland’s ethic is mutual aid and prosperity for all. It is a fine, highly socialized attitude, and therefore tragic that it has helped lead the nation to fall prone to the snake oil of debt peonage.
Having stuck Third World countries with debts beyond their ability to pay, the IMF and World Bank used their creditor leverage to force governments to impose draconian austerity plans that had the effect of preventing growth toward industrial and agricultural self-sufficiency, thereby also crushing prospects for competitiveness. The IMF and World Bank then demanded that debtor countries sell off their public infrastructure, land, subsoil rights and other assets to pay the debts that these institutions sponsored so irresponsibly. (If IMF loans were not simply irresponsible, then they knowingly crippled debtor-country economies.) It is an age-old story of conquest, now accomplished without conventional warfare.
Psychologists have explained the creditor proclivity for violence by the tendency for rentiers to fight for unearned income – inheritance, or other “free wealth” that they have obtained without effort of their own. People who work for a living and are able to support themselves believe that they can survive, and so there is less of the kind of panic that creditors and other free lunchers feel at the thought that their extractive revenue may end. They fight passionately against the prospect of having to live on what they produce or earn by their own merits. So the last thing that rentiers really want is a free market. In a shameless irony, they tend to accuse populations of being terrorists if they seek to defend themselves against predatory creditors and land-grabbers!
This is just the opposite of the free markets that were promised them back in 1990-91. Instead of economic growth, the “real” economy of production and consumption shrunk, even as foreign financial inflows inflated property prices for housing and office space, fuel and public utilities. Real estate and utility services hitherto provided freely or at subsidy to the economy at large were turned into a predatory vehicle for foreigners to extract income, putting the domestic population on rations, much as what occurs under military occupation. Yet the public media, academic centers and parliaments have persuaded populations that this is part of a natural order, even the product of how a free-market is supposed to operate, rather than a retrogression back to quasi-feudal institutions. The simplistic idea is that making money is itself “capitalist” ipso facto, regardless of whether industrial capital is being created or dismantled and stripped.
Most societies throughout history have sought to provide credit legally in ways that do not permit creditor oligarchies to emerge. Today’s creditor advocates are at war with the spirit of this idea. And in taking this position, they reject the thrust of the Enlightenment’s anti-usury laws, classical political economy’s distinction between productive and sterile investment, the St. Simonian attempt at financial reform, and the Progressive Era’s attempt to mobilize national credit to fund productive industrial investment rather than being extractive, benefiting only the few. The classical idea of economic freedom itself was formulated as the antithesis to feudal-epoch finance. And the ideal of freedom from predatory finance is what is being threatened today, as if society has forgotten how long and hard the reform struggle has been.
The common thread in these ideas is that people deserve to receive the fruits of their labor. This means bringing prices in line with actual labor-costs of production. It also means that one’s wealth should be limited to only what one creates – not land and natural resources, or monopoly privileges to extract income via control of roads, the right to create money and other natural monopolies. The aim of social reform for many centuries has been to purge capitalism of its legacy of absentee rentier property ownership patterns and creditor-oriented laws inherited from medieval times. The way to do this is to treat banking like transportation and the broadcasting spectrum, as a public utility to form a just fiscal base, not something to be privatized so that individual rentiers can tax society at large for what rightly is a public utility.
The problem goes to the very foundation of economic theory. Any set of statistics reflects categories in economic theory, and in recent years the Chicago School has taken the lead in what is now a nationwide trend to exclude the history of economic thought from the academic curriculum. One can get all the way through a Ph.D. without having surveyed the evolution of classical economics from the Physiocrats through Adam Smith, John Stuart Mill and the Progressive Era reformers. The essence of social reform throughout the Enlightenment, and indeed extending all the way back to the Church Schoolmen is no longer taught – the distinctions between earned and unearned income and wealth, and productive and unproductive (or “sterile”) employment and investment. Post-classical thought insists that all income is productive in proportion to whatever it earns – including the collection of economic rent or extortion of monopoly super-profit, or financial charges for interest and credit card fees, and the exorbitant salaries and bonuses that financial managers pay themselves. All revenue – and therefore, all wealth – appears to be “earned.” By their definition. This denies the concept of “investment in zero-sum activities that merely transfer income into the unproductive sector’s pockets, in contrast to creating income.
