This page was started
in 2011 as a way of taking notes on the issues while I was running
for the House of Representatives.
Results of California 2nd district House of Representatives race (Wiki).
When I see something interesting I add it to this web page.
The key message when I ran for the House of Representatives in 2012 was that electing either a Democrat or Republican would result in no change in Wall street or War policy.
Bernie Sanders is the only candidate with any possibility of making a change.
If you are happy with how Obama fulfilled his campaign promises then vote for Hillary.
If you are happy with Bush43 vote for the Republican candidate.
If you want a change vote for Bernie, even if that means writing his name on the ballot.
The lesser of evils is still evil.
Note: a vote for a Republican or Democrat is for sure a wasted vote. See: Democrats the same as Republicans on the big issues
Here are a couple of key concepts:
1. The Republicans and Democrats are in agreement when it comes to supporting big business and war. They only differ on a few other issues. So if you want reform in how business works or our war policy do not vote for either of them.
2. The bad outcomes we are experiencing (for example we pay the most for our medical care yet the quality of that care is ranked much lower than other countries) are the direct result of policy decisions we have already made. The outcomes are not random.
This is a good summary of where we are
as of 2012.
The Newsroom may be based on some of the ideas related to the book and movie about Dan Rather's (Will McAvoy) 60 Minutes II story on George Bush's National Guard produced by Mary Mapes (MacKenzie (Mac) McHale). The ACN (CBS) network owned by Atlantis World Media (Viacom (Wiki)) and the owners want to be friendly with the Republican administration because decisions made by the government had a strong influence on their profits. The news was not particularly easy on the government.
Movie: Truth (Netflix, IMDB) - The story of the Mary Mapes production about Bush43's National Guard stint. This incident caused Dan Rather to step down from doing the news.
YouTube Oct 2015 - Dan Rather: ‘Truth’ Is Less About Me Than ‘What’s Happened To The News’ | TODAY - "The story was true!"
Book: Truth & Duty: The Press, the President, and the Privilege of Power by Mary Mapes 2005
Mary Mapes (Wiki) is the producer of a number of stories presented by Dan Rather (Wiki) on 60 minutes (Wiki) and/or 60 minutes Wednesday (Wiki). She won a Peabody award for breaking the Abu Ghraib (Wiki) prison torture story. She makes a very convincing case that her 60 minutes II story is true.
In the book a web page truthandduty.com is mentioned, but today (21 Feb 2016) it is directed to some other web site. Sort of like the Saturday Night Live opening sketch of Obama's first 100 days has been scrubbed from the web (Huffpost - SNL Vs. Obama: Sketch Details All The President's Failures Since Taking Office (VIDEO) - The article remains (even has VIDEO in title, but the video has been scrubbed. ""There are those on the right who are angry. They think that I'm turning this great country into something that resembles the Soviet Union or Nazi Germany, but that's just not the case. Because when you look at my record it's very clear what I've done so far and that is nothing. Nada. Almost one year and nothing to show for it." PS If you have a copy of that SNL sketch please contact me.
While learning about the problems we
face in a number of places I've seen a strong parallel between
where we are now (2012) and the U.S.S.R. in the 1960s. When
I was working in Silicon Valley in the 1960 - 1980 time frame it
was a common saying that the difference between the U.S. and
U.S.S.R. was that in the U.S. a business can fail, but in the
U.S.S.R. that does not happen. That can no longer be said of
the U.S. Here are some points to consider:
Progress & Science
I put this paragraph on a web page about politics because we currently have a misconception about many aspects of how society can be best governed and they need to be replaced by better misconceptions (in the sense that the new one works better than the old one).
It turns out that for almost all of humanity's existence the life of children was pretty much the same as their parents. That's to say there was no progress. Here I'm talking about progress as any of the measures of well being. The change came about because of the scientific method which I'd say started with Copernicus (Wiki) around 1514 when he told some friends about his heliocentric hypothesis (Wiki). It was almost 100 years later when Galliello (Wiki) had visual evidence that it was true and the Bible was wrong. The problem with dogmatic religious belief is that it must be accepted as truth with no possibility of improvement, which means no progress. Most practical religions do not act as if their "book" is factual and so society can improve even when some of it is made up of practical religious people.
So, rather that believe in an absolute truth, society advanced by using the scientific method. But there continues to be a question about what 'science' really is. In my opinion the key difference between science and religion is that in science there are no facts, only conjectures. For example you might talk about Newton's misconception of gravity or Einstein's misconception of relativity this allows a misconception to be falsified and be replaced by a better misconception (in the sense that the newest misconception is the best description of all the experimental evidence).
In the late 1970 through 2000 a new misconception of economic theory emerged that looked to be better than the post depression misconceptions and this new theory was tried out, but it failed, but today we have not replaced the failed economic theory. But we could. One of the key ideas on this web page is that many of the misfortunes we experience are the direct result of laws we have passed. There needs to be a better mechanism to remove the bad laws (see below). In science when a new theory (misconception) is adapted as the current one projections are made and tested to try an falsify it. In a similar way new laws might contain some metrics as to how well they are working so they could be reviewed after a few years to see if they should remain.
The supreme court (see below) made a number of bad decisions such as Citizens United v. FEC (Wiki), Bush v. Gore (Wiki), Shelby County v. Holder (Wiki), and many others that have tarnished the reputation of the supreme court. For most cases pretty much everyone knows how each justice will vote based on their political bias. This could change if more impartial judges were appointed.
The two party system. It's not part of the constitution, which provides only for the election of congressmen and the president. The inability of Congress to act on many issues and the 2016 presidential elections where the voters are clearly not happy with either party demonstrate that the current misconception of how a representative democracy should work is false. We can learn a lot be looking at how the rest of the world holds elections and their multi party system.
Most of the paragraphs on this web page could be reworded in such a way as to demonstrate that the current way many things are being done is based on false ideas and need fundamental change. But that would take something like constitutional congress made up of intelligent fair minded people, an unlikely event.
Books about how science works:The Fabric of Reality by David Deutsch 1997 -4 key areas: quantum physics, epistemology, theory of computation, theory of evolution
The Beginning of Infinity: Explanations That Transform the World by David Deutsch 1998 - amplifies and develops the 4 key areas
Conjectures and Refutations: The Growth of Scientific Knowledge by Karl Popper 1963 -
The Myth of the Framework: In defense of science and rationality by Karl Popper 1994 -
I'm running for the House of Representatives mainly as a public service to let people know about the major problems we face and point out that there's hope if the voters will stop doing the wrong thing, that's to say don't vote for any Democrat or Republican.
2016 - For many of the past presidential elections we've been voting for the lesser of two candidates, i.e. voting against the less evil candidate. For the first time in decades there may be a candidate to vote for . . . Bernie.
The lesser of evils is still evil.
Feb 2013 - Reading "The Parties versus
the People" by Mickey Edwards, ISBN: 978-0-300-18456-3 as part of
the description of the problem he has a quote from Gilbert &
Sullivan's H.M.S. Pinafore:
"always voted at my party's call,
and never thought of thinking for myself at all."
This is by far the biggest problem where the voters have the power to make a real change.
Expecting a Republican candidate to do
a bad thing because it was a campaign promise is like expecting a
Democrat to do a good thing because it was a campaign
promise. Neither will happen. They will both do what
the money and their party tells them to do.
Rita Mae Brown in her book Sudden
Death on Pg. 68 from 1983.
"Insanity is doing the same thing over and over again but expecting different results."
Lefties by Mark Foire
Young Turks - Bill Maher:
Democrats Are the New Republicans
Maddow - Goofy gun conspiracy surfaces in Congressional
This TED Talk clearly shows that the idea of all countries moving to a democratic from of government is false. What the U.S. and much of the world needs to be doing is fixing our political problems.Eric X. Li: A tale of two political systems (TED, YouTube)
Many of the problems that we have were
caused by politicians in the sense that they authored laws now on
the books that were a mistake.
See the authoritarian section for Prison and Teen Pregnancy.
Since 2008 there has been no
improvement and in fact it's getting worse. Obama's JOBS Act
of 2012 (the Wall St. boiler room full employment act) and the
good parts of Dodd-Frank have not been implemented on schedule.
There's talk of new laws to further gut Glass-Steagall and
counteract the good parts of Dodd-Frank.
All lawmakers are human and therefore
make mistakes in the form of bad laws. It's not that they
set out to make bad laws.
But, there's no provision to get the bad laws off the books. A very few laws have expiration dates.
The thing that's allowed this to work
is that the people who enforce the law have quit enforcing against
the top 1%. Regulatory capture (Wiki)
means that the agencies who are tasked to regulate are now working
to protect the industry from criminal prosecution.
March 2015 YouTube: SEC's Andrew Bowden at Stanford – A Regulator for Sale? - sad
2014 - Eric Holder worked to NOT
criminally prosecute any of his Wall St. cronies while the local
police put people in prison at an all time high rate.
See the book The Divide: American Injustice in the Age of the Wealth Gap by Matt Taibbi
The Office of the President has much more power than the Constitution allows. In some cases this has happened by presidential directive and in others (like war powers) was given away by the Congress. The Department of Justice (Wiki: DOJ) has become a branch of the White House (index0811.html#SEC) and no longer enforces the law.
