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. This is going to be a long, “rambling” dissertation so I will get to my main point first. Also, 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 agenda, that is: economic and social justice based on the U.S. Constitution and existing law.
What is the stupidity that I am 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.) The infamous Washington to Wall St. -- Wall St. to Washington revolving door is the obvious explanation why American governments: federal, state and local are drowning in an ocean of debt. Why is all this debt a monument to political and fiscal stupidity? The answer is simple: all this debt is totally unnecessary!
For more than eight years I have been telling people on my web site, on my blog and person to person before and during my two political campaigns, that the government does not have to borrow money. Article one, section eight, paragraph five of the U.S. Constitution grants the U.S. government the power to “coin,” that is, create money “and regulate the value there of.” Why borrow from the capital markets (and stick the taxpayers with the debt) when the U.S. Treasury can issue debt free legal tender currency? That currency is called United States Notes (U.S. Notes or Greenbacks). I know many people refuse to accept this simple fact. However, I will not waste time debating counter arguments. Abraham Lincoln, John F. Kennedy and the Supreme Court have established my position as historical and legal fact. No further discussion is necessary (see my links to the U.S. Treasury web site for confirmation of this fact).
On August 27, 2004, I wrote a letter to an editor of the so-called liberal Pittsburgh Post-Gazette newspaper. I explained that the money raided from the social security trust fund and the projected future funding shortfall could be paid for with U.S. Treasury issued, debt free United States Notes. The editor’s response: my proposal was “interesting but unrealistic.” And “Printing new money would be inflationary and would unsettle markets, national governments and international finance institutions as they would wonder whether the US would resort to printing more new money to accommodate other debts, such as the mounting annual budget deficits.” Events in the post housing crash Great Recession period have revealed the stupidity of his response: The massive, multi trillion dollar “quantitative easing” (money printing) by the U.S. Federal Reserve (the Fed) and other central banks have barely quelled the fears of deflation. As for “unsettl[ing the] markets,” the news of Chairman Bernanke’s QE3 popped the (Dow) stock market up more than two hundred points in one day.
The reaction of the “markets, national governments and international financial institutions” would be moot. In other words, there is nothing they can say or legally do to oppose U.S. Treasury issuance of United States Notes because U.S. Notes are legal tender. They are interchangeable with and have exactly the same value as Federal Reserve Notes. And, they are currently an unissued part of our national money supply. I’ve explained all this in detail elsewhere on this blog. Also, I have this link: U.S. Treasury - FAQ: Legal Tender Status of Currency to the U.S. Treasury web site that proves that what I say is true.
There is no excuse for the “liberal” Post-Gazette’s suppression of the truth about Treasury issued debt-free money. It is noteworthy that my Oct. 11, 2010 letter challenging to the Post-Gazette to a public debate was unanswered. Click on this link: An open letter to the Pittsburgh Post-Gazette to read my letter. The above letter was sent and posted about a month before the 44th legislative district election for the Pennsylvania General Assembly. I was the Democratic candidate in that election. The public debate between me and the Post-Gazette could have exploded into a national debate about the issuance of debt free money. However, the “liberal” Post-Gazette made sure that didn’t happen. The result of those editors not doing their job is Mitt Romney, Paul Ryan and the rest of the mob of government haters claiming that social security, Medicare and Medicaid will “bankrupt America.” I say, it is the politicians (loan originators) who ignore the U.S. Constitution and borrow $16 trillion on the taxpayer’s credit card and then base our currency on that debt, who will bankrupt America.
No matter what I do, I can’t get the attention of the media. I wrote a letter to talk show host Cenk Uygur who at the time was working for MSNBC. Just about the time the letter should have arrived, Uygur disappeared as did my letter. He later surfaced on Al Gore’s Current TV Network but my letter was never acknowledged. I could fill half a page with the names of the media people and organizations I have contacted (I have all the E-mail addresses somewhere in “the cloud” to prove it. The media doesn’t want the general public to know that the national debt is a scam and a scandal because they are in on the scam. The result: widespread ignorance breeds stupidity in the general public.
