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5 Easy Steps to Saving the Economy

PragmaticIdealist's picture





 

Earlier this week, the Federal Reserve, in the second part of their two-part series entitled 'Fatal Conceit: The Return of QE', announced that they would be enacting a tax of $600 billion on each and every U.S. citizen in order to appease Wall Street and the newly commissioned QE Czar in Washington (rumour is this will be Paul Krugman).  The money "raised" from this de facto tax would be spent as any reasonable-minded central planner would advocate: by temporarily propping up asset markets for 6 months through monetizing the federal debt. This will effectively kill two birds with one stone for the Fed, allowing Wall Street to engage in their pursuit of massive bonuses in a hyper-liquid environment, and allowing Obama to go merrily on his way creating new jobs (WANTED: WINDOW-BREAKER (night shift) / WINDOW-FIXER (day shift)).

Although these policies will undoubtedly, somehow, possibly rescue the ailing U.S. economy from the precipice of the hyperinflationary Japanese-style deflationary spiral awaiting it, I have decided to come up with a set of policy perscriptions that the U.S. government may want to consider in the event of the surfacing of unintended consequences . Now, instead of the typical Austrian perscription (i.e., cut all spending and allow everything - including the U.S. middle/lower class - to be liquidated even though there is a massive debt overhang), my policies attempt to find balance between maintaining economic sustainability and preventing the chaos and various negative externalities that 100% austerity measures would cause. Also, my policies recognize that income and wealth inequality has been on the rise in America for decades now as a result of federal reserve inflationary policies and a system of legislation that allows the people or corporations with the most expensive lawyers to set up very high barriers of entry to the American Dream.

 

5 Easy Steps to Rescuing the U.S. Economy (in a Politically Feasible Manner)

1) Allow Ron Paul to have a go at cutting out all pork in the budget.

The Department of (Mis)Education, at least half of all military spending, entitlements directed at anyone beyond the poverty line, any subsidies for anything (including but not limited to college students majoring in sociology, the sugar industry, farmers), the criminalization of marijuana, social security (which is nothing but a transfer payment system anyways), all need to go. If anyone complains about not helping the weakest among us, respond by saying that unemployment programs (i.e., people are given benefits depending on their willingness to learn a new trade and prove their ongoing learning of said trade), as well as welfare and food stamp programs will either be untouched or improved. It also would not hurt to raise taxes somewhat on the very wealthy (i.e., incomes above $1,000,000) since taxes are going to have to be raised eventually anyways.

2) Declare a one-time jubilee of $X on all personal debts, with half coming from forcing the lenders to eat the losses and the remaining half coming from printing money to pay off the banks. For the rare American that is debt-free, they would get the entire amount in cold hard cash.    

Where $X is the amount needed to make the average mortgage LTV ratio for the bottom 1/3 of American homeowners equal to 90% instead of the 130% it's at now. All of the ancient civilizations had to enact a jubilee at one point and it's the only way for the U.S. to maintain any semblance of a non-feudal society at this point.

There is no question that the balance sheet of the average American is in dire straits. Rampant speculation in the housing market fuelled by low interest rates and a sad ignorance of how house prices work resulted in a severe disequilibrium. Either we let all the "irresponsible" banks and homeowners go under, or we recognize two unfortunate-but-true facts. 1) The fragile banking system that exists today is mainly a product of government influence and the entire TBTF system could be torn down once at least some of the banks are sufficiently capitalized, and 2) Many Americans were forced to go into too much debt as a result of their jobs being offshored thanks to record low artifical interest rates and the slave-type conditions the Chinese are willing to accept - they deserve at least some compensation for these phenomena.

Sure, the amount of money printing and debt forgiveness required here will be very inflationary and painful, but since actual people (and not corporations or banks) will be getting the initial infusion of cash, they will benefit the most. Net creditors (i.e., mainly banks, China and Japan) and pension funds will be hurt the most, but hell, the banks deserve it and China and Japan had it coming anyways (default or money-printing, pick your poison). To avoid a complete dollar collapse, the U.S. gov would have to a) commit to never money printing like this again for the foreseeable future, and b) drastically cut all spending. Seeing as how politicians always pledge to cut spending and never do, the only way to avoid dollar collapse may be to take a year or two actually cutting spending (i.e., see policy (1) above) before enacting the jubilee. Sure, banks and some corporations will take a lot of the pain here, but these are precisely the parties that have unduly gained for decades at the expense of the American worker, thanks to government intervention, and who are sitting on record cash balances or will rapidly see higher sales anyways.

