Nice quote by FDR appointed Fed chair Marriner Eccles. Here's the punch line:
So it is an illusion to think that to eliminate or to restrict the direct borrowing privilege reduces the amount of deficit financing. Or that the market controls the interest rate. Neither is true.Read it at This Episode of Life
Why can't the Treasury borrow directly from the Fed
by Tschäff Reisberg
The rest of it is so clear and concise. Why can't Bernanke speak like that?
ReplyDeleteThe Treasury shouldnt borrow from anybody to create their own money, they should do what Abe Lincoln did and just create greenbacks at zero cost to the public and put a stop to the perpetual river of money flow to the primary dealers and members of the money trust , another name for them is the central bank, which is not federal nor private but a quasi organization of the black hand that has inflicted suffering to the american people and has never met its stated mandates but has fufilled the unwritten true mandate, make the senators and Jamie Dimons rich men at the expense of the sheeple of the USA.
ReplyDeleteThe fact that they cannot go directly to the Federal Reserve bank to borrow does not mean that they cannot go indirectly to the Federal Reserve bank, for the very reason that there is no limit to the amount that the Federal Reserve System can buy in the market. That is the way the war was financed.
ReplyDeleteThat's how government manages to fund all the evil things that it couldn't fund if it were constrained by having to collect taxes in real time from the victims, I mean the citizens. That's the whole purpose of fiat funny-money and ours has the special characteristic of allowing the elite to skim off the top directly from the money creation process.
Bob Roddis "That's how government manages to fund all the evil things that it couldn't fund if it were constrained by having to collect taxes in real time from the victims, I mean the citizens. That's the whole purpose of fiat funny-money and ours has the special characteristic of allowing the elite to skim off the top directly from the money creation process."
ReplyDeleteSo you recommend change in the monetary system supposedly to prevent elite from grabbing power and profiting. Can you cite one instance in which that has worked historically? I can't recall any. But I can recall elite gaining control and rewarding the privileged under every monetary arrangement that has been tried in the past.
I don't see that it is possible or desirable to use a monetary approach to what is at bottom a political issue. I agree that there is a monetary component to it, but I don't see it as determinative, and I don't see how adopting your solution would be beneficial to everyone, for reasons that many here have previously explained.
The funny thing is, I'm pretty sure he copied it from here-- unless there's someone else who's been reading through 65 year old congressional testimony lately (using the identical link for the cite).
ReplyDeletehttp://mikenormaneconomics.blogspot.com/2011/12/we-won-mmt-got-everything.html?showComment=1324748843415#c989175682197295364
That's hilarious beowulf. But do you want to know what would make me slap my knee even harder? Share your extensive research with MMR.
ReplyDeleteBob Roddis, the quote is from 1947 - "the war" means WWII. Do you think it was "evil" that the US went to war against the nazis? Or would it have been better to let hitler take over the whole of europe?
ReplyDeleteAnonymous,
ReplyDeleteOne of the main causes of WWII was German expansionism. What was the cause of German Expansionism (or Lebensraum?) Was it some flaw in the German character? What was it? And what then made the Germans act as monsters?
The depression brought about in Germany by the Allied policies post WW-I (directly because of German Debt payable in gold.) Hitler got out of this depression by means of fiat currency, and good old military Keynesianism. But Germany is a small country with limited resources. When one gets hooked on growth, the results are problematic at best. The only way to continue German growth was for Germany to expand its borders and impoverish its neighbors (in a way this is what it is trying now in Europe with the Euro shenanigans.)
The problem with Keynesianism is "How do you stop growing without causing a depression?" "How do you stop growing so that you do not pillage the planet?"
Growth is addictive. But it is also necessary at times. How do you achieve a balance?
"The only way to continue German growth was for Germany to expand its borders and impoverish its neighbors"
ReplyDeleteThat wasn't the only way. It's just the way that was chosen by the nazis. Their economic model was completely geared towards war from early on. They were planning the conquest of europe and the elimination of populations they hated for quite some time.
http://www.economist.com/node/21556949
ReplyDeletey,
ReplyDeleteMilitary Keynesianism is very easy for politicians to adopt, and the population buys into it very simply. Find and enemy, demonize the enemy, and suddenly the financial spigots open up. Keynesianism that actually benefits the society like social security, medicare for all, social safety nets, planning for the future of society are much harder to sell to the common people. Petty jealousies, "moral hazard," "free lunches" all start coming into play, and the common people start fighting one another, instead of unifying around the goal of improving society.
Paradoxically, it is far easier to sell "inequality" than it is to sell "equality." Human beings want to feel special, and one way they feel special is by pretending that they are "better than other people," "richer than other people," "holier than other people" etc. etc.
And this is why it is easy for a group to unify against an "enemy" - "We as a group, have God on our side" and "Our God is better than their God"
"Military Keynesianism is very easy for politicians to adopt"
ReplyDeleteIt depends on the circumstances really.
Germany was coming out of a terrible economic and social situation. People were traumatised by the first world war, the hyperinflation, and the great depression. The world was splitting into extreme ideological camps - many were genuinely afraid of the rise of communism, but also felt that the capitalist financial elites had sold them down the river during WWI, then screwed them again with the hyperinflation. The nazis spread the belief that both communism and capitalism were 'jewish plots' to take over the world and destroy the 'aryan race', etc.
