Yesterday, I checked my post office box and, as usual, there was no response from Senators Pat Toomey, and Bob Casey. And there was no response from Congressmen Tim Murphy, Mike Doyle, Jason Altmire, Mike Kelly and Pennsylvania State Representative Jesse White.
Senator Toomey has refused to acknowledge my December 10, 2010, letter, my February 6, 2011, e-mailed copy of that letter and my February 7, 2011, phone call confirming that his Washington, DC, office received the e-mail. I would like to remind Senator Toomey that I have a Constitutional right “to petition the government for a redress of grievances.” To date, he has denied me this right. The same charge applies to the other six politicians. This is a clear case of taxation without representation.
I am reluctant to fall into the trap of sending follow-up letters, faxes and of making dozens of fruitless, long distance phone calls. After seven years of frustration, I have learned that all that effort was a waste of time and money.
I believe this stonewall of silence reveals something very important: Politicians have an agenda that is framed and controlled by campaign contributions. This, of course, is old news. However, I don’t think the true consequences of this situation are fully understood. For the people who are concerned about the turmoil in “the markets,” the partisan slugfest in Washington and the bi-partisan attack on social security, Medicare and Medicaid, this is my view of the “The Big Picture.”
First of all, I would like to encourage everyone to research and verify everything that I say. The easiest way is to go on line and “Google” key words like “capital strike” and key concepts like “cutting taxes increases tax revenues.” You will usually find thousands of articles on virtually any subject. It is important to read articles on both sides of the issue. That way you can make an objective judgment. I recommend the articles on this web site as a starting point. Just click the articles on the right side of this page. These articles are my campaign platform from my 2010 run for the Pennsylvania state legislature. Please click on my article “Taxation” to get a counter argument to the notion that cutting taxes increases government revenue. For the record, I would like to state emphatically that I have no intention of running again for public office.
It is truly remarkable that after more than seven years and my two political campaigns, not one politician, media pundit or academic will engage me in a serious public debate on this web site. Who are the people who won’t debate me? You name them, and I’ve probably called, written, faxed or e-mailed them. Seven glaring examples of the stonewall of silence are in bold type in the first paragraph of this UPDATE.
To examine the Big Picture, let’s start with the above mentioned term, capital strike. This is a polite way of saying economic blackmail. The primary reason the Great Depression dragged on for ten miserable, disastrous years was that the banking and business communities imposed a capital strike on the American economy. They did this to punish President Franklin D. Roosevelt for the New Deal. To be blunt, I’m sick of listening to conservatives and Republicans blaming the New Deal for the Great Depression. This is a myth created to discredit the truth that the government can fix problems that are caused by the private sector. And, the Great Depression was not caused by the Smoot-Hawley tariff legislation. This is another myth, created to justify unregulated, free market globalization, which is one of the main causes of our present economic and fiscal problems. I bring up the issue of a capital strike because the American economy, and the American people, are currently the victims of a new capital strike. Apparently, campaign contributions from banks and corporations have mandated that the Democrats never acknowledge this fact. But, before I explore the issue of the capital strike, I want to, once and for all, set the record straight with regard to the Great Depression.
The seeds of the Great Depression were sown, in 1919 (after World War I), when crushing reparations were imposed on Germany by the Treaty of Versailles. Then, in 1929, the stock market crash wiped out the cash reserves of the American banking system (and exposed the fatal flaw of our fractional reserve system). In the spring of 1931, Austria’s Creditanstalt, the biggest bank in Central and Eastern Europe, failed. This triggered the collapse of the entire European banking system. Without credit, the global economy went over a cliff. This is exactly what happened in 2007/2008. This time, however, the trigger was the massive fraud and greed on Wall Street. That, the product of deregulation, destroyed the global housing market and the banking system. Believe it or not, it was the actions of former Treasury Secretary Henry Paulson, Federal Reserve (Fed) Chairman Ben Bernanke and Treasury Secretary Tim Geithner, under the authority of President Barack Obama, that prevented another Great Depression. Unfortunately, nobody in the public or private sectors did what was necessary to prevent the mortgage meltdown disaster and the global credit crisis.