For a number of decades there really was not a president to vote FOR, rather there was the choice between the lesser of two evils. It seems the party in power (not really the man who is president) does something to cause the country to change political parties. The problem is that both parties agree on the big issues the economy & war) so changing parties does not bring about the change the voters want to see.
2016 - Both Democrats and Republicans are fed up with the establishment and there's strong popular support for Bernie and Donald. Bernie is popular with college students (maybe because they have considered his positions) and Donald is popular with many Republicans that are also tired of the establishment politicians.
Kennedy offered hope, poor prior (R) economy
Kennedy was popular, no party change, Goldwater was seen as a war monger
Johnson's Vietnam policies unpopular, change party & anti New Deal (Wiki), (R) Southern Strategy (Wiki)
good economy, relations with China improved, no party change
Watergate Nixon quits, change party
Reagan (R) Carter (D)
economy in big trouble, Reganomics (Wiki),stagflation (Wiki) change party
economy OK, no party change
GHW Bush (R)
economy struggling, no party change, Willie Horton negative TV ad (Wiki) &start of tough on crime
B Clinton (D)
GHW Bush (R)
problem economy & taxes, change party
Clinton adapted Republican Financial ideas because the Republicans got money from business and they got none. So the Democrats now get money from Wall St. and Republicans from other businesses.
B Clinton (D)
economy doing well, no party change
See Bad Laws above
GW Bush (R)
Clinton sex scandal (Wiki), Supreme Court decision on Florida vote count (Wiki)
GW Bush (R)
Post 9/11 (Wiki) no change in party even though the 2003 invasion of Iraq (Wiki) had no basis
Bush very unpopular, the (R) over reaction to 9/11 caused a change in party. Obama offered "change", but did not deliver.
hope continues, but Obama has not delivered on most of his promises.
Obama & Romney agree on war in debate No. 3 (YouTube)
Sanders or Clinton (D)?
Sanders & Trump are both anti establishment & neither is endorsed by their political party.
Mark Foire (00:01:36)
Mark Foire (00:01:44)
|Restrain Yourself by Mark Foire (2:31)
||United States of
John Roberts by Mark Foire (1:39)
Right to Privacy (Liberty)
Griswold v. Connecticut (Wiki) - establishes a right to privacy based on self-incrimination clause of the Fifth Amendment, the due process clause of the Fourteenth Amendment. It was cited in Roe v. Wade (Wiki). Also see: Justice Stevens and the so-called right to privacy
EugenicsBuck v. Bell (Wiki) - a state statute permitting compulsory sterilization of the unfit, including the intellectually disabled, "for the protection and health of the state" did not violate the Due Process clause of the Fourteenth Amendment to the United States Constitution. The decision was largely seen as an endorsement of negative eugenics—the attempt to improve the human race by eliminating "defectives" from the gene pool.
The Supreme Court has never expressly overturned Buck v. Bell.
The epistemology of science put forward by Karl Popper (Wiki) contains the idea that incremental improvements are the key to progress. So there needs to be a mechanism to unambiguously renounce bad decisions such as the ones above.
Wiki) and the U.S. Attorney General (Wiki) are supposed to prosecute criminals. But this is not longer the case for the top 1% and businesses.
In 2007 Alberto Gonzales (Wiki) supported the Bush43 administration rather than the constitution and eventually resigned.
In 2007 (after two interim AGs) Michael Mukasey (Wiki) continues to support Bush43 instead of the constitution.
In 2009 under Obama Eric Holder (Wiki) not only supports the continuation of the Bush43 polices, but the "Holder Memo" (DOJ) is used as the basis of stopping prosecution of Wall St. criminals.
With Liberty and Justice for Some: How the Law Is Used to Destroy Equality and Protect the Powerful 2012 by Glenn Greenwald - how the holder memo was used to protect Wall St, while people using small amounts of pot were sent to prison (not jail) for many years.
YouTube: Modern Money & Public Purpose 7: Financial Reform - about the criminal actions taken by Wall St. and how the DOJ stopped prosecutions.
There are two branches of Congress.
The Senate where the members serve six year terms. There are two Senators from each state. The idea is to give each state an equal vote at the federal level. An interesting observation is that whenever I have contacted my Senators neither of them ever responded, except a recent answer from D. Feinstien saying she backed giving the NSA more power to spy on U.S. citizens. Although she's clearly in the pocket of the people feeding her money, at least she is now aware that she can't continue to totally ignore those who can vote her out of office.
The House of Representatives was supposed to have one member for each 30,000 people, but when it grew to 435 members the Constitution was changed locking the number at 435. Note: If the population of the U.S. is about 300 million then we should have 10,000 Representative. But as it is each Representative has about 700,000 voters in their district. There's no way that they can represent such a large group of people. Note: Every 10 years when a new census comes out the 435 districts get redrawn. In most states this is a chance for that state's legislature to gerrymander (Wiki) the boundaries so that the political party in power will get the most votes.
@Google: Lawrence Lessig: Republic, Lost: How Money Corrupts Congress
|scientia est potentia
||the U.S. spies on
everyone and collects their data into a massive data
base. The Forth Amendment is gone.
"The right of the people to be secure n their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by the oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."
If ignoring this amendment is going to be official policy then at the Constitutional Convention we should remove it, or better, leave it in and start to obey it.
Because of a lawsuit the 2016 primary is very complicated.
In prior years(before 2012) California used a closed primary (Wiki) where only registered Republicans get to vote for the Republican candidates and only Democrats for Democratic candidates. The problem with this system is that there's no oath or other way of confirming which party you belong to when you register. So voters would register in the opposition party so that they can vote for the candidate most likely to loose the election.
The Top Two primary system that started with the June 2012 primary has the effect of eliminating third party (i.e. all except Democrats and Republications) from being on the November ballot. That's because only two candidates are on the ballot and there's no provision for a write in. In the presidential race there's provision for a voter to write in the name of anyone for president.
The people who vote in the primary are at the extremes of their parties, i.e. they do not represent the main stream voters. So the extremists pick the candidates who will run in the November general election. There's also low voter turnout.
We should just get rid of the primary elections, their main function is to eliminate candidates that are good for the people and put in candidates that big money wants. This is a KEY point, i.e. Citizens United v. FEC (Wiki) was passed by the Supremes because the voters do get a chance in the November election. If the primary election is removed that invalidates Citizens United.Lawrence Lessig: We the People, and the Republic we must reclaim
Note that the constitution makes provision for the electoral college for the office of President and Vice President (a history of the electoral college by the chairman of the FEC). But there is no provision for political parties in the Constitution. Yet in the history of the electoral college it's flatly stated that the effect is such as to force a two party system, i.e. it prevents a third party candidate from being elected. I expect this is why Bernie Sanders is running as a Democrat and also why Donald Trump is running as a Republican even though both of them are anti establishment candidates.
|Hi School Grad||0.40||0.30|
|Teen Birth Rate||0.37||0.21|
This is why Altemeyer's work is so important. People
that are Right Wing Authoritarian can be very dangerous.
These are not only examples of authoritarian behavior but
also of how current problems are caused by the actions of
politicians where the Democrats and Republicans agree on the
|Brooke on Prison
||Law & Disorder by Mark Foire
|The Mean World Syndrome
by Media Education Foundation
|| California Prisons: Cruel & Unusual Blues
The U.S. is No. 1 of the industrial countries in teen
Joycelyn Elders (Wiki) was the U.S. Surgeon General while Democrat Bill Clinton was president and fired for honestly answering a question about masturbation. At that time (and still in 2014) the official U.S. policy was that teenagers should abstain from sex. The Republican position on anything sex related is from the dark ages. And even today under Obama the surgeon general advice dances around contraception in education, see:
In the talk starting at 05:38 are U.S. maps showing Gonorrhea and HIV. Notice that the authoritarian states have a much higher infection rate than other states.
YouTube: Days of Revolt - Why
the Brutalized Become Brutal - Chris Hedges - 22
soldiers per day commit suicide in the U.S. - not because of
what was done to them but because what they have done.
Biometric identification and tracking, Due process, Executive power, Freedom of speech and dissent, Government secrecy, Immigration, enforcement, Infiltration of First Amendment-protected groups, Militarization of local police, Military detention, Privacy, Racial profiling, Torture, Second Amendment, Surveillance and intelligence collection
In California there are FasTrak towers along the 101 freeway to monitor cars (not for charging tolls) and in areas where there are no FasTrak towers they have license plate readers. This all goes into a data base so when asked someone can find out where you drive. Combine that with every use of a credit or charge card, or photo posted to a web page (the EXIF data on the photo often have location data and face recognition puts a name, date, time and location together) and you have a location data base for everyone in the world.
|Heart and Mind-O-Matic by Mark Foire
Thingamajig by Mark Foire
Our misguided war on drugs is surely an important factor where gangs are concerned. This is another vicious circle: Like Prohibition before it, the war on drugs renders the sale of illicit drugs extraordinarily profitable while requiring that drug dealers function outside the law, protecting their investment and turf with guns. If we ended our war on drugs, the money that finances most gang activity would disappear, as would one of the primary reasons for gang violence. No doubt, gangs would remain. But with the war on drugs abandoned, our police, courts, and departments of corrections could focus on the real problem of violent crime.
