It’s the Stupidity, Stupid
Actually, I’m not calling everyone who reads this blog update stupid (despite the attention grabbing title). My objective is to warn people about the dangers and consequences of accepting stupid ideas as revealed wisdom. After more than eight years of stonewalling and silence, it is obvious that I have to try harder to get the attention of the politicians, the pundits, the mainstream media (MSM) and the general public. Calling people stupid will usually get their attention. I am not running again for public office (calling people stupid is not a good way to get votes). As a non candidate, I don’t have to pander to anyone. I have a populist message, that is: economic and social justice based on the U.S. Constitution and existing law.
What is the stupidity that I’m talking about? The current budget “debate” is an exercise in stupidity that is a result of widespread ignorance. It is ironic that the politicians who stuck us with the sixteen trillion dollar national debt are now frantically warning us about the evils of public debt. I think it is more realistic to think of the politicians not as public officials, but as loan originators. After all, it was them, not the taxpayers, who borrowed the money that put us sixteen trillion dollars in the hole. Politicians, as loan originators, serve exactly the same function as did Mitt Romney when he owned and ran Bain Capital. That function was/is: to borrow huge amounts money that other people have to pay back. (And don’t forget, it was the loan originators, working for the banks, who created the massive debt that caused the home mortgage disaster.) I hope that everyone who reads this blog will write or call their Congressperson and ask them this question: If the Constitution and the law give Congress the authority to direct the U.S. Treasury to issue debt-free legal tender currency (United States Notes) why do we have a $16 trillion national debt? I recommend clicking on this link to the U.S. Treasury Department web site: U.S. Treasury - FAQ: Legal Tender Status of Currency. There you will learn that everything I say about debt-free money is true and based on existing law.
We have heard hundreds of times that, when President Bill Clinton left office, he had a budget surplus. This Peace Dividend produced a fearful reaction in Federal Reserve Chairman Alan Greenspan. Why would Greenspan fear a budget surplus? On page 104 of the worthless, conservative propaganda book I.O.U.S.A., Alice Rivlin (Director of the Office of Management and Budget under President Bill Clinton) is quoted: [the federal budget] “had a large surplus. It had such a large surplus that people were beginning to worry about the surplus. My then colleague, Alan Greenspan, worried that the surplus was so large that we would pay off the whole national debt.” Why would that be a problem?! Ms. Rivlin said: “Well, he thought it would be a problem because then the government would have to buy private securities.” I hope I have finally made my point that because our money is based on debt, we will never pay off the national debt under our current debt based monetary system. The national debt is an integral part of our economic/monetary system and the foundation of the global bond market. And, to make matters worse, U.S. government debt securities are in the retirement portfolios of millions of Americans. How is that for a really stupid idea?
The George W. Bush administration inherited the Clinton surplus, and we all know what happened next. President Bush said he wanted to give the surplus money “back to the American people.” Well, he could have replaced some of the money that the politicians had stolen from social security and the other “trust funds.” But, of course, he chose tax cuts that favored the rich. Fast forward to September 11, 2001. The historical record shows that the Bush administration ignored the warnings of the Clinton administration about the threat of Al Qaeda terrorism, but that’s another story. My point is about the surplus. From that day in 2001, when we were attacked, America was, and still is, at war. The justification for the Bush tax cuts was that the surplus was the result of the Peace Dividend (lower defense spending). According to that logic, the tax cuts should have been rescinded on September 12, 2001. As far as I know, I am the first and only person who has ever made this point. Now, our elected loan originators (politicians) are using the national debt as an excuse to attack social security, Medicare, Medicaid and other important, necessary and beneficial government operations. Is this monumental stupidity, or is it something more sinister and destructive?
I think I should take some time to explain how the fiscal cliff/debt ceiling scam goes beyond monumental stupidity into the realm of a deliberate attack on the general welfare of the American people. (These italicized words are found in the first sentence of the U.S. Constitution.) I’ve already established the fact that the national debt will never be reduced or paid off under our current debt-based monetary system. Believe it or not, Congress could have the Treasury issue $16 trillion of debt-free U.S. Notes and pay off the entire national debt tomorrow. Of course, the Bond Vigilante parasites, who own our politicians and our debt, would never permit such an act of fiscal responsibility. Also, Congress could send massive amounts of debt-free money to state and local governments to solve their funding problems (which are the results of the Wall Street-caused Great Recession). Of course, that will never happen because the tax-free municipal bond market parasites will never permit that, either.