3) Eliminate any tax that dissuades the hiring of Americans (e.g., payroll tax, social security, etc.), introduce tax credit and deductions for hiring Americans, and tax firms for every worker they hire that is not American.

Labor-arbitrage must be stopped, even if it means making American corporations less competitve. An eroding middle class is not sustainable and will only lead to feudalism, given the quantity of impoverished workers in the world willing to work for peanuts. Americans simply cannot compete with poorer foreign workers, and every nation needs to look after its own populace first and foremost before considering charity. Of course, the other (and better, albeit not as politically feasible) alternative is to allow free trade but to make the income tax system significantly more progressive or to even consider equalization payments between tax brackets. Severe levels of wealth inequality are simply unfair. Even if you believe that people deserve what they work for, it is a fact of life that money is made not only through creating value, but also through cheating, being lucky and inheritance. Given that these cannot possibly be measured reliably, they must be estimated and applied uniformly (through a progressive taxation system, for example). The level of "acceptable" wealth inequality is of course determined by the electorate in any democracy, through their voting. To the extent that the electorate is willing to forego economic growth in exchange for fairness of result, a progressive tax system is ideal. People must understand that this depression did not happen overnight for most Americans, but has been in place for decades and only hidden by increasing levels of unsustainable leverage.

4) Declare that no bank is too big to fail. Set up a government-run and free electronic money system whereby depositers no longer have to rely on the banking system to receive money or make payments/write cheques.

The whole concept that the government must insure the deposits of banks and that a massively leveraged banking system is required for capitalism to function efficiently is absurd. As Nassim Taleb likes to say, nature gave human beings two lungs and two kidneys for a reason. In any free society, people should be allowed to deposit their money somewhere and money should function as a store of wealth, free from the effects of a banking system that is prone to over and malinvestment during times of euphoria, as any group of investors is apt. Thus, the government should set up the electronic infrastrure required for people to deposit money in accounts and use their money as they wish, without the money being borrowed or used surreptiously. Sure, lots of banks will fail, and some may need to be taken into receivorship if the crises escalates. But at least a lot of parasitic banks/bankers/executives will be purged from the system and unable to gain access to an almost cost-free source of funds (God knows the FDIC underprices their insurance...)

5) Once the effects from the jubilee, budget cutbacks, labor arb tariffs and banking system remodelling policies are observed, and the financial system and American people are on somewhat solid ground, bring back the Gold Standard and alter the mandate of the Federal Reserve such that it solely engages in macroprudential supervision/research and must seek the permission of congress, the President and more than 50% of the U.S. population prior to printing any money - money that will be given to each and every American in equal instalments (see Policy 2 above). Then, allow interest rates to rise and be determined by market forces. Let the chips fall where they may.

Any questions?

 


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Mon, 11/08/2010 - 12:50 | Link to Comment Mediocritas
Mediocritas's picture

Good to see a thread devoted to finding solutions. Don't think much of the suggestions, they're far too small in scope, but still good to see the effort.

#1: the pork is actually needed in this twisted world we live in. Fact is that the primary role of government is as a money launderer for the Fed. Given that the Fed has now succeeded in capturing the government, US govt debt to the Fed is irrelevant (debt to yourself is not debt). Pork is a great way for the Fed to inject money into the economy so who cares? The suggestion is targeting a symptom rather than the disease.

#2: this would be hugely inflationary and after a brief surge of euphoria would put us right back where we were. Pretty pointless. Historical debt forgiveness worked because economies were paralyzed by deflation from money sinks. That is not the problem here (I mean, it is being dealt with in other ways).

#3: this is just racism. Since when were American workers actually better than any other worker? If the worry is paid wages going overseas, then tax exchanges. Maybe Americans should just get used to working for less OR maybe Americans should demand that foreign labor have the same protection (and higher wages) as American citizens do...