As a guide to policy reform, classical economics aimed at creating an economic and fiscal system that would bring market prices in line with technologically necessary costs of production. All such costs ultimately are reducible to labor. The necessary complement to the labor theory of value (adjusted for different grades of labor, the cost of their education and the linkage between wage levels and productivity) was the analysis of economic rent – an institutional add-on reflecting property ownership patterns, financial charges and taxes, not inherent costs of production. The classical reform program was to minimize the cost of production and of living, making economies more competitive by purifying industrial capitalism and removing its remaining feudal legacies, above all the right of hereditary absentee owners (landlords) to siphon off a rental charge for access to land for sites supplied by nature and given value by local public spending (e.g., “location, location, and location,” as real estate agents explain matters to prospective buyers) – and the right of bankers to charge for creating credit that governments could freely create themselves.Fighting against progressive reforms, banks and other financial institutions have sought to preserve their special privileges by law, minimizing taxes on themselves by shifting the burden onto labor and industry. What they have achieved by financializing economies is (1) to raise the cost of living and the cost of doing business; (2) to free their major customers – mortgage borrowers – from taxation so as to leave as much surplus as possible available to be paid as interest; (3) to collect revenue hitherto used to finance the public sector by capitalizing it into interest charges and to inflate the price of housing and other real estate and privatized monopolies; (4) to effectively shift taxes onto labor and industry, thereby raising prices and undermining the competitive power of financialized economies. This is a travesty of classical “free market” policy. It is a policy for predators that mainly burdens economies with high interest and fees while also making the tax burden more oppressive while they reap the benefits.
John Maynard Keynes believed that the proper task of governments was to prevent over-indebtedness from leading to economic depression. He concluded his General Theory (1936) with a call for “euthanasia of the rentier.” Hoping to make credit productive, not extractive, his followers have advocated making banking a public utility so as to steer debt creation to fund growth in the means of production, not economic overhead by inflating property bubbles. Radical as this may appear today, this was the aim of the 19th century classical economists, and underlay the financial reforms that shaped the 20th-century economic takeoff. Only quite recently has the global financial press rediscovered this logic in the wake of today’s bubble meltdown.
Exerpts of a brilliant economic analysis follows, read the full essay here: http://www.marketoracle.co.uk/Article9986.html
Iceland’s financial crisis today is less an issue of international law as of outright lawlessness perpetrated by the purveyors of so-called free market democracy. Nations pressing Iceland for payment impose one set of laws for others while following quite a different set for themselves. Preaching to Iceland about international law, the United States and Great Britain themselves have broken the clearest of international laws – those against waging aggressive war. Their propagandists are skillful at using the language of capitalism and morality, yet they are neither capitalist nor moral. Their financial strategy is to play an ages-old psychological game. Make countries like Iceland feel guilty about being debtors rather than recognizing they have been victims of an international Ponzi scheme. In a nutshell, the game is to lay down “laws” for debtors in the form of destructive austerity programs fashioned by irresponsible and indeed, parasitic creditors. This “aid advice” ends in outright asset stripping, both public and private.
Asset stripping to pay debts has caused collapse time and again in history, but is strangely downplayed in today’s academic curriculum as an “inconvenient truth” as far as vested financial interests are concerned. Income is siphoned off by a scheme that is elegant and simple. Hapless victims – and now entire economies, not just individuals – are maneuvered onto a debt treadmill from which there is no escape. Creditors pile on credit and let the debts grow at the “magic of compound interest,” knowing that their loans cannot be repaid – except by asset sell-offs. No economy’s productivity can keep pace with exponentially compounding debt. Whatever was owned (and indeed, financed originally by public debt but now paid off) is stripped away for interest payments that never end. The aim is for these payments to absorb as much of the surplus as possible, so that the national economy in effect works to pay tribute to the new global financial class – bankers and money managers of mutual funds, pension funds and hedge funds.
The product they are selling is debt. They build up their own wealth by indebting others, and then forcing sell-offs to buyers who take on their own debt in the hope of making asset-price gains as property prices are impossibly inflated relative to the wages of living labor. This has become the new, euphemistically dubbed post-industrial form of wealth creation – a strategy that is now collapsing economies throughout the world.
The second important principle is how radically today’s post-capitalist order has inverted traditional ways of making money. Instead of making profits on new capital investment, the easiest path to quick riches in today’s global financial system is to foreclose at pennies on the dollar, and make a “capital gain” by flipping property onto world financial markets that are being inflated by central banks. While financial spokespersons promise that “there is no such thing as a free lunch,” today’s hit-and-run financial bubble, fraud and insider privatizations culminating in public-sector bailouts (“socializing the risk” while privatizing the profits and capital gains) – has become all about obtaining a free lunch.