They were sold a dream of a great-again germany, but then the new nazi regime became increasingly ruthless and soon people no longer had a choice. The nazis banned non-nazi party trade unions, banned strikes, made it illegal to quit your job, forced down wages, made it illegal to change prices or raise wages, etc. After a while anyone who spoke out against the regime was forcibly silenced. Only pro-nazi media was allowed, kids were brainwashed at school and in the hitler youth, people were forced to join the party and the army. Classic totalitarian takeover.
The keynesian policies which dominated in the western world following WWII, which lead to full employment, increasing living standards across the board, fantastic economic growth and improvements in productivity, and greater equality, etc - were actually hugely popular.
Though I suppose it could be argued that much of the US was still a 'war economy' in a sense, given the madness of the cold war arms race.
Clonal" "Paradoxically, it is far easier to sell "inequality" than it is to sell "equality." Human beings want to feel special, and one way they feel special is by pretending that they are "better than other people," "richer than other people," "holier than other people" etc. etc."
ReplyDeleteIN the US this is a racist divide. "Ordinary" (white) people don't want "their hard earned money" (taxes) going to lazy and indigent (black) people or their money and their jobs going to "illegal immigrants" (most of whom are of Native American ancestry from Central and South America).
Without this racist divide it would be a much more difficult sell. Look at the other developed countries, all of which are much more "socialistic" than the US. The US is at the bottom of the heap in the developed world other than in GDP and military.
Another reason I am saying if you don't want to stay and oppose the status quo, then the better option is to seek greener pastures where the populace is overall saner.
Tom,
ReplyDeleteYou are reading my comment wrong. I am not talking about the race thing - even though that plays out a lot in the US.
I am talking about the psychology that idolizes the rich figures in society - the "superstar" syndrome. That syndrome, leads to a skewed sense of the self - which leads people to purchase a one dollar mega lotto ticket in preference to buying a homeless person a dollar meal - even though in my opinion, feeding the homeless is more gratifying than the lotto ticket.
The psychology causes an individual to picture himself/herself in the place of the "superstar" and drawing a lot of vicarious pleasure from that picture -- and the thought "I can be like that as well." That thought in itself is viewing yourself from a perspective of extreme inequality - and wanting/ desiring that outcome. Feeding the homeless person brings no such vicarious pleasure - and is viewed as being a zero sum game.
I hope I did not give the wrong impression of you intent, Clonal, and thanks for the qualification. That is what I took you to be saying.
ReplyDeleteI'm saying that at bottom it is not only a quirk in the American mindset as you describe. It is basically a racist bias and it is being used successfully as a political wedge, just like the different between public and private workers is being used to destroy public unions by appeal to private workers after their own unions were rendered ineffective so that they are less "advantaged" than public workers.
These wedge issues are cleverly designed to play on cognitive biases in order to manipulate voters to vote against their own interests and the shared interests of their class.
Clonal,
ReplyDelete"Feeding the homeless person brings no such vicarious pleasure - and is viewed as being a zero sum game."
As a person on the political right and embedded in Christendom, I can testify that 'feeding the homeless' (and other charitable works) is a big part of what the pastoral types in Christendom like to do and lead others into, and most of these folks I can tell do look at it as pleasurable or otherwise personally rewarding.
Again these are the pastoral type of people in there. Which today Christendom only has 'evangelists, pastors and teachers' (Eph).
imo this activity then starts to drift towards 'faith thru works' (which I believe to be false), and these pastoral type of people start to resent or to look askance at the thought of 'the government' getting involved in these 'charitable works'. (perhaps they start to look at govt as a sort of 'competitor')
And of course a lot of what the govt does end up doing is 'handouts' (food stamps, medicaid, etc) rather than the policies that MMT would prescribe ie JG, HSAs, revenue sharing, etc...
So I think what you then start to see in Christendom (this is a big political block in US) is a distrust in 'big government' that starts to develop, to the point where they actually start to desire 'smaller govt' which is code for balanced budgets and spending cuts (even for public assistance programs ie 'safety net' which you would think they should support).
The trick is going to be how to get these people in Christendom to drop this dogma, which includes 'faith thru works' which in itself is a HUGE misunderstanding between major sects within Christendom.
I see the hard over "faith thru works" types in Christendom probably opposing MMT... but not perhaps because they do not find helping others non-pleasurable...
resp,
Bob (2nd comment above) is right to say “The Treasury shouldnt borrow from anybody to create their own money, they should do what Abe Lincoln did and just create greenbacks at zero cost to the public..”
ReplyDeleteHowever, there is problem there, namely that politicians then get very close to the printing press. And we all know where that leads, especially just before election time.
The solution is to have a committee of economists, not those Neanderthal politicians, determine overall stimulus – monetary AND fiscal. The exact level of stimulus (or “anti-stimuklus”) is after all a very technical question. In contrast, the electorate and the Neanderthals they vote into power can be left to determine the strictly political stuff like what proportion of GDP is allocated to public spending and how that is split as between education, the military, etc.
Found this while looking for the actual law that forbids the Treasury from running an overdraft at the Fed. Came across one bit of testimony with a senator calling the arcane method the Fed finances government "absurd" but I lost it, if anyone finds it please let me know.
ReplyDeleteAnyways the law is Section 14(b) of the Federal Reserve Act:
"To buy and sell in the open market, under the direction and regulations of the Federal Open Market Committee, any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States."
The key word there is open market.