So, what is all this debt alarmism really about? It is about attacking so-called “entitlements” and destroying the power of the American government. If you listen to the disgusting rhetoric of conservative politicians, pundits, CEOs and the think tank shills, the above statement becomes a self-evident fact. The PLAN is to destroy “entitlements” and starve the government into a powerless, heartless tool of the private sector. And the totally unnecessary national debt is the perfect lash to enforce the collective will of the conservative politicians, CEOs and Wall Street.
When viewed in this context, the insanely illogical drumbeat for tax cuts, with a $16 trillion national debt, makes perfect sense.
On this blog, I have totally debunked the “Printing Money Causes Inflation” myth. I previously explained that several other factors, not printing money, cause inflation. Now I would like to put this concept into the framework of what is happening today. The Supreme Court’s infamous Citizens United ruling is inflationary. Why? It increased the massive amounts of corporate and business money that floods into our corrupt electoral system. This legalized bribery money is added to the cost of the products and services that we buy. This obviously causes inflation. I have a better idea for funding elections: use Treasury issued debt-free money to publicly fund all political campaigns and kick the private sector media out of the process. (In my opinion, the advertising “industry” is a plague on our culture and a gigantic, inflationary waste of money.) Candidates can make their cases for election through a government information service. This will save the billions of dollars that are wasted on our idiotic electoral circus and lower the prices of many of the goods and services we buy. Publicly funding elections with debt-free money would be a great way to fight inflation. But, the private sector would probably just use the money that they squandered on candidates for more dividends, more stock buy backs and even more lavish salaries, perks and golden parachutes. That’s why price controls are the best way to fight what I call Greed Inflation.
I previously made the point that conservative “think tanks” are inflationary. But I didn’t cover foundations. Massive amounts of private sector business money floods into foundations. This highly dubious, and in many cases wasteful, use of money is inflationary because it adds to the cost of the goods and services that we buy. I could write many pages about the inflationary foundation scam, but I will focus on just one: the Peter G. Peterson Foundation.
Back in 2008, Peterson bankrolled a piece of worthless, conservative propaganda titled “I.O.U.S.A.” The book rounded up a bunch of “entitlement” haters, millionaires and billionaires to warn us about the fiscal evil and dangers of “entitlements.” The very premise of the book is enough to turn your stomach. By the way, I was so furious when I finished reading “I.O.U.S.A.,” that I fired off a challenge to everyone at the Peter G. Peterson Institute and everyone involved with the book, including former Comptroller General (and Romney supporter) David Walker, to a public debate on my web site. Of course, I was ignored. Plausible deniability is very important to these people. Let’s take a look at the “Honorable” David Walker and some of the “Cast of Characters” of “I.O.U.S.A.” The Cast:
Former Senator Judd Gregg: a regulation hater now working for Goldman Sachs as a highly paid Wall Street shill.
Former Chairman of Citigroup, Goldman Sachs, the Council on Foreign Relations and former Treasury Secretary Robert Rubin, A Wall Street billionaire who fought regulation and oversight of the financial services “industry.” Mr. Rubin is one of the main culprits of the 2007/2008 mortgage disaster/global credit crisis.
Former Federal Reserve Chairman Alan Greenspan, He fought regulation and oversight of the financial services “industry.” He is also one of the main culprits of the 2007/2008 mortgage disaster/global credit crisis. He is a devoted student of Ayn Rand.
Congressman Ron Paul, Gold bug to the Tea Party. He called social security “unconstitutional.” Some people considered his 1999 legislation, H.R. 219, back door privatization of social security.
Investor Warren Buffet, He is the owner of discredited Moody’s credit rating agency. He admits that he doesn’t work (“I get other people to do the work”). He owns things and buys stocks. How productive!
Senator Kent Conrad: As the chairman of the Senate budget committee, did he ever suggest using Treasury issued debt-free United States Notes to balance the budget? Why finance the government with borrowed money if you don’t have to? Why borrow money with a $16 trillion national debt? Treasury issued U.S. Notes is the only solution to our budget problems, Senator.
Former Federal Reserve Chairman Paul Volker, Historians claim that he “cured the stagflation of the1970s with 20% interest rates.” But the resulting recession and high unemployment indicates that the “cure” left much to be desired. Economists are still arguing about the causes of the “stagflation,” so I guess I can add my opinion.