I would like to reinforce my point again that printing money does not cause inflation. The “explanation” from the gold bugs and conservative media pundits for the lack of hyperinflation, despite massive “money printing” by the Fed, is that “there will be hyperinflation down the road when the economy improves.” This deceptive spin is constantly repeated in the media but I never hear a discussion of the implications of this statement. How convenient for me that their “explanation” clearly confirms my Greed Inflation thesis! Which is: prices rise because people can or will pay the higher prices. As they say: “raise the price and see if it sticks.” This is classic Greed Inflationary thinking. The size of the money supply is irrelevant. Also, Chairman Bernanke has stated repeatedly that, before inflation becomes a problem, he will withdraw the “excess” money from the system. President Abraham Lincoln proposed exactly the same solution in 1862 in the event inflation became a problem when he put debt free United States Notes into circulation. Try finding that important fact in a boxcar full of Abraham Lincoln biographies.
I dislike the idea of pulling money out of circulation to fight inflation. Decreasing the money supply tends to cause a recession. I would rather see Congress authorize the correct amount of debt free money for addition to the existing money supply. Price controls should stop Greed Inflation when the money supply expands to “promote the general welfare of the American people.” More money in circulation in America means more customers and more profit for American businesses. There is no reason for more money to cause higher prices. Increased costs, of course, can justify price increases but with a flexible currency like U.S. Notes, costs can be offset with more liquidity. If price controls fail, the so-called excess money can be withdrawn from circulation and the American people informed of the reason for the economic downturn. Treasury issued U.S. Notes would put a stop to all the frantic warnings and worry about a “fiscal cliff” or raising the debt ceiling. As for the hyperinflation myth, it does serve one purpose: it sells a lot of gold – just ask Glen Beck and G. Gordon Liddy. Americans who “invest” in gold are actually speculators betting against their own country. The nonsense about “going back on the gold standard” is debunked elsewhere on this site. The stupid idea of a “partial gold standard” is nothing but a scheme to make money for the gold bugs. It will do nothing to solve our fiscal and economic problems.
I know conservatives and Republicans are fainting at the thought of price controls. However, here is some economic history trivia for the price control haters: Wage/price controls were imposed three times in American history, during World War II, the Korean War and the Vietnam War. I would like to remind the price control haters that we are currently at war.
Increasing the money supply does not devalue a currency. Price increases that grab that extra money is what devalues a currency. This is Greed Inflation. Greed Inflation is insidious because the businesses that raise prices benefit from the extra money but consumers and workers are stuck exactly where they were before the money supply was increased. General prosperity is stifled and the dollar is devalued by Greed Inflation because it takes more dollars to buy the same product.
“Money printing” has some obvious benefits that I’ve never heard Romney, Ryan or the other government haters mention. After the 2007 crash, the Treasury’s and the Fed’s “easy money” policies prevented the collapse of the global financial system, rescued the financial markets and prevented a second Great Depression. This debunks the stupid myth that President Obama “hates bankers and businessmen.”
The rescue was/is great for bankers, investors and corporations. However, it did nothing to solve the problems of the national debt, funding shortfalls in social security, Medicare, Medicaid, the Pension Benefit Guarantee Corporation and the general lack of money for necessary and desirable government operations. Only the U.S. Treasury can put money directly into the trust funds to replace the roughly $5 trillion stolen and spent by the politicians. Only the U.S. Treasury can put money directly into the government’s general revenue fund. The idea of raising taxes and/or cutting spending to solve our fiscal problems is a fantasy – the math doesn’t work. The solution to America’s fiscal problems is: U.S. Treasury issued debt free money injected directly into the money supply – it’s that simple. Fully funding the government, the trust funds and government funded and administered (debt free) full employment policies would cause a massive increase in GDP and a drastic reduction in unemployment. Our debt to GDP ratio will be so good; the Bond Vigilantes will be in tears. We can argue about the details when some reputable pundit or politician finally writes to me at PO box 815, Coraopolis, PA 15108. There are two things stopping the immediate government issuance of debt free money: the stupid notion that printing money causes inflation and the stupid acceptance of this hoary myth. The loan originators have us right where they want us!