It has been said that the Great Depression was caused by the Smoot-Hawley tariff because it restricted global trade flows. This is total nonsense. Millions of Americans were out of work and destitute. They owned nothing but the clothes on their back. Why didn’t the American private sector economic system put these people to work producing the goods and services that they desperately needed? Two reasons: one, the banking system and stock market destroyed a large part of our money supply. And two, after President Roosevelt, that is, the government, recapitalized the banks; they went on strike to punish FDR for being a great president. The similarities to today’s “jobless recovery” are undeniable.
In 1937, thanks to government intervention, the economy had recovered significantly. However, on the advice of his supply side economic advisors, President Roosevelt drastically cut government spending in order to balance the budget. The result was the Second Great Depression. Too bad President Roosevelt didn’t have better economic advisors. He should have followed the Constitution (Article 1, Section 8, Paragraph 5) and example of President Abraham Lincoln. As Lincoln did in 1862, Roosevelt could have had Congress authorize the Treasury to issue debt free United States Notes (Greenbacks) and put that money directly into the economy. That would have been a debt free, tax free, economic stimulus. The money injection would have countered the capital strike and quickly ended the Great Depression. For an explanation of how Treasury-issued, debt free money can solve our economic and fiscal problems, please click on my article The Legal Basis for Lincoln/Kennedy Monetary Reform.
Today, Governor Rick Perry’s statement, that Fed Chairman Ben Bernanke’s actions were “almost treason,” may have unintended consequences. Mr. Perry, in a peculiar way, endorsed the idea that “printing more money” stimulates the economy. But, apparently, Rick Perry doesn’t want Ben Bernanke to stimulate the economy until after the 2012 election. This might be good for the Perry Campaign but it would be hell for the American people.
Of course, increasing the money supply, aka “printing more money,” stimulates the economy. That was the lesson we learned the hard way from the Great Depression. The notion that printing more money devalues the dollar and causes inflation is debunked in part three of my article Social Security/Pensions. I don’t want to give a long dissertation on monetary theory now. I just want to make a few points. Right now, we are in an economic trap. Globalization has created a permanently weakened American economy. The Bush/Obama tax cuts drastically reduced tax revenue. Factor in the $14 trillion national debt. The result: the government doesn’t have and can’t borrow enough money to stimulate the economy. And the capital strike, apparently, means the private sector will sit on its hoard of cash until they get a Republican in the White house. It all adds up to (or subtracts to) the “New Normal” of permanent austerity for workers, the poor, the sick, the disabled and the elderly.
The new deficit commission has a mandate to cut $1.2 trillion from the federal budget. How much good, useful and necessary spending will be cut? The Constitution gives Congress and the Treasury the authority to issue enough debt free money to “promote the general welfare” and “ensure the domestic tranquility” of the American people. In light of this fact, to eliminate good, useful and necessary spending to “balance the budget” is the height of stupidity. A perfect example of this stupidity is the politician’s attack on NASA. This is a classic Washington/Wall Street squeeze play: politicians underfund the space program because of the national debt and reduced tax revenue. The private sector and foreign governments then happily fill the void left by what is a precious national asset. As a result, the American people will have to pay the private sector and foreign governments a fortune for what our government can do for free! This isn’t fiscal responsibility; this is fiscal stupidity. We will have privatization rammed down our throats no matter how stupid or destructive it is. If the private sector wants it, the politicians will force us to take it.
When it comes to economic data, you can’t believe the numbers or the people who put them out. If you factor a deliberate capital strike into the economic data, all the numbers suddenly become meaningless. For example, Unemployment is 9.2 %. This proves the economic stimulus didn’t work, and President Obama’s policies kill jobs. Wrong. What would the unemployment rate be without the capital strike? (And what would the unemployment rate be without the stimulus?) Another example: The Gross Domestic Product is an anemic (pick your number) %. This proves President Obama’s economic policies are a failure. Wrong. What would the GDP be if there was no the capital strike? (And what would the GDP be without the stimulus?) The capital strike has been literally and publicly acknowledged by prominent media fixtures, Larry Kudlow and John Fund. And a capital strike has been blatantly implied and threatened by the famous Tea Party leader, Dick Armey, and many other conservative pundits. But, for some unexplained reason, it seems that the Democrats haven’t noticed the capital strike. I guess they would rather lose another round of elections than be accused of “bashing corporate America.” To read how we can create good jobs without government borrowing or raising taxes, please click on my article Rebuilding American Manufacturing.