The October, 1973, Arab-Israeli War caused the famous five month OPEC Arab Oil Embargo. Somehow, we are told, this five month embargo led to a global, decade long stagflation crisis. The embargo and oil production cuts were retaliation against the countries that supported Israel in the war. But did the embargo really cause the price of oil to quadruple? Of course not, because OPEC didn’t set the price of oil. The price was set by the global free market. What a golden opportunity for the oil companies and the commodities traders to gouge, not only the hapless American consumer, but the entire world! (Does anybody remember the “windfall profits tax”?) Of course, high oil prices caused the price of everything else to go up. What a golden opportunity to blame the high prices on American workers. (Does anybody remember the so-called “vicious wage/price spiral”?) Then, when President Nixon tried to protect American consumers with price controls, the oil companies simply hoarded the oil, and the result was stagflation and gas station lines around the block. The phony “Law of Supply and Demand” ensured that the price of gas would stay high, and the abused American consumers would be ready and willing to go to war with the hated Arabs.
The weak 1920s Weimar Republic’s hands off policy toward the markets led to the infamous hyperinflation and the catastrophic Nazi takeover of Germany. In the same way, President Nixon’s inability to reign in the oil companies and the oil commodity markets led to stagflation and global economic turmoil. Fiscal stimulus, money supply growth and the inherent momentum of the American economy eventually returned things to “normal.” Twenty percent interest rates fixed nothing.
Former Alcoa Chairman, former member of the Trilateral Commission and Former Reagan Treasury Secretary Paul O’Neill, As far as I know, the then Treasury Secretary O’Neill never explained what Vice President Dick Cheney meant when he told him “Reagan proved that deficits don’t matter.” (Check out my last (9-27-2012) Update for my explanation of Cheney’s statement.)
Investment bank advisor Art Laffer, He gave us the discredited “Laffer Curve” and the now discredited supply side economics. Was Laffer the unnamed Ronald Reagan staffer who coined the phrase “Starve the Beast”? Calling the American government a “beast” is sedition according to the dictionary definition that I quote elsewhere on this blog.
Executive Director of the Concord Coalition Robert Bixby, He “educates the American people about the growing national debt.” I recommend my blog to Mr. Bixby. He might find it educational.
Billionaire investment banker Peter G. Peterson, I have one question for Mr. Peterson: What did you actually do to become a Wall Street Billionaire?
Former Comptroller General David Walker, Talk about someone being asleep at the switch! David Walker was Comptroller General from 1998 to 2008. Where was he when the politicians were stealing $5 trillion from the social security and other trust funds and adding that missing money to the national debt in the form of so-called IOUs? Instead of whining and crying about government spending, he should have been learning about Abraham Lincoln’s and John F. Kennedy’s debt-free, legal tender United States Notes. Was it willful ignorance that caused him to miss his opportunity to stop the national debt in its tracks in 1998 when it was “only” $5,526,193,008,897? In his Annual Report to Congress, he could have reminded the politicians of their legal and Constitutional authority to have the Treasury issue debt-free, legal tender United States Notes instead of borrowing money from the Bond Vigilante parasites. Thank you “deficit hawk” David Walker for approximately $10.5 trillion of our national Debt!
So, that’s the lowdown on the Peter G. Peterson Foundation. When these “highly respected policy analysts” tell us that we have to slash “entitlements,” we should laugh in their faces and ignore them. Unfortunately, this gang of entitlement haters have great and undeserved influence with our politicians, but they have zero credibility with me.
I’m reading “Better, Stronger, Faster -- the Myth of American Decline…” by Daniel Gross. (I personally believe America is in a very serious state of decline. But, we will see if Mr. Gross can change my analysis.) I was stopped in my tracks on page 2 by his statement: …“Congress and the president were locked in an absurd standoff over extending the debt ceiling. … official Washington had managed to turn a once-routine formality into a circular firing squad.” Unfortunately, Mr. Gross didn’t elaborate on the explosive implications of his statement. Does a “once-routine formality” mean that the national debt will automatically increase forever?! Apparently, that is exactly what he meant, because our currency and economy are based on that government debt. Consequently, as our population and economy expand, the national debt will expand right along with them. The “routine formality” of raising the debt ceiling reminds me of the algorithms in billionaire New York city Mayor Michael Bloomberg’s Bloomberg Terminal (aka the “Bloomberg Machine”). Those Nobel Prize winning algorithms predicted that housing prices would go up forever. We all know how that worked out – Crash! I only bring this up to reinforce my point that the national debt is an integral part of our economic system. (Have you ever heard of “fixed income investments”?)