Here is an economics trivia question: What did Dick Cheney mean when he said “…Deficits don’t matter”? I’ve never heard a satisfactory explanation so I will offer my explanation. Our currency is backed by U.S. government debt. As the population expands, the economy must expand and the money supply must expand to support the increased economic activity. Therefore, the national debt must expand with the money supply. To quote Fed Chairman Mariner Eccles (1934-51): “If there were no debts in our money system, there wouldn’t be any money.” This means, of course, that the national debt will never be paid off under our current economic/monetary system. I immediately thought of the Eccles quote when I heard Republican VP candidate Paul Ryan say he “would pay off the national debt.” Congressman Ryan, the only way to reduce or eliminate the national debt is with Treasury issued United States Notes.
After the 2007/2008 crash, Chairman Bernanke's easy money policy was designed to give the banks plenty money (recapitalization) to loan into the economy for job creation. But this begs a question that is rarely if ever asked: what happened to the trillions of dollars that the U.S. Treasury and the Fed had to replace when the global financial system “froze up”? In reality, that money never existed – it was debt. Contrary to current, stupid economic thinking: debt isn’t money. Widespread acceptance of the stupid notion that debt is money is what caused the 2007/2008 global credit crunch, the crash and the Great Recession that followed. I explained this in detail elsewhere on this blog, but I would like to repeat the main points: Worthless mortgage backed securities (debt) were the collateral for a large part of the global money supply. When the myth that mortgage debt is money finally exploded in the summer of 2007, a large part of the global money supply simply vanished into thin air. Then, to make matters worse, for Wall Street’s second act, they sold insurance policies called derivatives to investors (counterparties) to protect them when the mortgage backed securities became worthless. But there was a massive, potentially catastrophic problem: Wall Street didn’t have the money to pay off on the derivatives! Isn’t this fraud? Whether it is or isn’t, the disappearance of several trillion dollars is the reason “helicopter Ben” Bernanke and other central bankers had to throw trillions of dollars into the global money supply. They had no choice. Don’t believe the claptrap that you hear from conservatives and Republicans that “Obama’s stimulus and economic policies didn’t/don’t work.”
“Helicopter Ben” gave the banks plenty of money, the problem is: the banks aren’t lending (or they aren’t lending enough.). There are two reasons for this problem – both are beyond the control of the Fed. 1. The New Normal (caused by globalization) of low wages, lack of proper benefits for workers and high unemployment means there are less qualified borrowers and thus, less demand for loan “products.” 2. The Capital Strike: The private sector is sitting on trillions of dollars of cash. This is after billions of dollars have been lavished on non productive shareholders in the form of dividends and stock buy-backs. (In our culture, this parasitism, including capital gains, is considered preferable to actually working for your money.) The American private sector is filthy with cash. If they want to “build factories and put people back to work,” in America there is nothing stopping them. But, despite loads of money and politicians in their pocket, the private sector says they are paralyzed with fear because of that dreadful “uncertainty.” I say all the problems in the economy are the result of a Capital Strike, the Great Recession and the globalization of the economy which created the New Normal. Obviously, the Capital Strike is economic blackmail designed to force politicians to deregulate and lower taxes on businesses. Also, the real or imagined “horrible Obama economy,” caused by the Capital Strike, is Mitt Romney’s main campaign issue. Whatever the actual state of the economy, conservatives and Republicans will blame all the problems, real or imagined, on the so-called “horrible Obama economy.” This claptrap will be repeated in the other elections -- local, state, U.S. House and Senate.