#4: There's some merit here but it needs to be explained in far more detail. Too vague and too easy to see it falling back to the way things are.

#5: No. The Gold Standard is huge mistake (as any commodity backed currency is). These things have always failed in history (eventually) because they are too inflexible and encourage hoarding. It's much better to maintain a highly flexible fiat currency but to ensure that the control of money supply is placed under democratic review rather than private interests. (This falls under your #4 I expect).

Mon, 11/08/2010 - 11:57 | Link to Comment ManitouMike
ManitouMike's picture

How can you talk about rescuing the economy in one breath, while slashing government spending in the next? The short term effect of slashing government spending to the tune of what you are suggesting, will simply cause another recession and an associated bump in unemployment. Government spending DOES in fact cycle into GDP and employment.

About defense spending, simply slashing spending like you are talking about would be quite dramatic. Whether you like it or not, you simply cannot just slash spending in key industries without causing huge amounts of pain. The problem with the housing bubble was that people obtained skills in various housing industries. When the bubble collapsed so suddenly, you ended up with massive numbers of people who's skills were no longer needed and had limited market value. One reason why the unemployment rate is still so high is that there is simply no replacement industry to absorb those people, and existing industries have no need to expand. Now back to defense spending. Defense spending contributs a lot of money to research and development, as well as serve as a de-facto employment program for the unskilled. Slash defense budgets and all of a sudden you will find yourself with huge increases in youth unemployment as well as your middle class engineers and scientists permanently out of jobs. I say permanently because there isn't enought tech in this country to absorb 200k-300k unneeded and highly skilled technical people. If you don't have a replacement industry for the people you just yanked their jobs out from under, you will just make the economy worse. It's really ignorant to just assume that slicing spending will magically cause jobs to appear out of nowhere.

Point number three is just obsurd. Business owners will hire people when they need additional people to meet demand. Even if you get rid of those taxes, business will simply either pocket the difference, or cut their prices. The decreased prices might increase demand and more people might get hired eventually, but all you did was increase short term employment at the expense of people's retirement. The social security and medicare programs have enough problems as it is without a complete disruption of their funding. I'll also note that SS and Medicare are pay-as-you-go, so if you just cut the employment taxes, the federal government will have to allocate LOST OF CASH to write the checks to the current retirees.

In short, you are so full of shit it's coming out of your ears.

Zero Hedgeits are so good at finding the unintended consequences of the fed and other establishment policies, but have little to no ability to apply that same logic to their own supposed "fixes." This is my big problem with those who just want to get rid of the Fed. It would be folly to replace the monetary system without having some understanding and appreciation of the risks involved and the consequences. It's childish to just assume that you can abolish the evil Fed and we will suddenly find prosperity. It's quite possible that you would abolish the Fed and get an even worse system in it's place. Thank GOD that saner heads prevail.

The only reason I bother to read Zero Hedge is to catch the 5 percent of good material that occasionally comes across the RSS feeds. Occasionally, the kooks really do have some good points worth paying attention to.

Sun, 11/07/2010 - 22:35 | Link to Comment Aristarchan
Aristarchan's picture

The real problem in this country is that we really have nobody to vote for who really has any agenda other than being elected, and then re-elected. We (well, not me, I do not vote, but that does not absolve me of any guilt) constantly vote in lawyers who are more interested in power and creating new laws than in looking deeply at the system and determining why is does not work as it was originally intended. Now...first, the swingers who originally created this system were not Gods...they in fact, were assholes. Slavery continued, despite their high-flying language in the constitution, women could not vote, non-landowners could not vote, and they created an electoral system which was designed to prevent the common people (popular vote) from having too much of a voice in who got elected. So now we have the Tea Party....ok...what is that going to get us? nothing. The Republicans will co-opt then as soon as possible. And the Rebublicans, whose new majority leader got up and told us they did not have a mandate ( and tried his hardest to show real - vote getting emotion in the process, is now watching his minions on all the talking-head TV shows now claim a mandate). Fuck them and the barely viable horse they rode in on. The only difference between the repubs and the demos is the type of voter they try to appeal to...that is it. And, do not throw Ron Paul at me, I consider anything that he is involved with is not only dumb, but doomed from the start.