This means all the dire warnings and hand wringing over raising the debt ceiling and the “unsustainable” national debt are really just self-serving political rhetoric. The debt ceiling will always be raised. But, on the other hand, the debt alarmism rhetoric is a real and deadly threat to social security, Medicare, Medicaid, the “trust funds,” the Pension Benefit Guarantee Corporation and the power of the American government. How is the national debt a threat to the “social safety net” (a term I dislike)? The answer is simple. Our stupid, debt based economic system can’t completely service our stupid national debt. Something has to go, and we know what that is. “Entitlements.” Are you getting the picture?
Why do I dislike the term social safety net? It implies that it is normal for lives to be ruined by the instability of our economic system and social security, Medicare and Medicaid exist to catch people as they plunge into the economic abyss. This stupid notion gets the private sector off the hook for their responsibility to provide the American people with a stable and prosperous economic system. Are people so stupid that they can’t figure out that social security and Medicare are an integral part of the compensation package of every working American and not an optional afterthought?
Social security and Medicare are called entitlements because we paid into them and we are entitled to that money. Of course, we all know that there is a funding shortfall problem. Whose fault is that? Conservatives and Republicans say it is the fault of the workers because they are living too long!!! Actually, real workers, people who really WORK for a living are not living longer. It is true that the average life span is longer but, surprise; longer life spans aren’t the problem. The problem is our greedy, selfish, deregulated, globalized, financialized, free market economic system. Over the years, workers simply weren’t paid enough money to properly fund the social security and Medicare systems. And, to make matters worse, the politicians were stealing the trust fund money and adding the amount of the stolen money to the national debt in the form of IOUs!
When I hear multi-millionaire and billionaire bankers, businessmen and CEOs say they are willing to pay higher taxes only if we cut entitlements I want to start smashing things. Why would I have such an angry reaction? I go ballistic because it is the bankers and the CEOs who are responsible for the social security and Medicare funding short fall!!! This is self-evident, but I will connect the dots anyway. Bankers prefer to invest in the most profitable businesses. As they say: “Capital chases return” (on invested dollars). The more a business slashes wages and benefits the more profitable they become. Consequently, less money is available for the social security and Medicare systems. It’s that simple. And let’s not forget the CEOs and stockholders. The CEOs want profit growth because profit growth means that huge salaries, perks and golden parachutes are even bigger, and profit growth means more capital gains on their stock and bigger dividends. The stockholders want profit growth for the capital gains (that they didn’t work for).
So, the globalized free market business model demands union busting, off shoring, downsizing and a lean and mean work environment. The workers are expected to work until they die and pay for their own healthcare with their “globally competitive” wages. Remember, the New Normal economic benchmark is the lowest subsistence wages, the most miserly “benefits,” the most brutal, dangerous working conditions, with maximum job insecurity in the most heartless, inhumane “emerging market economies” of the world. That is the ideal. And, that is a big part of the underfunding problem of social security and Medicare.
For almost a century, conservatives, Republicans and business interests have been battling the Democrats in order to deny the American people universal healthcare. Do these people have no shame? Because I know about Treasury issued debt-free money, it makes me very angry when I hear multimillionaire bankers, CEOs, politicians and conservative talk show shills say: “We just can’t afford it.” We can afford it, stupid! I cast a wide net for my information. So I listen to conservative talk radio when I’m driving. For years, I have been a believer in the ethical teachings of Jesus and the Old Testament Prophets. But, I never thought much about the existence of the devil until I started listening to conservative talk radio.