The Republican “jobs plan” is to cut taxes on businesses and to destroy government regulation and oversight. This will, supposedly, dispel the “fear and uncertainty” that has, supposedly, paralyzed the business community and caused high unemployment. The Republicans and conservatives carefully avoid any mention of the New Normal economy that has been crippled by globalization and deregulation. I doubt that anything, including the Republican jobs plan, will induce the business community to abandon the maximum profit/global supply chain business model. The merchants and shareholders are demanding a transition to a China/India economic model.
The Democratic plan isn’t much better: borrow more money to build and rebuild the national infrastructure. Why can’t the private sector build and rebuild the infrastructure on its own? Why do the taxpayers have pay to hold the private sector’s hand? Meanwhile, the Right Wing plan to destroy government regulation and oversight is rolling along just fine. In all the talk about jobs, there is no mention of vitally important government jobs. When are we going to clean house at, and fully staff, the Securities and Exchange Commission? When are we going to clean house at, and fully staff, the Commodity Futures Trading Commission? Have we learned nothing from the financial disaster of 2007/2008!? The Right Wing wants to dismantle the Environmental Protection Agency. Now, that’s a really stupid idea: let’s poison the air and water. But, the Republicans counter that they were elected to deregulate. In reality, the Republicans were elected because of the massive Republican/talk radio/Fox News spin machine. And, they won because there was little or no opposition from the shockingly weak Democratic Party and their Soros-funded “progressive” allies. The Republicans won by default.
I said there is a bi-partisan attack on social security, Medicare and Medicaid. How is this possible? Aren’t the Democrats supposed to be the defenders of these vitally important government programs? When Democrats call for a “payroll tax holiday,” they are reducing the amount of money that to goes into the social security trust fund. That sounds like an attack to me. This is the only thing I can think of where the Republicans agree with the Democrats. The Democrats claim the lost trust fund revenue will be made up out of the general fund. The problem with that idea is that the extra general fund money will be borrowed, thus, increasing the national debt. Apparently, the Democrats have adopted Dick Cheney’s idea that “Deficits don’t matter.”
To explain the bi-partisan attack on our social safety net, I’m afraid another history lesson is in order. After the terrorist attack of September, 2011, the Federal Reserve made a series of interest rate cuts. This was supposed to prevent the economy from going into a recession. According to some revisionist historians, this was the cause of the disastrous housing bubble. This claim is more self-serving nonsense. Low interest rates should have resulted in low interest rate fixed rate mortgages. But the banks, and Wall Street, did exactly the opposite with adjustable rate mortgages, securitization and predatory lending practices. At the same time, mortgage brokers made fat fees for originating mortgages to just about anybody who would sign on the dotted line. Rating agencies sold AAA ratings for junk mortgage backed securities. And appraisers and real estate agents hitched a lucrative ride on the runaway mortgage freight train. All of this pumped air into a gigantic housing bubble. When the bubble inevitably collapsed, it wiped out the fictitious part of our money supply that was composed of mortgage backed securities and bogus home values. This was very similar to the credit crisis of the early 1930s.
And, much like the 1930s, after the housing bubble burst the global economy instantly plunged into the Great Recession. This, too, is old news. However, this disaster has a direct bearing on the bi-partisan attack on social security, Medicare and Medicaid. And, this disaster is a good starting point for a new Wall Street Conspiracy Theory.
Briefly, the conspiracy theory goes like this. From the minute Democratic President Bill Clinton signed the Republican Gramm, Leach, Bliley deregulation legislation in 1999, the economic and financial disaster of 2007/2008 was inevitable. It didn’t take long for most, if not all, of the Wall Street fat cats to figure this out. But, they knew that in the run up to the collapse, there was tons of money to be made. And, they also knew that when the bubble inevitably exploded, the government would pick up the pieces and bail them out. The government had to bail them out because, if they weren’t bailed out, the global economy would have collapsed, and it would be the Great Depression all over again. Don’t believe the conservatives and Republicans who dispute this historical fact. They are just plain wrong (or worse).
Although Bernanke, Geithner and President Obama saved us from another Great Depression, they couldn’t save us from the subsequent Great Recession. The Great Recession ushered in the “New Normal.” The New Normal is: high unemployment; stagnant or falling wages; record corporate profits; a structurally weakened American economy and, most important, drastically reduced government revenue.