The conservatives and Republicans created the myth of a “horrible economy.” Then, every so-called “bad” economic number and every problem is blamed on Obama. There is virtually no mention of the New Normal, the 2007/2008 mortgage disaster/global credit crisis, off-shoring, outsourcing, the lean and mean business model, downsizing, American workers competing against sweat shop labor, the Great Recession or the Capital Strike. Intellectually, these people are a joke. In fact, one conservative pundit from the American Enterprise Institute (AEI) tried to debunk my New Normal thesis by saying: “I don’t believe in the New Normal.” He said: “It [the bad economy] is his [President Obama’s] fault.” Obama slashed the government payroll to satisfy these AEI government haters. This was supposed to relieve some of that mythical “uncertainty” that has the private sector “paralyzed with fear.” No matter what Obama does or doesn’t do, the private sector will always whine and cry about the “confiscatory tax code” and the “job killing government regulations.” The problems that exist in the economy are not the fault of President Obama, Chairman Bernanke or Secretary Geithner. The problems are the result of the Wall Street-caused Great Recession, the Capital Strike, globalization, and the New Normal, stupid.
After President Obama, the Fed has become the favorite target for the army of Wall Street hacks that infest our media. Here is a perfect example of Wall Street disinformation: A highly respected expert said the Federal Reserve’s quantitative easing (money printing) is counterproductive. To paraphrase: The Fed’s money printing is making the economy worse. Is this “expert” so stupid that he dismisses the Great Recession, the New Normal and the Capital Strike as factors that affect the state of the economy? Is anybody stupid enough to believe his hackish nonsense?
So, because the private sector has given us low wages, slow growth and high unemployment, tax revenue to the government’s general fund and the trust funds is significantly reduced. Now, thanks to the private sector, we have budget problems and the government can’t service its debt to the Bond Vigilante parasites. As I said, the budget “debate” is mindless gibberish. But, there is a sinister component to the debt alarmism of the conservatives and Republicans. The national debt is the excuse and a weapon that Wall Street and their stooge politicians use to attack vital government programs like social security. (The money raided from the trust funds is added to the national debt!) Am I the only one who smells a rat? What happens if Wall Street, the insurance “industry” and their stooge politicians succeed in destroying social security, Medicare and Medicaid? All that trust fund and tax money goes to them. Banking and insurance are not industries. They are expensive, redundant, unstable and predatory private sector bureaucracies. Insurance is a great idea, of course. However, today’s “insurance” companies are about more than insurance – they are about investing and profits. This is why government funded and administered insurance -- social security, Medicare, Medicaid and the Pension benefit Guarantee Corporation, -- are much better for the American people than the private sector version.
The national debt scam is like the old loan shark trick: load the sucker up with debt; then, the money lender has him (us) by the throat. We are VICTIMS of the greatest shakedown in history, $16 trillion! Do I blame the Federal Reserve for this mess? No, I blame Congress. The Fed under Chairman Bernanke has done everything it could to fix the economy that was wrecked by Greenspan, Rubin, Summers, Cox, Gramm, G.W. Bush and others. Actually, even with the U.S. Treasury issuing United States Notes, the Fed can go about its business pretty much as usual. I never said we should replace Federal Reserve Notes with U.S. Notes. I recommend a debt free supplement to our existing money supply. This is what Abraham Lincoln and John F. Kennedy did in 1862 and 1963 respectively. Three hundred million debt free dollars are already in the national money supply. Please click this link to the U.S. Treasury web site U.S. Treasury - FAQ: LegalTender Status of Currency for confirmation of this fact. All Congress has to do is increase that amount to what is needed to “promote the general welfare of the American people”. It is all up to Congress. Only Congress has the authority to replenish the empty (minus $5 trillion) trust funds. It is Congress that can authorize the funding for vitally important government agencies and operations that have been gutted because of “budget constraints” caused by Wall Street’s Great Recession. Only Congress can undo the monumentally stupid folly of downsizing and privatizing the National Aeronautics and Space Administration (NASA).