What we need is a viable party that can get elected while at the same time, jerk the lifestyle heart out of 300 million Americans....think that will happen? no, of course not. Is it possible to create huge voting blocks that represent a platform, and not a party? maybe, but probably not...just look here at ZH, which is a fairly cohesive community...there are many different ideas and disagreements. I guess we are what we are....a country divided by what it takes to get US....the indivdual, what we want. I say that because every idea I hear is a zero sum game.

Sun, 11/07/2010 - 21:49 | Link to Comment Crab Cake
Crab Cake's picture

It doesn't matter if I agree or disagree with your post.  Why?  There is zip chance of "a solution" coming to the fore; yours or otherwise.  Why would TPTB want a solution?  They have exactly what they want. You pretend at the idea that the people and institutions in control don't want feudalism, news flash they do. 

If you don't want to live in a feudalistic USA, well you're going to have to do more than come up with ideas; not that they're horrible.  These kind of ideas might matter if our representatives actually represented our interests, they don't, or if the people and institutions that have a chokehold on our nation in too many ways to count were benign; they're not.  So, who's listening?  Hmmm?  Email your suggestions to the Congress people, the President, and see what happens; automated thank you piss off message. 

If we don't want to be serfs, if we want our ideas and concerns to be given voice and power, then we will have to fight for it; figuratively and possibly literally. It will come to this without doubt.

Sun, 11/07/2010 - 21:39 | Link to Comment Revolution_star...
Revolution_starts_now's picture

You "ASSUME" they want to fix it. In an effort to not be an ass you might consider the "lawn chair" theory. Flowing from the "form follows function", assets are rolled up into greater concentration.

If I replaced the nomenclature "banking" with "orange juice" I suspect you might have greater insight to the "problems".

Sun, 11/07/2010 - 19:40 | Link to Comment Fearless Rick
Fearless Rick's picture

I didn't bother reading most of the article and comments because if there were an easy way out, it would be already underway. Allow me to offer the HARD WAY OUT.

1. Prosecute all the bankers, brokers, appraisers, etc. who perpetrated the FRAUD that was the housing boom. Liquidate the five largest banks. Additionally, all mortgages held by the largest lenders - any that used MERS (dismantle that POS) - are void. Homeowners win, even those current and paying. Everybody owns their property free and clear. The banks lose. Fuck them because this was all their fault to begin with.

2. Cut all taxes to the bone. Eliminate the payroll tax. Smash social security to pieces along with Medicare. Make payments to those already invested (baby boomers) in lump (non-taxable) sums. Keep paying those already on it, but slowly wind it out of existence. These measures will free up huge sums of disposable income.

3. Cut all government salaries by 20% - federal, state, local. Cut pension and health benefits by similar amounts if not eliminating them altogether. Get the government pensioners off the taxpayer backs. eliminate 75% of IRS rules and other regulations that harm small business.

4. Cut out the Depts of Education, Homeland Security and 40% of the Defense Budget. In lopping off those three big wasters, we could probably run a surplus.

5. Legislate the Fed out of existence. Return to some form of gold/silver standard.

Elect Ron Paul-Rand Paul as Pres/VP and most of this will happen, but can we wait until 2012? Probably not, so I say we're screwed unless Rand Paul filibusters the vote on raising the debt ceiling. Any red-blooded patriot (and I'm not one of those crazies who carries guns and thinks we should overlord the rest of the planet) should promote this ONE IDEA with passion, for it alone will push us over the edge and make the reluctant congress actually DO something for a change.

Sun, 11/07/2010 - 21:00 | Link to Comment Aristarchan
Aristarchan's picture

I just asked myself that question:) But to ask this question a little deeper....if we have a gold standard currency, we allow foreigners (who own most of the gold) to determine the price of the dollar...where if we have a fiat currency, we have some control per interest rates and the money supply. Again...am I wrong here? and if so, why?