Youtube - Retired Police Captain demolishes the War on Drugs
TED -Ethan Nadelmann: Why we need to end the War on Drugs Oct 2014 - Speaker's Footnotes -
12 June 2014 - Time magazine cover Eat Butter: Scientists labeled fat the enemy. They were wrong by Bryan Walsh
Time's video: Ending the war on fat- the science is sound, but the politicians don't get it and are still promoting sickness.
This started in 1964 and has been a total failure.
Modern Monetary Theory (See MMT below) says that the main
reason for poverty is lack of jobs. None of the programs
in the WOP involved creating jobs.
Until a direct job creation program is put in place for "full employment" poverty will continue.
The U.S. has lost sight of these.
Here's an example that demonstrates a number of the problems.
Ford pardons Nixon
for criminal activity (Wiki)
Carter pardons G. Gordon Liddy (wiki) - Watergate
Reagan pardons George Steinbrenner (Wiki) - Obstruction of Justice, Watergate
G.H.W. Bush pardons: Elliott Abrams, Duane Clarridge, Clair George, Alan D. Fiers, Robert C. McFarlane, Caspar Weinberger - Iran-Contra, Armand Hammer CEO of the Occidental Petroleum Co. & many many others (Wiki)
Clinton pardons: Roger Clinton, Jr. - his brother, Lewis Libby Watergate, Fife Symington III - Republican Governor of Arizona, Susan McDougal - partners with Bill Clinton and Hillary Rodham Clinton, Henry Cisneros - Clinton's Secretary of Housing and Urban Development, Mel Reynolds - Democratic member of the United States House of Representatives, John Deutch - Director of Central Intelligence, FALN - commuted the sentences of 16 members of FALN, a violent Puerto Rican terrorist group that set off 120 bombs in the United States
G.W. Bush pardons: Lewis "Scooter" Libby - Assistant to President George W. Bush and Chief of Staff to Dick Cheney related to Valerie Plame & gave retroactive immunity to Verizon, AT&T, and Qwest. "...the Bush White House had converted the DOJ into it's own political group and was firing honest prosecutors who refused to advance that agenda." (from Greenwald's book With Liberty and Justice for Some page 196)
Obama gives immunity to the telecom industry (Wiki). He also has stopped foreign governments from prosecuting the Bush43 administration for war crimes (see: Greenwald's book With Liberty and Justice for Some starting at page 181 Philadelphia Daily News "The Day That Barack Obama Lied to Me" by Will Bunch (1 Oct 2010).
"In its first months in
office, the Obama administration sought to protect Bush
administration officials facing criminal investigation
overseas for their involvement in establishing policies
the that governed interrogations of detained terrorist
suspects. An April 17, 2009, cable
sent from the US embassy in Madrid to the State
Department—one of the 251,287 cables obtained by
WikiLeaks—details how the Obama administration, working
with Republicans, leaned on Spain to derail this
Another way justice is thwarted is by means of Executive
The quality of education in the U.S. is very poor considering
that we spend more than any other country on it (in terms of
absolute dollars or in terms of dollars per student).
The educational system of Finland (Wiki)
may be a better model of where we should be heading.
Note: compulsory education is through 9th grade (Wiki) and admission to upper secondary school (17 & 18 year old) is based on GPA (Wiki).
In Taiwan there are national tests and only some
percent of students can advance in public education (Wiki),
so only the very best students attend public high school.
This has the effect of weeding out students who are troublemakers. In the U.S. the schools keep all students, and the troublemakers pull down the rest.
In Denmark (Wiki) "education is compulsory for children below the age of 15 or 16, even though it is not compulsory to attend"
Now reading: Education Myths: What Special-Interest
Groups Want You to Believe About our Schools - and why it
isn't so by Jay P. Greene
Promotes the idea of Charter Schools (Wiki) - this privatization (Wiki, Major U.S. cases all of which turned out badly) of the schools is a bad idea for a number of reasons.
The U.S. is now suffering many of the problems of the U.S.S.R in the 1960s. One of those is that the factories in the U.S.S.R. were under contract to the government, but they did stupid things, while in full compliance with their contract. Whenever any business comes about by privatization they have a capitalistic motive to make profit by strictly following the contract but doing things that harm society. So although it's possible to have a successful privatization, it requires an iron tight contract and those are as common as chicken's teeth.
It used to be that the U.S. Vocational Schools (Wiki)
were run by the state governments. This provided three
options for people leaving high school: college, vocational
school or no further education. But it seems most of the
state run vocational schools are gone, either because their
graduates could not find jobs or because they were replaced by
privatization in the form of businesses offering vocational
eduction who can get money from the federal government.
It turns out that some of these private schools falsified
their placement rates to defraud their investors, get money
from the U.S. government and to get more enrollment. In
order to have a viable vocational education system there needs
to be jobs for those who graduate, but that's a questionable
If we shrink class sizes and give schools the power to expel
difficult students then we also need to think about where the
expelled students end up.
Modern Monetary Theory (Wiki: MMT, Chartalism)
Money based on gold and/or silver ended in 1971. Prior to 1968 they could be changed for silver, after than only into a Federal Reserve Note.
"Silver Certificate (Wiki) this certifies that there is on deposit in the treasury of the United States of America One Dollar"
Note the Series (year) 1957 B on this case is not the year printed but rather related to the year the design was first introduced. The newest $1 silver certificate is this one.
The replacement Federal Reserve Notes now used are not redeemable for anything. But they say "This note is legal tender for all debts public and private"
This is an idea that came about post 1971 (Wiki: Nixon Shock), so does not agree with prior economic theories that go back thousands of years. The benefits of MMT apply only to sovereign governments where there are no constraints on the money (for example not on the gold standard) and the government is the issuer of the money (not a user like the members of the EMU) . But MMT can also be used to get insight into economies where the benefits do not apply, such as the EU. The U.S. federal government operates using MMT rules but elected officials don't understand that. MMT does not apply to the EU (Wiki), states, cities or households. The key concept is that when MMT applies the government can always pay for what it wants, i.e. it's checks never bounce. There's never a solvency issue.
I see MMT as a new framework or point of view in understanding how the US (and other countries) economy works. It is not a policy. That's so say how someone uses the ideas of MMT depends on them. For example the quantity (G-T) government spending minus government taxes can be changed many ways. Bill Clinton (Wiki) made (G-T) negative, i.e. he paid down the national debt, which MMT teaches us means he sucked money out of the private sector, not a good thing in a healthy economy. So how you raise or lower spending and/or taxes is a policy decision. MMT allows you to predict the impact based on (G-T).
Recognizing that MMT is the correct way of seeing the US government financial situation does not mean that there will be more money to spend but rather it makes much more clear how fiscal and monetary policy work.
The mood of society today (2016) seems pessimistic. For example the movie Requiem For The American Dream (IMDB, Netflix) reinforces the pessimism. While American manufacturing output is at an all time high in terms of dollars, employment in the private sector is down about 30% from 20 years ago. That's to say there are a lot (tens of millions) of people out of work. It's clear that the private sector has traded jobs for profits and they will not be the source of new jobs any time soon. None of the presidential candidates has presented a concrete program for job creation. But MMT offers a lot of hope for job creation.Wiki)". But after 1971 monetary policy has no effect on jobs, hence after all the Quantitative Easing (Wiki: QE) there has been no impact on jobs because the rules have changed. In fact the only thing the Fed can do is control the overnight interest rate. It does not have any tools that will do anything else. There is talk of just folding it into the Dept. of the Treasury since what it does now is an automatic function.
If you don't know how something works and you try to fix or modify it the results may not be what you expect. For example if you believe that when your car is going down the freeway it makes a lot of exhaust, so if you pipe the exhaust back into the engine the car will run better, it will not work the way you expect. A good understanding of how things really work is necessary in order to make changes that will work the way you expect. The economic ideas prior to 1971 were sort of OK for their time, but now no longer describe how the system really works.
1776 - There were two revolutions, one summarized in the Declaration of Independence (Wiki) and the other in the book Wealth of Nations by Adam Smith (Wiki), which is the basis of capitalism.
1971 - Another major revolution happened, but very few people really understood the implications. It wasn't until 1992 that Warren Mosler, the father of Modern Monetary Theory (MMT) had an epiphany in relation to the bond market in Italy where he understood better than the Italian government that they could never default on their bond payments because they were at that time a sovereign government with a floating currency. That meant that they could always pay their bills.
1998 - Forecast of 2008 Global Financial Crisis (Wiki): Goldilocks and the Three Bears - the 3 bears are: Asian debt deflation, belief that economy was strong 1996 - 1997, Clinton budget surplus
1999 - Forecast of 2008 Global Financial Crisis: Can Goldilocks Survive? - "Goldilocks is doomed" forecast the Global Financial Crisis and cites the Clinton budget surplus as the cause
2001 - Forecast 2009 European Union debt crisis (Wiki): Rites of Passage financial problems would happen in the European Monetary Union (see EU below) in the exact way that they transpired.
Governments operating under the MMT rules (see Scope above) are the issuers of their currency. They must spend money BEFORE then can collect it using taxes. (see gold below for how it used to be) The current misconception that the federal government must tax in order to raise money so they can spend it on government programs was true prior to 1971, but that's no longer the case. This is similar to a football stadium issuing tickets then collecting them, in both cases the issue comes before the collection.