But it is a zero-sum gambling game, with losers on the other side of the table from the winners. One party’s gain is another’s loss – and indeed, this kind of game ends up shrinking the economy by diverting resources away from real investment in tangible capital formation. Unlike industrial capitalism, which employs labor and invests in capital equipment to turn raw materials into salable commodities, today’s post-industrial financialized system only offers the virtual (and temporary) wealth of asset bubbles. Its financial managers claim to be acting in the tradition of classical economists and share their concept of free markets, but in actuality they have been part of an intellectual fraud that depicts their system as something other than the financialized wealth extraction on the real economy of production and consumption that it is. Financialized wealth is extractive, not productive. That is because loans, stocks and bond securities are claims on wealth, not real wealth itself.
Fortunately, this need not happen in countries that do not impose debt leveraging on themselves, but only in countries that let the public utility of money and credit creation be privatized in the hands of a cosmopolitan financial class.
Consider the role of banking in this neo-feudal order. Banks do not create credit to finance manufacturing – that is done mainly out of retained earnings and equity. Banks create credit primarily to lend against collateral already in place – loans that simply extract money from the economy. This is an inherently destructive act, one that is anti-capitalist in the sense that it undercuts industrial growth in favor of interest extraction and short-term speculative gains.
The trick is to get this policy welcomed as if it were progress, as “post-industrial” rather than a lapse backward. Only today is it becoming apparent that the collateral-based lending of banks “creates wealth” mainly by inflating asset-price bubbles, especially in real estate. Bankers calculate how much debt a given flow of residential or commercial real estate income can support, and create enough credit to make a loan large enough to absorb this surplus revenue. Bankers do the same with industry by lending corporate raiders enough money in take-over “junk” bonds to turn profits into a flow of interest payments for themselves, and with capital gains for the raiders. Central banks fuel this process by swamping economies with easy credit (that is, debt) that keeps the financial sector fat while impoverishing the increasingly indebted nation.
Finance thus is the historical antithesis of property, sanctifying its own right to expropriate indebted property owners. Originally denounced by Christianity, Judaism and Islam, interest-bearing debt has sanctified itself as the predominant form of wealth. This is not what the classical economists and democratic political reformers expected to see. They explained how to avoid this economic dystopia by appropriate government tax policy and regulation to minimize the economic role and political power of post-feudal bankers and rentiers. (Rentiers are people who live off interest and rents, that is, off absentee incomes paid on a regular basis.)
Bankers managed to convince ambitious fortune-seekers that the way to wealth and economic growth lay in debt leveraging, not in staying free of debt. Selling debt as their product, banks and speculators at the world’s financial core needed to prepare for what they must have known would lead to economic collapse and destroyed economies throughout history. They prepared the path to ruin by ideological engineering aimed at shaping how populations think about history, so as to accept debt pyramiding as a good economic strategy.
Turning economic power into political power - Creditors in most countries have been able to turn their economic power into political power with the aim of shifting the tax burden off themselves and onto labor and industry. The final coup de grace occurs when they get the government to bail them out from their losses on bad loans. In the United States, Congress has tripled the national debt in less than a year to bail out creditors with little thought of helping debtors, or even of prosecuting the massive financial fraud involved in its subprime real estate bubble and the sale of junk mortgages to gullible foreign buyers.
Allowing economies to be crippled with interest payments was unthinkable until recently. To achieve so radical a break in the public’s idea of prosperity and self-reliance, it has been necessary for creditors to wipe out knowledge of how legal systems have been amended to put creditor interests above those of debtors over the past eight centuries – and how the leading classical economists and Enlightenment cultural and religious leaders sought to subordinate creditor interests to those of growth and prosperity for the economy at large. But the new banking class has been clever enough to hire the best propagandists money can buy while remaining blind to the havoc they are wreaking with people’s lives.
The trick is to fool debtors into thinking that “free markets” means paying one’s debts. Creditors can succeed in letting debt leveraging and “the magic of compound interest” empty out economies only by diverting attention from what Adam Smith and other classical economists warned against. For them, a free market was one free of debt – especially foreign debt. In The Wealth of Nations (especially Book V, chapter 3), Smith warned against creditors becoming “free” enough to disable the ability of governments to protect citizens from creditors – especially the Dutch, who were the major investors in British monopolies created to be sold to pay for that nation’s seemingly eternal wars with France. The problem was that creditors sought to extract the wealth of nations for themselves, not to create wealth. Their greed was destructive to society as a whole, because it was easier to simply strip assets than to create real capital.