Why are people cheering the death of the Space Shuttle program? One title read: “Space Shuttle Endeavour’s last flight worth cheering about.” A former astronaut said: “I am feeling a tremendous amount of pride.” I don’t feel like cheering, I feel angry and ashamed that some people were stupid enough to take the magnificent Space Shuttle program and throw it onto the scrap heap of history. Who do I blame for this debacle? Politicians are obvious suspects, but I smell the same forces that want to destroy social security, Medicare and Medicaid -- Wall Street and their cronies. They killed the Shuttle program and now their “start ups” are swarming around and feeding on the dying body of NASA like a school of piranha. America had something that was the pride and envy of the world and now we have nothing and the world has nothing. How could those people be so stupid?!
Why do I blame Wall Street and their start up entrepreneurs? My Wall Street Killed the Space Shuttle Conspiracy Theory goes like this: With little fan fare, the politicians killed the Shuttle program in May of 1991 when they refused to authorize Rockwell International Corporation to build another Shuttle after the completion of Endeavour. At this point, Wall Street surely noticed that big money was to be made reinventing the space plane wheel that NASA had operating as routinely as an airliner. Stand by for CREATIVE DESTRUCTION! The IPOs are coming suck more money into Wall Street’s pockets. Apparently, Wall Street’s plan didn’t work very well because now we are begging and paying the Russians for a ride into space. How long will we have to wait and how much money will be wasted before the sacred entrepreneurs blunder their way to a replacement for what we already had ?
Here is a better idea: Using Treasury issued debt free money, rebuild the Shuttle program as it was before Wall Street and the politicians killed it. The template still exists, it wouldn’t be that difficult. This resurrection would include bringing Pittsburgh based Rockwell International Corporation back from the dead (a victim of Wall Street’s “creative destruction”). Rockwell built the orbiters so they are part of the original program. Shuttle building should have never stopped. Why was it stopped? If the problem was lack of money, then the debt free money issue falls on our heads like an anvil. If we had funded the Shuttle program with Treasury issued debt free money, America would still have the Space Shuttle and it wouldn’t cost the taxpayers a penny!
Wall Street wrecked the American economy, they killed the Space Shuttle and now they are threatening the solvency of the American government. Why would anybody want to wrap the pillars of the New York Stock Exchange with the American flag? I see this as an outrage and desecration of our hallowed symbol.
I hear a lot of talk about the Simpson-Bowles budget plan to slash the government. Politicians say we must make “tough choices.” Alan Simpson said, in effect, if Congress doesn’t make the tough choices and slash away at the government and government programs, the bond market will make those decisions for us. Erskine Boles said: “I believe the markets will force us” to come to a deal.” When did the American people give these loan originators the right to give away our national sovereignty to a bunch of Bond Vigilantes? Following the Constitution and issuing debt free money was/is a tough choice that Simpson, Bowles and everyone in Congress has avoided since the assassination of President Kennedy. This tough choice takes more guts than any of our politicians, then or now, possess. I have a question for all the “starve the beast” government haters. Where in the Constitution does the phrase “limited government” appear? I constantly hear conservatives and Republicans say: “Let’s get back to the Constitution and limited government.” I couldn’t find the phrase “limited government” or even the concept of limited government anywhere in the Constitution. The Constitution defines our government, it does not set limits. Twenty-seven Constitutional Amendments prove that point, stupid.
This is my contribution to the budget “debate:” Congress should immediately vote to increase the national money supply by twenty-five percent -- approximately $2 trillion -- with Treasury issued U.S. Notes. Why twenty-five percent? From 1862 onward, President Abraham Lincoln issued $400 million of U.S. Notes. This amount increased the money supply by approximately 25% with little or no inflation. Today, Congress can do exactly the same thing using the authority of the Legal Tender Act of 1862. The historical precedent was set by Presidents Lincoln and Kennedy. This fact destroys the objection that this was never done before. Two trillion dollars is a small fraction of the amount of money that is needed to fix our fiscal and economic problems, but it would be a good start. Is there a politician out there with the wisdom and courage of Abraham Lincoln or John F. Kennedy.
Rebuttals to my analysis, by reputable pundits or politicians, can be sent to PO box 815, Coraopolis PA 15108