Note that for a simple model of the economy where there is only the government sector and the private sector (i.e. assuming balanced imports and exports) any deficit in the government sector is balanced exactly to the penny with a private sector surplus. This is an accounting identity, not a theory. It's like looking at a transaction as if you are the government or the private sector. So if the federal government balances the budget, or worse runs a surplus, the private sector is drained of money, that's not a good thing. Since it's impossible for a government operating under the MMT scope to bounce a check there's no problem with a deficit. In fact if the economy is healthy you would expect the federal deficit to grow. That's to say the surplus in the private sector will grow.
After W.W.II the U.S. invested heavily in Germany and Japan rather than punishing them like Germany was punished after W.W.I. Since W.W.II the US has imported many products from Germany and Japan, and more recently from China. The countries whose products we import are getting paid in US dollars. The reason we are importing these goods is because they appear to be a good deal to us and the sellers are happy to get US dollars in exchange. There is some current worry about the amount of US bonds and Treasury bills held by China. But China can not ask the US to cash in their bonds/bills in gold (see Scope above). Their options are limited. They can buy US products or exchange the US dollar denominated bonds/bills for some other currency at the existing exchange rate. Note that a large currency exchange will have the effect of making the Chinese money stronger (which has been the desire of the US government for a long time) thus making Chinese imports more expensive and also making US exports to China, Germany and Japan more attractive to them.
Trade allows for world wide competition so a free market allows consumers to pay a lower price. So economists say it's a good thing. But, when US workers compete in a world wide market they loose their jobs. So, while it's true that in an economic sense everyone is better off (in terms of being able to buy goods at lower prices) it comes at the expense of jobs that are permanently lost.
MMT offers a solution to the unemployment problem (see jobs below). Classical economics offers no solution to unemployment. That's to say classical economics has blood on it's hands in terms of human suffering.
I expect that in the future a larger percentage of the population will be permanently out of work. The existing support structure for the unemployed is far from adequate and needs to be improved.
Prior to 1971 the government did need to use federal taxes to fund their spending (see Gold below), but that's very different since 1971.
Since there is no need to collect taxes in order to spend, the policy of taxes can be seen in light of two ideas.
First, if the federal government did not require anyone to pay them using US dollars then the currency probably would not have value. So if somewhere the federal government requires a payment in US dollars then the US dollar has some value. Because MMT is such a new idea no one has really determined what level of payments to the government are required, if any, to give the US dollar official value. Prior to 1971 this was not an issue.
Second, taxes should be used for progressive purposes and to punish "evils" such as alcohol, tobacco or other things society wants to discourage. So when the purpose of taxes is seen in this light, payroll taxes are a very bad idea. They penalize employers, employees, drive jobs off shore and encourage replacing workers with automation. So a very progressive income tax would stop the extreme compensation packages that C-suite executives now get. Prior to 1980 the marginal rate was 80% now it's more like 15%. In my opinion is should be 50.0%. I choose half because if the rate goes over half then the taxpayer is encouraged to waste money on buying tax losses. That's to say people do stupid things when they are dealing with losses rather than gains.
A really simple solution would be to eliminate all payroll taxes and provide all citizens Social Security (medical then retirement) benefits and eliminate all the current payroll taxes and record keeping and replace that with an annual W2 statement of taxable income that would determine the retirement benefit amount. Note "medicare for all" greatly simplifies the current record keeping both for the government and for the vendor (doctor, hospital, employer...). I expect this simple idea would save billions if not trillions of dollars in record keeping costs alone. Currently every medical facility in the country has a staff of people whose only job is to match up the different insurance payment rules with the procedure the doctor recorded. In a similar way employers have record keeping expenses that really are not needed if this simple idea was adopted.
The US government could start a "jobs for all" program offering an entry level job to anyone who wants one. This would be in parallel with the existing safety net programs now in place. People in this program would find it much easier to get a better job in the private sector since they would have a current track record of being a good worker. In all probability most if not all of the current safety net programs would be reduced since these would be full time jobs. Note the pay rate needs to be below Walmart or McDonald's so that it does not compete with the private sector.
The Philips curve (Wiki) has been shown to be wrong, so full employment does not automatically lead to inflation. It may of had some value pre 1971. So, under MMT, it's probable that a zero rate of unemployment is not inflationary. One MMT adage is that the key indicator for limiting government spending is the length of the unemployment line. When is at zero further spending will cause inflation. This is because at that point the government is in competition with the private sector.
It appears that an Employer of Last Resort (Wiki)(CFEPS) or jobs guarantee (Wiki) can be done without an impact on inflation. The idea of a Non-Accelerating Inflation Rate of Unemployment (Wiki :NAIRU) is false. According to MMT, government policy now sets the unemployment rate as a result of trying to control inflation. Unemployment can be near zero if that's what the government wants without unacceptable inflation.
As a general rule, mild inflation seems to be desirable. "Economists generally believe that deflation (Wiki) is a problem in a modern economy because it increases the real value of debt, and may aggravate recessions and lead to a deflationary spiral". Note: all the Wiki deflation examples are post 1971, so this idea may be in line with MMT?
Note that the productivity of the job is not part of it's MMT economic value. For a silly example if you hire someone to dig a hole then fill it there's a tremendous benefit to the economy. That's because the worker will spend pretty much all the money he earns and so will help create other jobs where he spends. But the jobs can be much better for society such as when the job includes training for needed jobs to maintain infrastructure and to build new infrastructure such as a nation wide fiber optic network in a similar manner to the interstate highway system. Infrastructure maintenance is an on going requirement and is not being done at any level of government. So a key target for the jobs program would be to maintain it not only at the federal level, but also at the state and local levels.
The interest on the national debt is seen as a problem, but again a government operating under the MMT Scope there's no need to raise money by borrowing (or taxing) in order to be able to spend it. So no borrowing is needed "to fund the debt" the government just makes the payments it desires.
Fallacy of the Money Multiplier
When a bank makes a loan thus creating money (see Money based on debt below), contrary to the current idea that they are somehow restricted by the reserve requirement, in fact the bank borrows whatever reserve it needs during the next week's bank clearing cycle. The problem of the bank lending only the principal amount (they do not lend the money needed to pay the interest) is solved because the other source of money is US government spending. The idea of a money multiplier (Wiki) is not valid because the reserve ratio (percent of loans covered by reserves) is a false concept if the bank does not restrict loans based on reserves. That's to say changing the reserve requirement does not change the multiplier.
IntroductionApril 2016 - read The Seven Frauds book (Ref) and have a bunch of MMT books on order.
Here's an introduction to the idea:
YouTube: L. Randall Wray -- MODERN MONEY: the way a sovereign currency "works" & there are a number of others by The Modern Money Network (YouTube).
Here are the pop quiz questions asked in the beginning of the video:
1. Just like a household, the government has to finance its spending out of its income or through borrowing. [ ]True [ ]False
2. The role of taxes is to provide finance for government spending. [ ]True [ ]False
3. The National Government borrows money from the private sector to finance the budget deficit. [ ]True [ ]False
4. By running budget surpluses the government takes pressure off interest rates because more funds are then available for private sector investment projects. [ ]True [ ]False
5. Persistent budget deficits will burden future generations with inflation and higher taxes. [ ]True [ ]False
6. Running budget surpluses now will help build up the funds necessary to cope with the aging population in the future. [ ]True [ ]False
See answers below.
When the US left the gold standard (see Gold below) a profound change occurred. Maybe because of the way Nixon made the change most people did not recognize the HUGE implications.
Keynes recommends deficit government spending (Wiki: Fiscal Policy) when there's a recession as does MMT. But a faster way would be to reduce taxes, for example have the U.S. Treasury (Wiki) pay both employer and employee FICA (Wiki) taxes. The idea is that if the FICA taxes were eliminated the determination of Social Security benefits would be difficult, but with the Treasury paying the records would be as they are now. Note that there's no problem funding Social Security (Wiki) since the U.S. is a sovereign country and our money is not constrained to gold or the euro. Note that employment taxes hurt the economy, not what you what any tax to do, by penalizing employers, employees and drives jobs off shore and encourage automation.
But the idea that lowering interest rates (Wiki: Monetary Policy, Quantitative easing) will stimulate the economy is wrong "you can not push a string" (Wiki). If a business has no customers they don't care what the interest rate is. Getting out of a depression or recession requires fiscal policy adjustments.
A sovereign government (U.S., Japan, Turkey, &Etc. but not EU) puts money into circulation by spending. Banks can also generate money but that's a small fraction of the total money. The money has value because it's what's needed to pay taxes and other government fees.
The purpose of taxation is not to raise money but rather to control the economy. The government funds whatever it wants to do directly. For example to pay for a war the government just writes checks to it's suppliers. There was not a tax increase to pay for the recent wars. The old idea that taxes are needed to pay for government programs is just flat out wrong.
The government buys some goods and services and what's left the private sector can buy. In a hot economy, where the government competes with the private sector for goods and services inflation results.
The standard of living for U.S. citizens depends on the sum total of goods and services provided in the U.S. plus what is imported less what is exported. Imports improve the standard of living for those getting them. When China (or anyone) exports to the U.S. they are paid in U.S. denominated currency (dollars). They can use those dollars to by treasury bonds which is many believe is funding the U.S. deficit, but that's not the case. Suppose they get mad at us what can they do: buy stuff in the U.S., get U.S. paper money to take back to China, exchange U.S. dollars into some other currency. If the later that would cause the exchange rate between China and the U.S. to change making the dollar weaker and Chinese goods more expensive. But the U.S. has been trying to get China to increase the value of their money for many years and if they changed their dollars to something else it would have that effect, i.e. making Chinese imports more expensive and U.S. products less expensive.above.