The tacit assumption is not that bankers’ exorbitant greed is achieved at the expense of the economy at large, but that the financial sector’s prosperity is a precondition for the economy to grow. The bankers try to cap matters by trotting out poor retirees (like the widows and orphans of old – presumably those living on “fixed incomes” in the form of trust funds) whose meager savings should be supported. Doing so just happens to save the financial oligarchy of billionaires at the top of the economic pyramid, but not the proverbial victims.
The use of human shields such as union members concerned about the investments of their pension funds to protect the wealth of the kleptocrats is likewise shameless. Wall Street sages in the United States, for example, shed crocodile tears over the fate of the working people suffering from the stock market collapse, knowing full well that financial assets are heavily concentrated at the top of the economic pyramid, with workers having, only a meager share of those stocks and bonds. Ignored is the fact that the government could bail out failing pension funds (like Social Security) directly at just a small fraction of the cost of propping up the assets of the affluent.
The best path for nations is to put their own economic growth before the interests of creditors. For many generations this ethic supported a set of political checks and balances that kept the growth of international debt in terms considered to be tolerable – much too heavy by the free-market standards of Smith and John Stuart Mill, but not so high as to prompt widespread defaults and debt repudiation.
This ethic has changed in recent years. Countries have accepted creditor propaganda that debts are a “point of honor,” much as the poor believe that paying their debts – even when they are in negative equity – is the “honest thing to do.” Obviously this ethic is not self-applied to the world’s largest financial institutions or real estate speculators. But Iceland accepted it in what is a characteristic of small, closely-knit communities where the word of neighbors is their bond. The root of Iceland’s ethic is mutual aid and prosperity for all. It is a fine, highly socialized attitude, and therefore tragic that it has helped lead the nation to fall prone to the snake oil of debt peonage.
Having stuck Third World countries with debts beyond their ability to pay, the IMF and World Bank used their creditor leverage to force governments to impose draconian austerity plans that had the effect of preventing growth toward industrial and agricultural self-sufficiency, thereby also crushing prospects for competitiveness. The IMF and World Bank then demanded that debtor countries sell off their public infrastructure, land, subsoil rights and other assets to pay the debts that these institutions sponsored so irresponsibly. (If IMF loans were not simply irresponsible, then they knowingly crippled debtor-country economies.) It is an age-old story of conquest, now accomplished without conventional warfare.
Psychologists have explained the creditor proclivity for violence by the tendency for rentiers to fight for unearned income – inheritance, or other “free wealth” that they have obtained without effort of their own. People who work for a living and are able to support themselves believe that they can survive, and so there is less of the kind of panic that creditors and other free lunchers feel at the thought that their extractive revenue may end. They fight passionately against the prospect of having to live on what they produce or earn by their own merits. So the last thing that rentiers really want is a free market. In a shameless irony, they tend to accuse populations of being terrorists if they seek to defend themselves against predatory creditors and land-grabbers!
This is just the opposite of the free markets that were promised them back in 1990-91. Instead of economic growth, the “real” economy of production and consumption shrunk, even as foreign financial inflows inflated property prices for housing and office space, fuel and public utilities. Real estate and utility services hitherto provided freely or at subsidy to the economy at large were turned into a predatory vehicle for foreigners to extract income, putting the domestic population on rations, much as what occurs under military occupation. Yet the public media, academic centers and parliaments have persuaded populations that this is part of a natural order, even the product of how a free-market is supposed to operate, rather than a retrogression back to quasi-feudal institutions. The simplistic idea is that making money is itself “capitalist” ipso facto, regardless of whether industrial capital is being created or dismantled and stripped.
Most societies throughout history have sought to provide credit legally in ways that do not permit creditor oligarchies to emerge. Today’s creditor advocates are at war with the spirit of this idea. And in taking this position, they reject the thrust of the Enlightenment’s anti-usury laws, classical political economy’s distinction between productive and sterile investment, the St. Simonian attempt at financial reform, and the Progressive Era’s attempt to mobilize national credit to fund productive industrial investment rather than being extractive, benefiting only the few. The classical idea of economic freedom itself was formulated as the antithesis to feudal-epoch finance. And the ideal of freedom from predatory finance is what is being threatened today, as if society has forgotten how long and hard the reform struggle has been.
The common thread in these ideas is that people deserve to receive the fruits of their labor. This means bringing prices in line with actual labor-costs of production. It also means that one’s wealth should be limited to only what one creates – not land and natural resources, or monopoly privileges to extract income via control of roads, the right to create money and other natural monopolies. The aim of social reform for many centuries has been to purge capitalism of its legacy of absentee rentier property ownership patterns and creditor-oriented laws inherited from medieval times. The way to do this is to treat banking like transportation and the broadcasting spectrum, as a public utility to form a just fiscal base, not something to be privatized so that individual rentiers can tax society at large for what rightly is a public utility.