Conservatives and Republicans hated social security, Medicare and Medicaid from the minute they were created. Their ongoing efforts to destroy these programs can be found in the historical record. Now, with a $14 trillion national debt and the Astroturf Tea Party Movement as their weapons, Wall Street and their allies finally have their big chance to destroy our social safety net. Corporate profits are at record levels but social security, Medicare and Medicaid are all on the chopping block. Conservative pundits say “There can be no economic recovery until the entitlement issue is resolved.” And, in a touching display of bi-partisan cooperation, both Democrats and Republicans agree – “cuts must be made to save these programs.” Remember, the seeds of the Great Recession and the bi-partisan attack on our social safety net were sown when Senator (Foreclosure Phil) Gramm, Congressmen Jim Leach and Thomas Bliley and President Bill Clinton deregulated the financial services “industry.”
Conspiracy or not, the fiscal mess in Washington and the national debt are now the justification for targeting another thing that conservatives and Republicans despise -- government regulation. After the disaster of the 2007/2008 mortgage meltdown, how can anybody in their right mind call for more deregulation with a straight face? The housing debacle was the result of deregulation and a lack of government oversight. That’s a fact.
Here is the question we must ask: was it stupidity or conspiracy? Lots of smart people on Wall Street and in Washington knew exactly what was going on in the housing market and where it would lead. Some people made huge amounts of money and some people positioned themselves to be out of the way when the house of cards came crashing down. I know Alan Greenspan publicly confessed to his low interest rate “mistake” that, supposedly, caused the crisis. But is that what really happened? Is this so-called mistake actually a cover story designed to absolve the FIRE sector of the blame for the crisis? (The FIRE sector is: Finance, Insurance and Real Estate.) Coincidence or conspiracy, the results of the crisis are just what Wall Street, conservatives and Republicans wanted all along: Social security, Medicare, Medicaid and government regulation are going to be whacked thanks to the mess caused by the housing bubble, the Great Recession and the national debt. Coincidence? It sounds like a PLAN to me. When you connect the dots, a conspiracy theory is born.
To learn how we can make social security, Medicare, Medicaid and the Pension Benefit Guarantee Corporation permanently solvent, without raising taxes or borrowing money, please and read my article Social Security/Pensions. For a detailed explanation of how the politicians are raiding the social security “trust fund” and how we can replace the missing money without raising taxes or borrowing money, please scroll down to the article “The Social Security Trust Fund” in my 2010 campaign web site located at the bottom of this site.
Finally, I would like to examine the problem of the national debt. After millions of words have been spoken and written about the debt, the debt ceiling and cutting government spending, there is still one important thing that is missing from the debate, the truth. The truth is that the national debt is a scam and a scandal.
It is a scam because the U.S. Constitution gives Congress, and only Congress, the authority to issue our money. This fact was proven during the Civil War when President Abraham Lincoln prevailed upon Congress to authorize the Treasury to issue $449,338,902 worth of debt-free United States Notes (Greenbacks.) I have covered the issue of debt free money extensively on this web site so I won’t labor the point beyond asking one simple question: If the Treasury can issue our money debt free, why do we have a $14 trillion national debt? After more than seven years of trying, I have yet to find anyone who will answer that question.
So, I guess it’s up to me to answer my own question. The national debt is a $14 trillion shakedown of the American people. Our politicians are so negligent and irresponsible that they have let the entire global financial system become dependent on our federal government debt: The Federal Reserve (Fed) creates money by buying federal government debt securities. Without the debt, there is no money. And, since the dollar is the world’s reserve currency, the American taxpayer is on the hook for the global money supply.
I know this sounds crazy but we learned the truth the hard way during the 2007/2008 global credit crisis. In late 2008, in order to fix a “global dollar shortage,” the Fed pumped $4.5 trillion into the global money supply. Does this make Fed Chairman Ben Bernanke a bad person? No. He had no choice. Without that emergency infusion of dollars, the global economy would have collapsed into a second Great Depression. The real villains are the Wall Street banksters who wrecked the global financial system that Ben Bernanke had to fix. My point is this: under our current economic/financial/monetary system, we can’t pay off the national debt.
Congress could legally authorize the Treasury to pay off the entire national debt in one crack with United States Notes. If they did that, what would happen? According to a newspaper editor that I wrote to, the entire global bond market would instantly collapse. I don’t agree with that doomsday scenario but, needless to say, the global bond market wouldn’t like it if their “benchmark debt” suddenly disappeared. And all those poor defenseless investors all over the world would lose their safe haven -- “the flight to safety” -- when the global financial markets are in turmoil. We don’t even charge them rent when they park their money in nice, safe U.S. government debt. In fact, we pay them. What a racket!