When the EU (Wiki) was setup the European Central Bank (Wiki) was setup to maintain price stability. But in times of recession the central bank needs to pump money into the economy, but the ECB does not have this power (limited to 3% of GDP) and the member countries in the EU do not have that power. The problems will continue until there's a way to deficit spend money into circulation. The IMF (Wiki) was founded at the Bretton Woods conference and was intended to work along side a gold standard, the Marshall Plan and other economics of the 1945 time frame, not the post 1971 non gold standard times. It appears that the IMF is causing much more harm than good and needs to be shut down or totally revamped to take into account MMT.
Note the ECB only has monetary policy tools (Wiki), it does not have fiscal policy tools. MMT (or Keynes) tells us that fiscal policy is needed it time of a debt crisis (Wiki) but the EMU has no fiscal policy tools.
The Stability Growth Pacts (Wiki) limit the debt of an EU member government so they can not use fiscal policy to recover from a recession. The 2005 reform still kept the ceilings of 3% for budget deficit and 60% for public debt were maintained.
Warren Mosler (Wiki, Mosler Economics, YouTube: Modern Money Network, Amazon, Facebook)
Warren Mosler - on order
The 7 Deadly Innocent Frauds of Economic Policy 2010 by Warren Mosler (free pdf version) He's the father of MMT.
Is the Ryan Budget the Next Bachmann Budget? 2012 by Warren Mosler -L. Randall Wray (Wiki, Amazon, UofKS, Levy Economics Institute of Bard College)
The Certainty of Debt and Taxes - The Fiscal Cliff Burden of Proof 2012 by Warren Mosler -
Demand Leakages: The 800lb Economist in the Room 2012 by Warren Mosler -
YouTube: Warren Mosler, Issuers vs Users of a Currency 2012 by Warren Mosler (5:28) - with inserted video clips of Bernanke and Greenspan (Recommended short video)
Italy Then and Now.pdf 2012 by Warren Mosler - how joining the EMU caused a lot of problems for them. "The euro zone is in 'Ponzi' until the ECB writes the check"
Rites of Passage 2001 by Warren Mosler predicting the problems now facing the Euro - "The market’s arrows will inflict an initially narrow liquidity crisis, which will immediately infect and rapidly arrest the entire euro payments system."
Modern Monetary Theory.pdf - a Primer on the Operational Realities of the Monetary System by Scott Fullwiler (posted on Warren's web page) -
Understanding Modern Money:The Key to Full Employment and Price Stability 2006 by L. Randall Wray (free KindleUnlimited version)Frank Newman (Wiki, Amazon, )
MMT, The Euro and The Greatest Prediction of the Last 20 Years (free html) based on a 1992 article by L. Randall Wray - predictions of MMT
Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems 2nd Ed - 2012, 2015, L. Randall Wray, Palgrave MacMillian, ISBN 978-1-137-53990-8
pg 131; "A government that operates with a nonsovereign currency, using a foreign currency or a domestic currency convertible to foreign currency (or to precious metal at a fixed exchange rate) faces solvency risk. However, a government that spends using its own floating and nonconvertible currency cannot be forced into default. ... This is why a country like Japan can run government debt-to-GDP ratios that are more than twice as high as the "high debt" Euro nations (the "PIIGS": Portugal, Ireland, Italy, Greece and Spain) while still enjoying extremely low interest rates on sovereign debt."
pg 141: "Ideally, it is best if tax revenue moves counter cyclically - increasing in expansion and falling in recession. That helps to make government's net contribution to the economy counter-cyclical, which helps to stabilize demand."
YouTube: L. Randall Wray - Modern Money Theory: Intellectual Origins and Policy Implications - summary below:
Theoretical basis of MMT:Levy Institute
Georg Friedrich Knapp (Wiki) - The State Theory of Money 1905 - money must have no intrinsic value and strictly be used as governmentally-issued token, i.e., fiat money.
Abba P. Lerner (Wiki) - Functional Finance 1943 (Wiki) - government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation.
Beardsley Ruml (Wiki) - Taxes for revenue are obsolete (free pdf) 1946 - We learned from W.W. II that taxes do not fund spending.
Hyman Minsky (Wiki) - Financial Instability Hypothesis (Wiki) - "Stability is destabilizing". 3 types of borrowers: hedge borrowers, speculative borrowers & Ponzi borrowers. People are momentum investors by nature, not value investors.
Alan Greenspan (Wiki) - the Greenspan put (Wiki): supposedly eliminated risk in the financial markets, but, according to Minsky, that increased risk. "Matt Taibbi described the Greenspan put and its bad consequences saying: "every time the banks blew up a speculative bubble, they could go back to the Fed and borrow money at zero or one or two percent, and then start the game all over", thereby making it "almost impossible" for the banks to lose money. He also called Greenspan a "classic con man" who, through political savvy, "flattered and bullshitted his way up the Matterhorn of American power and...jacked himself off to the attention of Wall Street for 20 consecutive years".
Ben Bernanke (Wiki) - The Great Moderation (Wiki) aided by the Taylor Principle (Wiki) - The pronouncement of a new stability caused instability.
Employer of last resort (Wiki) - the government offers jobs to anyone who wants one
On Taxes (goal is to drive the money, change behavior and be progressive):
Duping Dopes will not work - BitCoin will not succeed since that's their model
Taxing work is bad idea (Wiki: Payroll Tax, FICA) - regressive, discourages work, discourages employing people, favors moving jobs outside America, favors replacing people with robots
Taxing corporations is a bad tax: drives them out of America, encourages cutting deals
The Income tax: he's neutral
Likes taxing bads: alcohol, tobacco, pollution, financial transactions,
A Hut tax based on cubic feet of your house (eco friendly).
Inheritance tax to stop family fortunes he likes.
The War On Poverty after 40 years, A Minskyuan Assessment, No. 78, 2004 (pdf) - "the real flaw in the WOP was that it lacked job-creation initiatives of the type developed by President Roosevelt during the Great Depression."..."Instead of providing th impoverished with an opportunity to work, it provided them with the opportunity to learn how to work."...“policy weapons which are sufficient to move aneconomy from slack to full employment are not sufficient to sustain full employment” ...
"Minsky’s fundamental argument is simple:
(1) poverty is largely an employment problem;
(2) tight full employment improves income at the bottom of the wage spectrum; and
(3) a program of direct job creation is necessary to sustain tight full employment. Thus, he argued that a program of direct job creation was “a necessary ingredient of any war against poverty” (Minsky 1965, p. 175).
As Minsky put it: “The New Deal, with its WPA, NYA, and CCC, took workers as they were and generated jobs for them....The resurrection ofWPA and allied projects should be a major weapon of the War on Poverty” (1965, p. 195).
Improving Governance of the Government Safety Net in Financial Crisis, 2012(pdf) -
Chapter 2. Summary of the Causes of the Global Financial Crisis: A Minskyan View - ZZZZZ
Frank Newman - on order
Freedom from National Debt – May 2, 2013 by Frank Newman - on order
Vimeo (2012, Suny Global Center): “Six Myths That Hold Back America- and What America Can Learn From the Growth of China’s Economy” - (1:20:26) Frank Newman (Title is book title)
The six myths:
1. Asian nations are bankrolling the U.S.
2. Treasuries "crowd out" financing for the private sector.
3. If everyone tries to save more, the nation will save more, and Investment, GDP, and employment will increase.
4. If the deficit is reduced, then national Saving and Investment will increase.
5. Deficits create great burdens of repayment and taxes for our children.
6. If the U.S. does not get its fiscal deficit reduced soon, U.S. Treasuries will face the same problems as bonds of Greece and Ireland.
Mathew Forstater (Wiki, UMKC Pubs)
Little Book of Big Ideas: Economics 2007 by Mathew Forstater - 2 pages for each about 5 dozen economistsWynne Godley (Wiki, Amazon, ) - WIki: Sectoral balances - Federal Reserve Economic Database (Wiki: FRED: MBST, ) -
The Observer Aug 31, 1997: Curried Emu - the meal that fails to nourish by Wynne Goodley -
London Review: Maastricht and All That Oct 1992 by Wynne Godley - "The central idea of the Maastricht Treaty (1991 Wiki) is that the EC countries should move towards an economic and monetary union, with a single currency managed by an independent central bank. But how is the rest of economic policy to be run?"
Michael Hudson (Wiki, Amazon, YouTube,
Super Imperialism: The Economic Strategy of American Empire by Michael Hudson 1972 - may be the first book to describe American Dollar Hegemony (Wiki: Dollar hegemony)Bill Mitchell (Wiki, Amazon, YouTube, Web Page, Newcastle, blog)
Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy by Michael Hudson (Wiki: )2015 - looks very interesting
Episode #91.2 // Michael Hudson on Killing the Host - 1 hour audio interview based on the book
Government Debt and Deficits Are Not the Problem. Private Debt Is. - 2013 paper
The Economic Crisis & Crisis Theory II 2014 - includes a video Alan Freeman Consumption, Profit and Finance: why can't the left get it right? (0:00 to 21:45), Andrew Kliman Were Corporations--or Corporate Executives--Really Hogging a Bigger Share of the Income Workers Produce? No. (23:00 to 45:35), Michael Hudson The New Austerity: Feeding the FIRE sector overhead (46:45 to 1:50:00), Q&A (1:50:30 to end)
Banks through out history, even when Marx was writing, only lent money to already existing products, not to industry or business.