The problem goes to the very foundation of economic theory. Any set of statistics reflects categories in economic theory, and in recent years the Chicago School has taken the lead in what is now a nationwide trend to exclude the history of economic thought from the academic curriculum. One can get all the way through a Ph.D. without having surveyed the evolution of classical economics from the Physiocrats through Adam Smith, John Stuart Mill and the Progressive Era reformers. The essence of social reform throughout the Enlightenment, and indeed extending all the way back to the Church Schoolmen is no longer taught – the distinctions between earned and unearned income and wealth, and productive and unproductive (or “sterile”) employment and investment. Post-classical thought insists that all income is productive in proportion to whatever it earns – including the collection of economic rent or extortion of monopoly super-profit, or financial charges for interest and credit card fees, and the exorbitant salaries and bonuses that financial managers pay themselves. All revenue – and therefore, all wealth – appears to be “earned.” By their definition. This denies the concept of “investment in zero-sum activities that merely transfer income into the unproductive sector’s pockets, in contrast to creating income.
As a guide to policy reform, classical economics aimed at creating an economic and fiscal system that would bring market prices in line with technologically necessary costs of production. All such costs ultimately are reducible to labor. The necessary complement to the labor theory of value (adjusted for different grades of labor, the cost of their education and the linkage between wage levels and productivity) was the analysis of economic rent – an institutional add-on reflecting property ownership patterns, financial charges and taxes, not inherent costs of production. The classical reform program was to minimize the cost of production and of living, making economies more competitive by purifying industrial capitalism and removing its remaining feudal legacies, above all the right of hereditary absentee owners (landlords) to siphon off a rental charge for access to land for sites supplied by nature and given value by local public spending (e.g., “location, location, and location,” as real estate agents explain matters to prospective buyers) – and the right of bankers to charge for creating credit that governments could freely create themselves.Fighting against progressive reforms, banks and other financial institutions have sought to preserve their special privileges by law, minimizing taxes on themselves by shifting the burden onto labor and industry. What they have achieved by financializing economies is (1) to raise the cost of living and the cost of doing business; (2) to free their major customers – mortgage borrowers – from taxation so as to leave as much surplus as possible available to be paid as interest; (3) to collect revenue hitherto used to finance the public sector by capitalizing it into interest charges and to inflate the price of housing and other real estate and privatized monopolies; (4) to effectively shift taxes onto labor and industry, thereby raising prices and undermining the competitive power of financialized economies. This is a travesty of classical “free market” policy. It is a policy for predators that mainly burdens economies with high interest and fees while also making the tax burden more oppressive while they reap the benefits.
John Maynard Keynes believed that the proper task of governments was to prevent over-indebtedness from leading to economic depression. He concluded his General Theory (1936) with a call for “euthanasia of the rentier.” Hoping to make credit productive, not extractive, his followers have advocated making banking a public utility so as to steer debt creation to fund growth in the means of production, not economic overhead by inflating property bubbles. Radical as this may appear today, this was the aim of the 19th century classical economists, and underlay the financial reforms that shaped the 20th-century economic takeoff. Only quite recently has the global financial press rediscovered this logic in the wake of today’s bubble meltdown.
Wednesday, April 1, 2009
South Park calls for Jubilee
Everyone had a chance to see the new South Park episode about the economic crisis (go here if you haven't http://dailybail.com/home/financial-comedy-genius-south-park-is-in-recession-and-needs.html)?
In the end, guess what solves the economic crisis? One kid pays everyone's debt off. Makes sense, doesn't it? If no one is in debt anymore, the economy can recover.
Still have yet to hear anything about debt cancelation by anyone in government. Just more bailouts of the finance industry.
So, given the choice between helping the common man and helping the mega-rich, our government chooses the rich. Hmmm, weird how that works.
In the end, guess what solves the economic crisis? One kid pays everyone's debt off. Makes sense, doesn't it? If no one is in debt anymore, the economy can recover.
Still have yet to hear anything about debt cancelation by anyone in government. Just more bailouts of the finance industry.
So, given the choice between helping the common man and helping the mega-rich, our government chooses the rich. Hmmm, weird how that works.
Tuesday, March 10, 2009
$50 Trillion Lost Last Year?
So $50 Trillion in financial assets were lost last year. So what?
The weird part is, everyone acts like this is totally real. In fact, it is complete fantasy. We are acting out our own bizarre economic fantasy play, wherein financial instruments are confused with real wealth.