Here is a question that has never come up, as far as I know. If the private sector wasn’t greedy and selfish, could social security, Medicare, Medicaid, the Pension Benefit Guarantee Corporation and the government, in general, be properly funded with fairly shared business profits and taxes? I don’t think so. If that is the case, where does that leave us? The answer is obvious: Treasury issued debt-free money. That is what this blog is all about. If our economic system, in its current form, can’t provide health care and pensions for the sick and elderly workers who earned and deserve it, there must be an alternative. This is why I have attacked and so thoroughly debunked the myth that “printing money causes inflation.” This myth and corrupt politicians are the two things that stand in the way of Treasury issued debt-free money and a more stable and prosperous life for the American people. Rebuttals to my analysis and proposals from reputable pundits, economists and politicians can be sent to post office box 815, Coraopolis, PA 15108. I will put their counter arguments on this blog, and I will debate them. The debate will be public and in the historical record.
Shifting gears, I have to say something about my hero, Federal Reserve (Fed) Chairman Ben Bernanke. I have been told that on my blog I make him out to be some kind of folk hero. That’s exactly what I’m doing because, to me, he is a folk hero. And, today (12-12-12) he reinforced my opinion of him. When you start talking about the Federal Reserve, quantitative easing, bond buying, the Fed funds rate, primary securities dealers, repos, reverse repos and the Fed’s balance sheet, most people’s eyes glaze over. Not me, I love it. So I think I know what I’m talking about when I say Helicopter Ben is a hero.
According to standard economic and monetary theory, when the economy is sluggish, the Federal Reserve lowers interest rates to stimulate the economy. This is normal. This is what the Fed is supposed to do under these economic conditions. In a convoluted way, which I don’t like and won’t try to explain, this gives more money to the banks and businesses. But, as we all know, the banks and businesses are sitting on the money and, consequently, we have a sluggish economy. This is the Capital Strike that I discuss extensively on this blog. [This is a good point to throw in a quick correction. I stated somewhere on this blog that the banks and business are sitting on “8 trillion dollars of cash.” This mistake was the result of me misunderstanding a statement by former Congressman Dick Armey. I thought he said $2 to 8 trillion. Apparently, he actually said $2.8 trillion. Sorry about the mistake. My hearing isn’t what it used to be – jet engines and loud rock n roll will do that.]
According to my Romney Campaign Conspiracy Theory, the Capital Strike was designed to put Mitt in the White House when President Obama got blamed for the sluggish economy. That didn’t work, so now this economic blackmail is being used to force the Democrats to cut taxes on the rich, businesses, capital gains, dividends, deregulate and to force them to slash “entitlements.” This is all very slick and diabolical but there is one problem – the Fed’s low interest rates. The financial services “industry” doesn’t like low interest rates for obvious reasons. Now, the business talking heads are on TV today with all kinds of whacky theories about how Ben’s money printing and low interest rates are hurting the economy.
But here is the good part. Chairman Bernanke said to the business community: when you lower the unemployment rate to 6.5%, I’ll give you higher interest rates. Brilliant! Fantastic! Helicopter Ben called their bluff. He made job creation a condition for the higher interest rates that they want. This was a brilliant tactical move. But the Chairman may have inadvertently exposed a very serious weakness in the structure of the “new economy.” One pundit coined the term “QE infinity,” that is, infinite quantitative easing. What could he have meant by that? Did he mean to imply that in the New Normal economy we will never get unemployment down to 6.5%? Of course, nobody asked him to elaborate on the implications of “QE infinity.” This New Normal is why I say the globalization and financialization of our economy is a disaster for America.
The Federal Reserve has a dual mandate: maximize employment and control inflation. Recently, conservatives, Republicans and conservative pundits have been calling for the Fed to dump the first part of the mandate. What a stunning coincidence. Did they fear that we had a Federal Reserve Chairman with the guts to put some real muscle behind his commitment to maximum employment? (I wonder what Ron Paul thinks about that.) That’s why Chairman Bernanke is a folk hero.
And, I want to commend Treasury Secretary Tim Geithner for calling the Republican’s bluff on the debt ceiling. In a brilliant tactical move, he caught everybody flatfooted when he said take the decision to raise the debt ceiling out of the hands of Congress and give it to the president. The media were shell-shocked into confusion or silence. I was jubilant because Secretary Geithner confirmed what I have been saying on this blog: the debt ceiling will always be raised so why waste time arguing about raising it? And, by all means, don’t let the Republicans use the debt ceiling as a weapon to attack social security, Medicare and Medicaid.
I’ve been telling people for a long time that Chairman Bernanke and Secretary Geithner are the smartest guys in the room. Fighting for American jobs and protecting social security, Medicare and Medicaid makes them folk heroes in my book.