Sun, 11/07/2010 - 21:00 | Link to Comment seadragonconquerer
seadragonconquerer's picture

Yeah...I stopped reading after the first paragraph. These rationalist solutions have no relevance to current POLITICAL - economic circumstances. What we are dealing with here is, in essence, the universalist machinations of a savage, nomadic tribe that has been fomenting revolution and war for 3,500 years, massacring, being massacred, then re-setting and doing it all over again. Push is coming to shove...ya know, like in Macy's during a sale. Ron Paul? At the risk of repeating myself, if Dr. Paul gets too frisky, he will learn the wherabouts of Judge Crater.

Sun, 11/07/2010 - 20:47 | Link to Comment Aristarchan
Aristarchan's picture

How do you see the transition from Medicare and social Security for old people? Most old people are not rich and cannot afford health insurance...do we just let them die?

Sun, 11/07/2010 - 22:23 | Link to Comment Aristarchan
Aristarchan's picture

Ok....is this post not a "reasonable" question that needs to answered? I can understand you flagging my personal rants, but now you are flagging a question that has bedeviled this country for years. The reason? you have no solution. Anything that questions your pet theories is evil. Fine, flag me out of here...do it to everyone that has an opinion that is not YOURS. But, remember where that puts you in the overall and important scheme of things...at the bottom, just another scum-sucker who loves a plan that does not hurt them. Selah.

Mon, 11/08/2010 - 00:32 | Link to Comment Fearless Rick
Fearless Rick's picture

Just to be clear, I did not junk or flag you. As far as old people on medicare and/or SS, my proposal is to keep them on it, but anyone in their 60s has to be weaned off, offered a "buyout" for what they've paid in. Medicare/Medicade? The sooner we get the government and insurance companies out of the medical field the better. I am old enough to remember when doctors made house calls. Let doctors be doctors. Do you think lawyers would like to have to work in a system like our current health care? Accountants? Auto mechanics?

America needs to go back to capitalism and the resourcefulness of the individual. Anything less than that is just more sliding into socialism, which has harmed this country's independent spirit.

I should add that many of the people on welfare and disability have gamed the system for years and do not deserve the benefits they receive. There's a lot of process needed to bring the country back to where it needs to be and there will be great pain for many, but that pain will be nowhere near as severe as if we stay upon the current path that leads to destruction of just about everything.

Free markets, not free rides.

And, as far as a gold standard, the dollar should be pegged to it. Right now, a dollar is worth roughly 1/1400th of an ounce of gold, a sorry number. My understanding is that if gold continues to appreciate, we will all be less wealthy by that standard. If the currency were pegged to gold, I suspect the dollar would depreciate even further, unless the government stopped its absurd policies.

That's the beauty of a gold standard; there's an actual base from which the value of money can be measured. In today's environment, with global floating currencies, there's too much manipulation and speculation. I believe the currency situation is a large part of the global problem, not confined to the US.

Sun, 11/07/2010 - 20:51 | Link to Comment Aristarchan
Aristarchan's picture

I just do not get the return to a precious metal standard as a backing to US currency. Gold is a highly-speculated commodity (as I admit..the dollar is), and we do not own most of it. Maybe this is some hole in my education, but I do not understand it. Plus, to me, a country needs the ability to drive their currencies up or down, depending on global circumstances. I would love for somebody to honestly explain to me whay I am wrong.

Sun, 11/07/2010 - 19:09 | Link to Comment gnomon
gnomon's picture

It is all so simple, (or all so difficult).  It is by applying CONSERVATISM to all of our financial and social problems that we will cut the Gordian Knot.

LIBERALISM is the antithesis of reality.

There is no magic formula.  It is the acceptance of PAIN. 

The only caveat is that all costs one must keep the military strong and our borders secure.

And prosecute the BASTARDS that got us into this multi-decadal mess.

Sun, 11/07/2010 - 18:40 | Link to Comment New Revolution
New Revolution's picture

Yes, I have a question.... Your full of shit.    Everything you've rattled off does nothing for the systemic issues underlying the problems with America's economy and its government.   Half of what you say might be applied on the third go around of cleaning up this mess, the rest is a pipe dream and will never garner the popular vote to apply.