Unfortunately, our current economic system is based on the fantasy that financial instruments are equivalent to real wealth, and our real economy is hitch to these financial instruments like a carriage to the horse. The horse has died so the carriage just sits there.
In reality, we are no less wealthy than we were last year. We have the same skills and materials that we had then. The fantasy of money has us mesmerized, so that our real economic activity stops because of the collapse of the money system.
Given the loss of $50 trillion in paper value, how many loans will not be paid off, how much debt will now be unpayable? We desperately need to establish an economy that is unhitched from the dysfunctional money system.
The first step is to cancel the debt and allow our productive economy to escape the madness of a crushing weight of debt, which is based on fictional asset prices and expectations from bubble times.
The IMF actually quantifies the amount:
Developing nations will bear the brunt of the contraction and they will face a shortfall of between $270 billion and $700 billion to pay for imports and service debts, the Washington- based World Bank said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ1kcJ7y3LDM&refer=worldwide
Saturday, February 28, 2009
Niall Ferguson calls for Debt Restructuring
The harsh reality that is being repressed is this: the Western world is suffering a crisis of excessive indebtedness. Many governments are too highly leveraged, as are many corporations. More important, households are groaning under unprecedented debt burdens.
Average household sector debt has reached 141per cent of disposable income in the US, 156per cent in Australia and 177 per cent in Britain. Worst of all are the banks in the US and Europe. Some of the best-known names in American and European finance have balance sheets 40, 60 or even 100 times the size of their capital. Average US investment bank leverage was above 25 to 1 at the end of 2008. Eurozone bank leverage was more than 30 to 1. British bank balance sheets are equal to a staggering 440 per cent of gross domestic product.
http://www.theaustralian.news.com.au/business/story/0,28124,25115869-643,00.html
Average household sector debt has reached 141per cent of disposable income in the US, 156per cent in Australia and 177 per cent in Britain. Worst of all are the banks in the US and Europe. Some of the best-known names in American and European finance have balance sheets 40, 60 or even 100 times the size of their capital. Average US investment bank leverage was above 25 to 1 at the end of 2008. Eurozone bank leverage was more than 30 to 1. British bank balance sheets are equal to a staggering 440 per cent of gross domestic product.
The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.
With the economy contracting at a rate (excluding inventory accumulation) of minus 5 per cent, we are on the eve of a public debt explosion that the CBO's forecast - $US4 trillion over the next 10 years, but peaking at 54 per cent of GDP - surely understates. The fact that so many other countries are adopting comparable measures means a flood of new issuance is about to hit national and international bond markets.
There is a better way to go, but it is in the opposite direction. The aim must be not to increase debt but to reduce it. In past debt crises - which usually affected emerging market sovereign debt - this tended to happen in one of two ways. If, say, Argentina had an excessively large domestic debt, denominated in Argentine currency, it could be inflated away. If it was an external debt, then the government simply defaulted on payments and forced the creditors to accept a rescheduling of debt and principal payments.
Today, Argentina is us. Former investment banks and German universal banks are Argentina. American households are Argentina. But it will not be so easy for us to inflate away our debts. The deflationary pressures unleashed by the financial crisis are too strong (consumer prices in the US have been falling for three consecutive months; the annualised rate of decline for the last quarter of 2008 was minus 12.7 per cent.)
The solution to the debt crisis is not more debt but less debt. Two things must happen. First, banks that are de facto insolvent need to be restructured, a word that is preferable to the old-fashioned nationalisation. Existing shareholders will have to face that they have lost their money. Too bad; they should have kept a more vigilant eye on the people running their banks. Government will take control in return for a substantial recapitalisation after losses have meaningfully been written down. Bondholders may have to accept either a debt-for-equity swap or a 20 per cent "haircut" - a disappointment, no doubt, but nothing compared with the losses suffered when Lehman Brothers went under.
Glasgow-born Ferguson is Laurence A. Tisch professor of history at Harvard University and William Ziegler professor of business administration at Harvard Business School. He is also a senior research fellow at Jesus College, Oxford University, and a senior fellow at the Hoover Institution, Stanford University. His books include The Ascent of Money: A Financial History of the World.
http://www.theaustralian.news.com.au/business/story/0,28124,25115869-643,00.html
Wednesday, February 4, 2009
Steve Keen: Debt Abolishment is Only Solution
Steve Keen is a brilliant economist, who accurately predicted the problems of our debt-based economy. The words of these men, like Keen and Schiller, who understand why things are happening the way they are, need to be listened to. Instead, we are being led by the same people who created the mess. Demand change, and help spread the word!