Michael Hudson, Financial Parasites, Left Forum 2014 Excerpts- Parasite different than Vampire Squid - an excellent 30 minute explanation of his idea
Michael Hudson: Money & Debt 2012 - historical overview and how canceling debts makes sense.
MMT vs. Austrian School Debate 2013 - Warren Mosler (Wiki, Amazon, home page) for MMT (Wiki) - The Austrian ideas work with fixed exchange rates, but not when rates float, so after 1971 no longer works. In today's floating rate world MMT describes how things work.
Excellent Intro to MMT: YouTube - Bill Mitchell: Demystifying Modern Monetary Theory - Bill coined the name MMT. Weimar Republic (Wiki) and Zimbabwe (Wiki) inflation explained, employer of last resort backgroundScott Fullwiler (Wiki, Wartburg College, YouTube, Amazon)
YouTube: Reframing the Debate: Economics for a Progressive Politics Q&A, London - Merge central bank with treasury, (0:17:59) do away with debt management agencies "Public debt is just corporate welfare".
There's a problem with merging the central bank into Treasury in that the treasury is controlled by politicians and without a well functioning government (which we don't have in the US) there will be runaway spending.YouTube - Professor Bill Mitchell - The Government Chooses the Unemployment Rate -
YouTube - Professor Bill Mitchell - The need for full employment -
YouTube - Professor William Mitchell - Fiscal Myths -
Billy Blog: Modern monetary theory and inflation – Part 1 -
Billy Blog: The dreaded NAIRU is still about! - Non-Accelerating Inflation Rate of Unemployment (Wiki) is a false idea.
Billy Blog: The Great Moderation myth - (Wiki) - Bernanke should quit or be sacked -
New Economic Perspectives - papers -
pdf), Beardsley Ruml, Chairman of the Federal Reserve Bank of New York - The experience of W.W.II showed that the U.S. could pay for the war without raising the needed revenue from taxes.
"Taxation is one of the limitations placed by government on the power of business to do what it pleases. There is nothing reprehensible about this procedure. The business that is taxes is not a creature of flesh and blood , it is not a citizen."Journal of Finance Aug 1946: Tax policies for Prosperity (pdf) by Beardsley Ruml - behind a pay wall
"The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government. Two changes of the greatest consequence have occurred in the last twenty -five years (since 1921) which have substantially altered the position of the national state with respect to the financing of its current requirements. The first of these changes is the gaining of vast new experience n the management of central banks. The second change is the elimination, for domestic purposes, of the convertibility of the currency into gold."
Purposes of taxation:
1. instrument of fiscal policy, i.e. price stability (goal: stable purchasing power)
2. public policy, i.e. progressive income and estate taxes (goal: wealth & income equality)
3. public policy, i.e. subsidizing or penalizing industries or economic groups
4. isolate and asses directly the costs of certain national benefits, such as highways ande social security
Taxing corporations is a Bad Tax.
"Briefly the idea behind out tax policy should be this: that our taxes should be high enough to protect the stability of our currency, and no higher...Now it follows from this principle that our tax rates can and should be lowered o the point where the federal budget will be balanced at what we would consider a satisfactory level of high employment."Reuters: Japan's government could run out of cash by October 2012 - can not happen according to MMT and did not happen.
Since countries differ in their export/import balance the above gets modified by MMT to be:
(from the MMT primer by Wray) "Tax rates should be set so that the government's budgetary outcome (whether in deficit, balanced, or in surplus) is consistent with full employment.
Levy Economics Institute - MMT Papers - Working paper 778 Modern Money Theory 101: A Reply to Critics 2013 (free pdf)
High Powered Money (Wiki) is mentioned in the paper and I didn't recognize the term and the Wiki page was less than helpful. Warren Mosler has this to say:Three UMKC Professors Among The Nine Who Predicted Eurozone Crisis - and confirm that there was no profit recycling mechanism as Yanis says.
"That's just cash plus dollars held by member banks in the reserve accounts at the Fed. It was called high powered money because it was convertible into gold before 1934. Randy (Wray) still uses it because his professor's initials were HPM (Hyman P. Minsky)."
Regarding the large upturn in HPM since 2007 (Wiki plot) L. Randall Wray says:
In any case what happened was that the Fed got confused and thought that QE would stimulate something. Exactly what, we do not know. Fed also started paying interest on reserves--which makes them equivalent to bills. So think of the $4T of reserves as bills paying low interest. That was the kink in the curve you saw. You could just as well exchange the reserves for bills and then the kink goes away.
New Economic Perspectives -
Center for Full Employment and Price Stability -
Centre of Full Employment and Equity -
"gold standard" means that you could turn in a dollar and
get gold in return. You can use gold in payment of
debts. Spanish gold coins could be used in payment or
melted down and recast as U.S. gold coins.
"fixed exchange rate, or pegged" gold sells for a fixed dollar amount. But gold is no longer legal tender for debts public or private.
The Gold Reserve Act of 1934 (Wiki)
Took the US off the gold standard and fixed the price of gold at
$35/oz. "...outlawed most private possession of
gold. The act also changed the nominal price of gold from
$20.67 (price paid to people turning in gold) per troy ounce to
$35 (the dollar is pegged to gold, not floating). This price
change incentivized foreign investors to export their gold to
the United States, while simultaneously devaluing the U.S.
dollar in an attempt to spark inflation. The increase in gold
reserves due to the price change as well as the confiscation
clause resulted in a large accumulation of gold in the Federal
Reserve and U.S. Treasury. The increase in the money supply
lowered real interest rates which increased investment in
durable goods." This removed the "gold standard" and left
the value of gold at $35 per ounce which was maintained until
For about 200 years (1792 to 1971) U.S. currency was tied to
gold and/or silver. Before 1971 the folding money in my
wallet said Silver Certificate (Wiki)
on the front (see photo above). I
could take it to the mint in San Fransisco (or any other US
Mint) and get either silver dollars or silver ingots in
exchange. Prior to 1971 the measures of the money supply
like M0, M1, M2 &Etc (Wiki)
were important because the amount of money was limited by the
gold and/or silver reserves held by the US government. If
the government ran a large deficit while the dollar was pegged
to gold/silver there might be a problem if everyone turned in
their currency and asked for silver. So, back then, the
government needed to use taxes to raise money in order to fund
government programs because they could not just print more
money. So governments at all levels (federal, state and
local) used taxes to raise money to fund their programs.
Prior to 1971 this was the correct way to think about government
funding of programs, but not after 1971.
[side bar: in 1946 Beardsley Ruml, Chairman of the Federal Reserve Bank of New York wrote a couple of articles pointing out that the US had paid for W.W.II without raising the money by taxation, see link above).]
The Federal Reserve System (Wiki) was created by the Federal Reserve Act of 1913 (Wiki) (Public Law 63-43, 63rd Congress, HR 7837) section 14(a). Open Market Operations: "To deal in gold coin and bullion at home or abroad, to make loans thereon, exchange Federal reserve notes for gold, gold coin, or gold certificates, and to contract for loans of gold coin or bullion, giving therefor, when necessary, acceptable security, including the hypothecation of United States bonds or other securities which Federal reserve banks are authorized to hold: (b)..." The current version of has the same paragraph 14a. BUT. . . in 1971 gold was decoupled from our currency so the Fed no longer can do anything with gold (see Nixon's implemented policies below).1971 (Wiki: Nixon Shock): 264 - Address to the Nation Outlining a New Economic Policy: "The Challenge of Peace." August 15, 1971 9 pm - Implemented:
The Global Minotaur (This may not be the real problem instead it looks like not understanding MMT: see MMT above)
TED talk: Yanis Varoufakis capitalism will eat democracy unless we speak up - how the recycling systems used since W.W.II that used profits to reduce debts has now failed and currently we are accumulating both debt and cash with no mechanism for them to get together.
Finance Fit To Purpose? 14 April 2016 - A quick
overview of Yanis idea.
Feb 2016 - If, as Yanis Varoufakis (Wiki) says, Greece is the canary in the coal mine (Wiki) then we need to really understand what's going on. He says there are two indications of the problem.
1. A growing mountain of debt caused by borrowing.
2. A growing mountain of cash caused by it not being used productively to reduce the mountain of debt.
During (and for some time after) W.W.II the U.S. accumulated a lot of gold as a result of a trade surplus. At the Bretton Woods Conference (Wiki) in April 1944 the Marshal Plan (Wiki) was a way that the U.S. recycled it's trade surplus to strengthen Japan and Germany (the offer made to the U.S.S.R. was rejected). This essentially sent U.S. dollars to Germany and Japan and allowed them to buy U.S. products. So from the end of W.W.II until 1971 when the U.S. left the gold standard (Wiki: Gold Standard, Nixon Shock) the U.S. sent it's excess trade balance to other countries. This allowed them to buy U.S. products. PS The CIA actions in South American politics (1944 to 1971) is related to the U.S. Global Plan for Japan in protecting it's raw material suppliers.