The first thing, the first damn thing that has to be done is to get rid of the privately held Federal Reserve Bank if for no other reason than it is privately held.    Why is this so hard to realize.   This leads to the end of the 2B2F's because the only reason they're even afloat is because the FED (which their major shareholders own) is keeping them alive.   Every 2B2F out there is a zombie,... as in dead.    So you bury them because they're stinking up the place.

What we're talking about is cutting the strings that about '300 White Guys in Manhattan' use to manipulate the markets, banks, finance, the government et al.   So the next thing that's done is to do away with all their new little financial product lines like CDO, CDS's, all these new derivatives and especially 'naked short sales'.

That takes care of most of your Regulation issues other than you go back starting at March 11, 2008 at the start of this manufactured financial crisis we're in and start tracking down the people who took us on this ride.   It's a witches brew of numerous criminal violations including RICO.   These people need to be indicted and tried.   If found guilty they'll be spending a lot of time with Bernie Madoff.

Then if you want to start making some of the plays your talking out your ass about, you can start with a RTC of commercial banks focusing on the residential side simply because commercial real estate is so deep and wide and fraudulent it still has to work itself out a bit down the line before we take that on,... besides, a lot of that is wrapped in insurance company's and various funds.

I'll share something else with you Mr. Genius.    America spends too much on foreign energy sources and if our government (after we've cleaned house) has to provide incentives to ween us away from our foreign addiction I say more power to US.   Solar, wind and nuclear will create one hell of a lot of new good paying jobs and the result will be real wealth creation.

Obviously, you haven't thought things through and your solutions are knee jerk high enough to kick us back in the ass while we're not looking.   

There you have it.   I don' think I've missed anything, but if so, I'll be writing about it.

Welcome to the New American Revolution!  

Sun, 11/07/2010 - 20:25 | Link to Comment Aristarchan
Aristarchan's picture

I am a little leery of the new energy technologies helping us much per an internal manufacturing base...already the brand-spanking-new solar cell plant that Obama visited and made a speech about "non-exportable jobs" has closed down due to competition from China. Other than erecting trade barriers per import quotas or taxation, if we are to compete on a global scale (in manufacturing) we will have to become more competitive. That is difficult, and will require structural changes that will impact everyone in this country. Of course it should begin at the top....if the government can get a handle on expenses - and that includes the "third-rail" of entitlements, then taxes across the board can be reduced. I would even be in favor of a low sliding-scale tax (with limited decutions per below) just to cover what entitlements that remain, and fund all other programs (defence, etc) through a national VAT tax. It is almost impossible to design a practical (and fair) system that trends Americans to a lower wage, so it is probably easier to do on the other end....allow tax credits for goods that are exported...including TO THE WAGE EARNERS INVOLVED...is this fair? probably not, will it eventually get frothy, probably, but it would be a real start (I think) to getting exports moving again. I will mention innovation, although a government cannot "legislate it as such." What it can do is offer tax credits for R&D, and try to get the roughly 50% of advanced degrees that are awarded to foreigners in our universities to stay here by offering immediate citizenship. I know everyone here seems to hate Social Security, but I do not have a real problem with it as long as it is done correctly. The Chinese system seems to work ok...it is run by the provinces - and even some cities using government guidelines. The problem with running it by states here in the US is it will of course, be unfair...rich states can take a larger chunk of wage earners pay...compare say Texas to Mississippi, to fund a more lucrative retirement. Maybe the way to deal with that is to give additional tax credits to companies that move to poor states, as long as the wages they pay there fall within a "national average."( I know I am gonna get flamed on this one:) The funds in all states that are collected from people are deposited in trust-funds, with interest paid, for the person who pays it. They can be transferrable to wives/husbands under the usual circumstances. The funds collected are NOT deductible (we now have a flat tax anyway).

Ok....our education system.......everyone blames it for all of our problems, but I do not think that way. I think you are always going to have people who are going to either drop out of school, or just finish high school...that is the human condition. And, we need people to dig ditches, mow grass and do all the other things...these things are NOT degrading...not if you want full employment. A tiered system like Germany's sounds good, but would probably not work in our society....but I think it should be examined. But, for the ones who go the non-skilled route, they will be dead in the water as long as immigration is not controlled per the people who are coming in and doing the lower wage jobs now.