Steve makes an important and convincing argument about why Bernanke's money printing will NOT end the deflation. If he is correct, and the Fed cannot inflate our way out of the debt, that leaves us with one fewer option, and the necessity of Jubilee debt cancellation becomes ever more apparent.
The UK Government has taken the first tentative steps towards a solution to this crisis with its decision today to give stressed borrowers an interest repayment holiday of up to two years (New scheme to help people at risk of repossession). The scheme is limited in scope to households that suffer ”a significant and temporary loss of income as a result of the economic downturn to defer a proportion of the interest payments on their mortgage for up to two years”. It also guarantees banks that the deferred payments will ultimately be made.
This is a step in the right direction–towards ultimately debt moratoria. It isn’t enough–because the interest will still be compounded–but it does make the important point that the accrual of interest on debt can be tampered with by legislative means as well as by economic ones.
I favour the legislative approach–which should ultimately include debt moratoria, or a revision of this scheme which involves no accrual of interest and repayments therefore reducing outstanding principal–because I don’t believe the accepted economic approaches to reducing the real debt burden will work.
The standard economic means to reduce the debt burden is to “print money to cause inflation”. Ben Bernanke himself is famous for the following remark:
"If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation." (Bernanke, Deflation: Making Sure “It” Doesn’t Happen Here)
I have little confidence in this mechanism. It is predicated on a Monetarist theory of money, in which, to quote the Godfather, “Inflation is always and everywhere a monetary phenomenon” (Milton Friedman, A Monetary History of the United States 1867-1960). It is possible to substantially agree with this argument and still argue that government printing of money won’t cause inflation–because Milton Friedman’s “model” of money completely ignored the existence of credit money.
Here is Milton’s model of money creation and how that engenders inflation:
Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated…
… When the helicopter starts dropping money in a steady stream … it takes time for people to catch on to what is happening… As people catch on, prices must for a time rise even more rapidly, to undo an initial increase in real balances as well as to produce a long-run decline… (Friedman, “The Optimum Quantity of Money”, in THE OPTIMUM QUANTITY OF MONEY AND OTHER ESSAYS, pages 4-5 and 13)
IF a helicopter flying over the land dispensing largesse (otherwise known as the Central Bank creating M0) was the only manner in which money could be created, and IF there was no private debt, and IF the economy was in long run general equilibrium and prices prior to the helicopter drop were therefore equilibrium prices… then this approach would work.
Yeah, right…
Instead, in the real world in which we live, financial institutions control the creation of money, private debt is at unprecedented levels, and the global economy is rapidly transiting from a far-from-equilibrium debt-financed boom into a far-from-equilibrium debt-induced crash in which the price of everything is totally out of whack.
In this world, government creation of M0 will be sent straight to the banks to reduce debt levels. The impact on turnover of goods and therefore prices will be minimal. Deflation will continue, and could do so for years as the government effectively swaps base money for credit money–only to see the absolute money supply drop. This was the Japanese experience.
Ultimately, I expect that the failure of the economy to respond to this Friedmanite tonic will result in a profound shift in politics, in which the unthinkable today will become policy: that much of the debt that the financial sector issued especially in the last two decades should never have been created in the first place, and it should be abolished–in conjunction with substantial reforms to financial assets that prevent a similar debt-bubble in the future.
We are still a very long way from that change in consciousness, but this move by the UK government is a first step towards it.
http://www.debtdeflation.com/blogs/2008/12/04/uk-steps-in-the-right-direction/
Steve makes an important and convincing argument about why Bernanke's money printing will NOT end the deflation. If he is correct, and the Fed cannot inflate our way out of the debt, that leaves us with one fewer option, and the necessity of Jubilee debt cancellation becomes ever more apparent.
The UK Government has taken the first tentative steps towards a solution to this crisis with its decision today to give stressed borrowers an interest repayment holiday of up to two years (New scheme to help people at risk of repossession). The scheme is limited in scope to households that suffer ”a significant and temporary loss of income as a result of the economic downturn to defer a proportion of the interest payments on their mortgage for up to two years”. It also guarantees banks that the deferred payments will ultimately be made.
This is a step in the right direction–towards ultimately debt moratoria. It isn’t enough–because the interest will still be compounded–but it does make the important point that the accrual of interest on debt can be tampered with by legislative means as well as by economic ones.
I favour the legislative approach–which should ultimately include debt moratoria, or a revision of this scheme which involves no accrual of interest and repayments therefore reducing outstanding principal–because I don’t believe the accepted economic approaches to reducing the real debt burden will work.