But as the post 1929 financial crash laws were repealed between
1965 and 2007 (see: Bad Laws) the banks
were allowed to gamble with depositors money. For example
the wide use of Collateralized debt obligations (Wiki:
CDO) in association with liar home mortgage loans (Wiki)
along with false AAA credit ratings (Wiki)
resulted in the financial crash of 2008 (Wiki).
This killed the Global Minotaur and has allowed a lot of debit
to accumulate in some places and a lot of cash to accumulate in
other places instead of allowing the cash to be invested in
places where there's debt to allow both accumulations to get
reduced. The 4 handmaidens of the Global Minotaur -
Chapter 5 (1.Wall Street, 2. Walmart, 3. the ideology and
politics of 'trickle-down' and 4. toxic economic theory)
These are discussed in Chapter 5 The Beast's handmaidens.
Note the 2008 crash has killed the Global Minotaur but the
handmaidens are still around and out of control, sort of like
the Sorcerer's Apprentice (Wiki)
Note: Walmart pays more than the minimum wage, but virtually
all of it's employees are below the poverty line which means
they qualify for food stamps and other government aid. So
the government is subsidizing Walmart, i.e. privatize the
profits and socialize the losses. Walmart is a socialist
business. I'm not saying it's a bad idea, rather I'm
saying it's not fair to allow corporations to work in a
socialized economy yet not allow people to do it.
A related idea is the "part time worker" (Wiki)
and/or "independent contractor" (Wiki)
- these are both ways that employers get around the requirement
to provide benefits to their employees that they otherwise would
be required by labor laws to provide.
What's needed is a way to recycle excess debt or cash so neither accumulates.
The Global Minotaur: America, Europe and the Future of the
Global Economy by Yanis Varoufakis 2015 (with new Chapter
9 A world without the Minotaur) - highly recommended (free
DiEM25.org - DiEM25 is in the air – a preliminary Q&A (31 Jan 2016) - it would be a mistake if the U.S. did not join this discussion.
Vicious Disequilibrium by Yanis Varoufakis 2014 - easy to understand
A world without the Global Minotaur: Why is the world economy failing to recover? by Yanis Varoufakis 2012
The Global Minotaur: An Interview with Yanis Varoufakis 2012 - Q&A
Modern Political Economics: Making Sense of the Post-2008 World 2011 - expensive textbook, but a lot is free on Amazon in Look Inside!
22 May 2013 - Jared Huffman has his first telephone Town Hall
meeting. I was No. 6 to ask a question "What was he doing
to bring back Glass-Steagall?" but after over a dozen answers he
didn't get to my question. At the beginning he said he
would answer everyone's questions off line if not on line, but
as of 13 Oct 2014 he has not answered this one. See the
TED talk above Capitalism will eat democracy for an explanation
of how politicians no longer can control the financial markets.
"Hayek's utopianism often spilled over into religiosity. As his disciple Ralph Harris described it, "once . . . you understand there is no other way to preserve the substance of individual freedom except through dispersed property ownership, . . . you can say it's almost like a religious belief . . . I have said - and it's offended some of my other Christian friends; they have said this is awful, sacrilege- . . . that the market is almost god-ordained"21 In Hayek's vision, government would be left to manage only those elements of society that could be run by no one else, such as defense. Among the services Hayek believed should be privatized were "all those from education to transport and communications, including post, telegraph, telephone and broadcasting services, all the so-called 'public utilities,' the various 'social' insurances and, above all, the issue of money."22 Tellingly, and perhaps surprisingly for those who subscribe to Hayek's general aims today, he advocated mandatory universal health care and unemployment insurance, enforced, if not directly provided, by the state, and he believed there should be free movement of labor across national borders."This included steps to privatize the U.S. Postal Service, deregulation of the banking system &Etc.
21. Interview of Ralph Harris (Wiki), July 17, 2000 Commanding Heights, PBS
22. F.A. Hayek, Law, Legislation and Liberty, VOl 3: The Political Order of a Free People, Univ of Chicago Press 1979, pg. 147
Mercantilism (Wiki) was
the economic system from the 1500s to 1800s replaced by Adam
Smith's Capitalism. "Most of the European economists who
wrote between 1500 and 1750 are today generally considered
mercantilists." "In modern economic theory, trade is not
a zero-sum game of cutthroat competition because both sides can
The Wealth of Nations (Wiki)
laid out what's called classical economics including the concept
of the Invisible Hand (Wiki).
I think the Invisible Hand sort of worked in Adam Smith's time
(i.e. before the Industrial Revolution (Wiki)
and large corporations), if there was a retail mom and pop store
that was doing something underhanded you could easily open a
shop that was fair and be successful, but that no longer is the
case with large corporations.
There was a change in focus from the King's wealth to the
wealth of the population.
PS. I think neoclassical economics (Wiki) is a waste of time because humans do not make good decisions under negative conditions i.e. they do NOT act as rational persons. There are a number of TED Talks on the topic of how humans and chimps make the wrong choice when loss is involved.
In all these pre 1971 monetary theories the money always was tied to gold in one way or another.
This is a subset of economic theory and addresses how the
amount of money will be determined. There are two major
historical schools of thought:
Wanted to issue paper money with no reserve requirement on
the amount of gold deposits.
Homo economicus (Wiki)
Money based on debt (Wiki)
Wiki) by Adam Smith, the basis of Capitalism. Prior to this there was Feudalism (Wiki). At the time products were made by craftsmen one at a time, and there was no manufacturing, electricity, plumbing, etc. A high technology business was making cast iron cookware. So the philosophy of doing what’s in your own self interest (greed) and an invisible hand (Wiki) will guide you for the good of society might have worked then. But greed is no longer working and we need to move on to a better idea.
When a bank makes a loan they just make two entries in their books. One puts the principal amount into your checking account (as a bank liability) and the other puts the principal amount into their collection of assets.
You borrow $100,000 for 30 years at 6%. The amount of money created is $100,000. Your checking account entry is a liability for the bank and your loan is an asset for the bank.
But, you need to pay back close to $216,000.
This is a big problem because the money to pay back the interest was NOT created. There is no provision to create money for the interest. Where is it going to come from?
Either the economy keeps on growing putting new money in the system, some of which is used to pay off old loans or there are bankruptcies that cancel loans.
A possible way around this is to eliminate interest from the system.
Islamic banking and finance (Wiki) does not allow interest and while the religious components don't make sense, the basic idea seems valid.
One way of doing this would be to make banks a utility operated by government paid employees where no interest is charged and the bank partners with the borrower.
Standard & Poor's: Repeat After Me: Banks Cannot And Do Not "Lend Out" Reserves (pdf) Aug 2013 - since banks have never been constrained in making loans based on reserves (the reserve requirement is met AFTER the loan is made) there is no "money multiplier" (Wiki) effect caused by the excess reserves generated by QE.
2016 Update - See MMT above for how the government puts money into the economy in addition to the bank's creation of money out of thin air.
IMF (Wiki: IMF)
The International Monetary Fund was created as part of the Bretton Woods Conference in 1944 (Wiki). This was a time before MMT (see MMT above) when there were fixed exchange rates and a gold standard. That changed in 1971 with the end of the gold standard, but the magnitude of the impact (the start of MMT) just started to be understood by a very few people in 1992. The result is that the IMF is basing it's demands on no longer valid theories.IMF groupthink and sociopaths by Bill Mitchell (See above) - The IMF report IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004-07 mentioned in the article can be found at (IEO part of the IMF).
re: Global Financial Crisis - "As the private debt was building up and the shonky (and criminal) bankers were increasingly defying responsible and ethical business practice, the IMF was part of the cheer squad – urging, no, bullying governments to deregulate further and undermine the working conditions further and to reduce the scope and quality of public services."
It's time to disband the IMF and probably the World Bank.
|Brooke on Capitalism 2.0
The jobs went overseas because of trade agreements we made that
allowed corporations to do that.
Note: caution is needed when looking at exports and imports
after NAFTA because we then started exporting a lot of sub
assemblies to Mexico and Canada that came back to us a final
The PBS Frontline "Obama's
Deal" goes into how he campaigned against the politicians
who made the Medicare Part D midnight deal to prevent the SSA
from negotiating prices of medicine, but when he wanted to pass
his Obama Care medical package made a deal with the big
pharmaceutical companies right after he made a deal with the
insurance companies to take single payer (Medicare for all) off
the bargaining table. His health plan was written by the
insurance and pharmaceutical companies. The big problem it
has is profiting from peoples medical problems and the
government forces everyone to pay those profits. It's way
too expensive and if implemented the costs will go up
Jan 2014 - So far there has been a lack of enrollment by young
people since they will be paying premiums that will be going to
benefits for older people. By April 2014 we'll know if the
system will require a massive federal subsidy to the insurance
companies. That's to say taxpayer money going to the
profits of the insurance business.
The PBS Frontline special Five
Capitalist Democracies & How They Do It (Watch
on line) looked at: United Kingdom, Japan, Germany, Taiwan
and Switzerland. In no country was there any business
making profits on peoples first order medical problems and there
were no people going into bankruptcy because of medical
expenses. When private insurance companies were providing
medical insurance they were not allowed to make profits on that
I've personally seen the Taiwan system first hand and think
it's great. For many people it would make sense to buy a
round trip first class plane ticket, go to Taiwan (or other
county) and have the treatment done off shore and return to the
U.S. The savings will more than pay for the plane ticket
and expenses. For many procedures it makes sense to fly to
Canada or Mexico and pay their going rate which are a tiny
fraction of the U.S. rates for the same procedure.