And, of course, the Wall Street wheelers and dealers need a place to park their money when they pull “The Big Short” and crash the global stock markets. It must be nice to get paid interest while you sit on your cash in nice, safe U.S. government debt and wait for the last sucker to “capitulate” and sell at the bottom. Then, the “value investors” can rush in and bargain hunt through the wreckage of the IRAs and 401 Ks. All this thanks to the American taxpayers and the $14 trillion national debt. What politician would dare to stand in front of that gravy train? The only one I can think of is me. But, I lost two elections, and I’m not running again. Oh well.
So, that’s the scam. We have a $14 trillion dollar national debt for no reason other than to benefit the financial services “industry.” Yes, yes, I know, the 401 Ks and IRAs have made us all investors and tax avoiders. What a master stroke! Now we’re all Wall Street banksters. We’re all riding the gravy train to wealth and prosperity, Right?
Not necessarily. Once upon a time the Japanese Nikkei stock market was 38,957.44. It crashed to 7054.98 but it “recovered” to 8963.72. The NASDAQ at one time was 5,132.52. It crashed to 1,108.49 but it “recovered” to 2,182.05. Believe it or not, some analysts have said that in the worst case meltdown, the Dow Jones “Industrial” Average could hit 1000! People who play the markets aren’t investors. They’re actually speculators. But there is always the “safe haven” of gold, right? In 1980, gold was $850 an ounce. In 1999 it was $251.70. Here are some fun facts for the Goldbugs (speculators): We can’t go back on the “gold standard” because there isn’t enough gold in the world to support a gold-backed currency. Gold is not money because gold is not legal tender. Only dollars -- Federal Reserve Notes and debt-free United States Notes are legal tender, that is, money. Some economists say gold is in a historic bubble, and the actual, intrinsic value of gold is $250 per ounce.
I always disliked the idea of speculating in gold because you are betting against your own country. When conservative fear mongers predict the decline and fall of America, the Goldbuggers rush out and buy more gold. Conservative talk show hosts who slam our “worthless dollar” are just pumping up the gold price. What a coincidence that these conservative talkers are sponsored by the same people who sell you the gold. I recommend an Internet search of the expression “pump and dump.” This will explain how financial markets work. What would happen if Congress totally fixed America’s fiscal and economic problems by issuing debt free United States Notes? Would gold crash to $250 per ounce? Like I said, the Goldbuggers are betting against their own country. Sometimes I wonder if the financial markets are all either Ponzi schemes or taxpayer shakedowns.
When will we pay off the $14 trillion national debt? Under our current economic/financial/monetary system, as I explained above, the answer is never. Without the issuance of debt free money, not only is it impossible to pay off the debt, it is becoming impossible to service the debt. I know, I know, all we have to do is tax the rich, close the loopholes, stop all foreign aid, shut down corporate welfare and bring the troops home, and the budget crisis will be solved. Good luck with that. Speaking of debt free money, the conservative economic geniuses tell us that foreign markets will refuse to accept Treasury issued United States Notes. This is more self serving nonsense. Foreign markets will have no choice but to accept United States Notes. They are legal tender just like Federal Reserve Notes. What’s the problem? For an explanation of why United States Notes are a legal and practicable solution to our fiscal and economic problems, please click on my article The Legal Justification for Lincoln/Kennedy Monetary Reform.
Conservatives, Republicans and some Democrats tell the American people that we are “living beyond our means.” Wrong. Our economic problems are caused by a defective economic/financial/monetary system. It is a system designed to produce debt. The historical record and current events prove that creating jobs is, obviously, a secondary consideration. Whether the means is provided for the American people to live is irrelevant. This ugly truth was revealed by the Great Depression and the current Great Recession.
So, how do the politicians plan to service our totally unnecessary $14 trillion national debt? The plan is to impose austerity on the people who can least afford it, of course. The politicians will punish the most vulnerable Americans just to protect the sacred national debt and the bond market parasites aka the Bond Vigilantes. Every politician takes an oath to uphold the Constitution. The Constitution mandates that every politician “promote the general welfare” and “the domestic tranquility” of the American people. Instead, they act as enforcers for the cruel demands of the financial markets.
That’s the scandal.