The standard economic means to reduce the debt burden is to “print money to cause inflation”. Ben Bernanke himself is famous for the following remark:
"If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation." (Bernanke, Deflation: Making Sure “It” Doesn’t Happen Here)
I have little confidence in this mechanism. It is predicated on a Monetarist theory of money, in which, to quote the Godfather, “Inflation is always and everywhere a monetary phenomenon” (Milton Friedman, A Monetary History of the United States 1867-1960). It is possible to substantially agree with this argument and still argue that government printing of money won’t cause inflation–because Milton Friedman’s “model” of money completely ignored the existence of credit money.
Here is Milton’s model of money creation and how that engenders inflation:
Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated…
… When the helicopter starts dropping money in a steady stream … it takes time for people to catch on to what is happening… As people catch on, prices must for a time rise even more rapidly, to undo an initial increase in real balances as well as to produce a long-run decline… (Friedman, “The Optimum Quantity of Money”, in THE OPTIMUM QUANTITY OF MONEY AND OTHER ESSAYS, pages 4-5 and 13)
IF a helicopter flying over the land dispensing largesse (otherwise known as the Central Bank creating M0) was the only manner in which money could be created, and IF there was no private debt, and IF the economy was in long run general equilibrium and prices prior to the helicopter drop were therefore equilibrium prices… then this approach would work.
Yeah, right…
Instead, in the real world in which we live, financial institutions control the creation of money, private debt is at unprecedented levels, and the global economy is rapidly transiting from a far-from-equilibrium debt-financed boom into a far-from-equilibrium debt-induced crash in which the price of everything is totally out of whack.
In this world, government creation of M0 will be sent straight to the banks to reduce debt levels. The impact on turnover of goods and therefore prices will be minimal. Deflation will continue, and could do so for years as the government effectively swaps base money for credit money–only to see the absolute money supply drop. This was the Japanese experience.
Ultimately, I expect that the failure of the economy to respond to this Friedmanite tonic will result in a profound shift in politics, in which the unthinkable today will become policy: that much of the debt that the financial sector issued especially in the last two decades should never have been created in the first place, and it should be abolished–in conjunction with substantial reforms to financial assets that prevent a similar debt-bubble in the future.
We are still a very long way from that change in consciousness, but this move by the UK government is a first step towards it.
http://www.debtdeflation.com/blogs/2008/12/04/uk-steps-in-the-right-direction/
Tuesday, February 3, 2009
Mr. Mortage says: Cancel Debt!
The following is a brilliant analysis and plan, by Mr. Mortgage. The only solution is mortgage principal write-downs, i.e., cancellation of debt! When will our leaders wake up to this? Nationalize the banks and cancel the debt, it is that simple.
http://mrmortgage.ml-implode.com/2008/12/14/mr-mortgage-my-case-for-mortgage-principal-reductions/
http://mrmortgage.ml-implode.com/2008/12/14/mr-mortgage-my-case-for-mortgage-principal-reductions/
Monday, February 2, 2009
Putin Calls for Debt Cancellation
Vlad Putin calls for DEBT CANCELLATION. Putin is a very smart man, and his speech deserves to be read and fully contemplated. Frankly, he sounds more pro-freedom and pro-capitalist than we Americans. I guess we really shouldn't be surprised by that.
"Unfortunately, we have so far failed to comprehend the true scale of the ongoing crisis. But one thing is obvious: the extent of the recession and its scale will largely depend on specific high-precision measures, due to be charted by governments and business communities and on our coordinated and professional efforts. In our opinion, we must first atone for the past and open our cards, so to speak. This means we must assess the real situation and write off all hopeless debts and “bad” assets. True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalisation, bonuses or reputation. However, we would “conserve” and prolong the crisis, unless we clean up our balance sheets. I believe financial authorities must work out the required mechanism for writing off debts that corresponds to today’s needs."
http://www.globalresearch.ca/index.php?context=va&aid=12087
"Unfortunately, we have so far failed to comprehend the true scale of the ongoing crisis. But one thing is obvious: the extent of the recession and its scale will largely depend on specific high-precision measures, due to be charted by governments and business communities and on our coordinated and professional efforts. In our opinion, we must first atone for the past and open our cards, so to speak. This means we must assess the real situation and write off all hopeless debts and “bad” assets. True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalisation, bonuses or reputation. However, we would “conserve” and prolong the crisis, unless we clean up our balance sheets. I believe financial authorities must work out the required mechanism for writing off debts that corresponds to today’s needs."
http://www.globalresearch.ca/index.php?context=va&aid=12087
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