An interesting fact is that Japan set the price for various
imaging procedures (spiral CAT, MRI, etc.) at a very low
level. Japan is one of the key sources of high technology
imaging equipment and the manufacturers developed newer lower
cost machines to comply with the government low cost
target. It turns out that my hospital has the spiral CAT
scanner that was developed because of the Japanese medical
system. So I'm seeing a benefit from their health care
system. The implication is that if the U.S. does a similar
thing a benefit may show up in other places in the world.
This is consistent with John Nash's Governing
Care: Cuba vs. U.S. - (0:01:15) Apr 8, 2016 -
While watching this talk I noticed a number of statements
that seemed to contradict high school physics. I sent an
email to the speaker with a general question and got an
answer, but when I asked the harder questions he "was too
busy" to answer.
Microbes in the sea generate half the oxygen we breath, 1/4
comes from land plants and 1/4 from macro algae like kelp.
|I believe that the climate is changing,
but I'm not convinced that the cause is all man
made. That's because the ocean is very large and
as it warms it's releasing not only CO2 but also a lot
of methane, but I can not get anyone to tell me how
much. We need to cut down on emissions, but a
larger problem is sustainability
and it's impact on economic systems. 2014 update -
the idea of silting and dead animals 2mm thick every
year all over the ocean bottom may be a much simpler
Recently in many places I've seen the argument that 97% of climate scientists believe that global warming is a problem.
This is not a valid argument.(Wiki). For example Galileo was the only scientist who thought the Earth went around the Sun, all the others thought the Earth was the center of the universe.
PG&E did some studies and found this type of appeal worked because people want to be part of the crowd.
Nov 2014 - I have the book "Full-Rip 9.0: The Next Big
Earthquake in the Pacific Northwest". In chapter 1 it's
mentioned that there were survey results that suggested land
movement on the order of a few millimeters per year but before
Plate Tectonics (Wiki)
no one paid attention to the data. On the Wiki page they
show horizontal movements for various parts of various plates
on the order of 20 to 100 mm/year and if only a few percent of
that was vertical movement then you would get the few
mm/year of sea level rise we are now seeing. It seems to
me that a whole ocean could rise if the plate(s) under it
rose. Sort of like lifting a bowl of soup up off a
table. If you are measuring the liquid height using a
gauge on the table then lifting the bowl shows a rising water
level, but there's been no addition of water and no
temperature change in the water. So I question the
current model that says there are only two factors, i.e. added
water (melting glacial ice) and added volume (thermal
expansion). There's a third factor geodesy (Wiki).
The key idea of this book is that another Full-Rip 9 subduction quake (Wiki) is in store for the upper right corner of the Pacific Plate that will effect the Pacific Northwest. This coming quake will be 100 times the magnitude of a typical San Andreas strike slip (Wiki) type quake. "Subduction zones are a special class of thrusts that form the largest faults on Earth and give rise to the largest earthquakes."Books related to Climate Change
I believe recreational use of
marijuana in all its forms (Wiki: marijuana,
aka: cannabis, Kief, Hashish, Hash oil and
LSD and Ecstasy should be legal in the same way alcohol is legal
to use. That implies that like tobacco it should be
taxed. Note it's legal to brew your own beer and make your
own moonshine and in a similar way you should be able to grow and
refine hash for you own and your friends use, but selling requires
the tax stamp just like tobacco or alcohol.
to scheduling - "The new classification system suggested
that alcohol and tobacco
were in the mid-range of harm, while cannabis,
lysergic acid diethylamide
("LSD") and MDMA ("Ecstasy") were all less harmful than the
two legal drugs."
July 2014 -
David Cay Johnston: Governmental Capture - a one minute video. Just as the government regulatory bodies have been captured, the government itself has been captured by the campaign funders.
10 May 2014 - Here is an email I sent to someone promoting a constitutional amendment to nullify the Citizens United vs. FEC (Wiki) decision.
The problem is that adding an
amendment to the constitution requires ratification by a 2/3
majority of the states, so even if both houses passed it that
would not make it a law. Note the Equal Rights Amendment (Wiki)
was never ratified by the states so is not part of the current
I think Lawrence Lessig has a good handle on the overall problem, see his TED talk and get his book.
Republic, Lost: How Money Corrupts Congress--and a Plan to Stop It
Since the states must ratify an amendment let's start with a state initiative to change the rules here. For example here's a question I submitted at a meet the candidates meeting in town last week. Note these were candidates for the CA state senate and assembly.
"Considering the corruptng influence that campaign finance has on making politicians more responsive to their funderes than the voters, would you promote a bill that would only allow campaign contributions from voters registered to vote for that candidate?"
As it is now all candidates get campaign contributions from pretty much everywhere, I'd guess that 90% of it comes from outside the district they are supposed to serve. You can confirm that for federal politicians by looking at www.FEC.gov. and there's an equivalent web site for state politicians. That means that the candidate needs to be responsive to people who may and probably do have agendas that are in conflict with the voters.
A state law would be much easier to pass and would serve as a model for other states. It would also effect federal elections in that state.
Note that in the 1970s and 1980s
politicians were accepting cash to vote for (and more importantly
to kill) bills and a number of them went to jail. (Wiki: Abscam)
Today the vast majority of politicians do not accept cash bribes,
but instead their campaign committee accept contributions which is
legal although is still corrupt.
This very well may be the NUMBER ONE
issue. For example the current (Oct 2013) shutdown of the
government is caused by the fear of Representatives that if they
make an enemy of the Tea Party they will loose the next Primary
election (note: fewer voters turn out at primary elections than
general elections and it's easier for negative campaign money to
defeat a candidate in a primary). But the problem isn't just
the Tea Party, it's anyone with enough money to campaign against a
candidate, either an incumbent or challenger.
Another example of this effect is the
Pledge that's been signed by 236 House members and 41
Senators as of the 112th Congress. If any of them break
their pledge to NOT vote for any tax increase they know they will
be kicked out at the next primary election. There's no way
that Congress will do anything to change this situation since it's
in their best interest to keep it going, even if that means
bringing the country down.
We can act by promoting a
Constitutional Convention where we can overturn Citizens United
vs. the F.E.C. and probably McCutcheon vs FEC (SCOTUSblog)
where the supremes probably will make another bad decision.
Note: this effects not only Congress, but also the Supreme Court and the office of the President.
TED Talk - Lawrence Lessig: We the People, and the Republic we must reclaim
Money allows a candidate to gain recognition by means of phone calls, mailing cards, letters, polls, etc, TV and radio spots and person to person contact either door to door or at public locations. Corporate Personhood is a big part of this problem.
A large part of our news media is now
a propaganda operation like in the USSR
in the 1960s.
The Newsroom - Tea Party is the American Taliban
Sarah Silverman | Let My People Vote 2012 - Get Nana A Gun
May 2014 - For the past couple of months I've been reading about bad science. When Gary Taubes (Wiki) finished his second book (published in 1993) on bad science "Bad Science: The Short Life and Weird Times of Cold Fusion" people in the physics community said if he wanted to see real bad science to have a look into nutrition and diet. In July 2002 he published the article: What if It's All Been a Big Fat Lie? in the New York Times. Based on this article he received a book contract that paid for four years of his time to do research, he spent 5 years and published Good Calories, Bad Calories: Challenging the Conventional Wisdom on Diet, Weight Control, and Disease. This book gets into the nitty-gritty of all the mistakes that were made in U.S. nutrition research resulting in pretty much all of "official" organizations telling us the wrong things to eat. The American Medical Association, American Heart Association, U.S. Department of Agriculture, National Institutes of Health, Centers for Disease Control, &etc. all said we should eat a low fat diet. The base of the "Food Pyramid" (Wiki) was seventy percent carbohydrates.
It turns out all of them were very wrong and carbohydrates are the real problem. But politics prevents a change any time soon. Note that a can of beer has the same effect on anyone's (including children) waistline and liver as a can of soda pop with sugar or a glass of organic fruit juice.
A few years ago the World Health Organization said that chronic disease (Wiki) had become a larger problem that infectious disease (Wiki). The cost of chronic disease in terms of death and disability is staggering. There are predictions that the impact will bankrupt Medicare in a couple of decades.
It turns out the Metabolic Syndrome (Wiki) medical problems are a very large part of chronic disease and it seems are the direct result of eating foods (carbohydrates) that are harmful.
This is a huge problem that needs to get fixed at the federal level.
For more see my Diet and Nutrition web page.
This is a problem I discovered in Diet & Nutrition where U.S. authority figures (USDA, NIH, AMA, CDC and many others) have for decades been promoting ideas that have no basis in science and so the scientists have lost creditability. The implication of that is a disaster since how do you know anything coming from these organizations is factual?
See: Crisis In Nutrition IV - Vox Populi & Science For Smart People both by Tom Naughton.
Although humorous this is not far from the truth in terms of what's passing for science: Teen Boys Losing Virginity Earlier And Earlier, Report Teen Boys