There is probably a lot more I can say to get in trouble here...but I will leave it here for now.

Sun, 11/07/2010 - 19:00 | Link to Comment anony
anony's picture

The point of Chaos and Inertia has been transcended.

There is no cure for the global economic system, notwithstanding your innovative nostrums.

A single state, like Californica, cannot be governed effectively. How on earh do you expect a consolidated 51 of 'em to even reach minimal functioning, let alone efficiency, fairness, equality??

Bust up the disunited states to officially recognize the Fail or muddle along incoherently babbling, while those who control it, well known to anyone who chooses to observe these last 3 years, and can still exchange oxygen into carbon dioxide, continue to recognize and capitalize mightily upon the chaos they have created.

Sun, 11/07/2010 - 18:26 | Link to Comment Aristarchan
Aristarchan's picture

Won't work....but then I don't have a workable solution either that is acceptable to the American people and practical to implement in a global environment.

Sun, 11/07/2010 - 18:17 | Link to Comment Disambiguation
Disambiguation's picture

Create an TRC II which buys all of the current forclosures for fair value, and then rents to any occupant who wants to and can affor the fair value rent. Then the Trust can sell the home in the future for fair value, and the renter can participate if the are qualified and interested. Hopefully the current investigation by our 50 state AGs will lead to the proper treatment of the banks

Sun, 11/07/2010 - 18:15 | Link to Comment gkm
gkm's picture

You lost me at:

1)  somewhere between "Print money" and "money is a store of wealth" since that makes no sense

2) debtors would get X dollars and savers would get X dollars, except that debts and assets shouldn't be valued the same way; if you say savers would get X +, then that makes some sense, in fact they should get X + X imo and debtors would get zero, which is the normal course of things

Sun, 11/07/2010 - 21:14 | Link to Comment Aristarchan
Aristarchan's picture

From a practical sense, money is a store of wealth as long as it is accepted for goods or services in a quantity that is in equilibrium with what the users consider sustainable for their present needs. Of course, this is premised on defining wealth as an acceptable lifestyle. People always look at the future and the value of a currency and worry about gains and losses per their future condition. However, without the existence of high inflation, this worry rarely manifests itself in perceivable losses. In other words, as long as most people thing a fiat currency is valuable, then it is, by definition. There are outlying conditions that can change this (Weimar), but they are relatively rare in developed countries.

Sun, 11/07/2010 - 18:09 | Link to Comment Dmon
Dmon's picture

Agree some form of #2 needs to occur.  why shouldn't ordinary americans benefit from this money they are borrowing.  We are paying the bill are we not? 

Inflation is what benny boy is trying to create is it not?  so have at it and erase the debt of ordinary citizens in the process.  

And while we are at it give an amount of cash for the purpose of a mandatory refinance of mortgages at prime.  Screw the banks. they got us into the mess let em take a hit for a change. 

everyone gets a decrease in monthly expenses, banks get their "funding" and there is an ongoing economic stimulus that folks can count on for the life of their new mortgage term.  

If liquidity was really the problem for the banks then why not just "fund" them through ordinary taxpayers paying off debt with their own government borrowed or printed "stimulus money?"  

Oh I forgot about bank profits and that they might not get their bonuses...gee how insensitive of me to forget. 

the fact that no plan even resembling anything close to this has even been discussed and that not one inditement has been issued is proof how far we are being sold up the river.   Its all just playtime for them, and bendovertime for the rest of us.  

 

 

Sun, 11/07/2010 - 17:51 | Link to Comment RockyRacoon
RockyRacoon's picture

Set up a government-run and free electronic money system...

Right, like I'm going to entrust a nickel to the gov't thieves.  How long will it take them to evolve (devolve) into a fractional banking system and we'll have a national bank!  Sure.   Bad news.  Remember the Congressional bank in which all our "lawmakers" were overdrawn?


Sun, 11/07/2010 - 17:33 | Link to Comment Disambiguation
Disambiguation's picture

This book, The Seven Deadly Frauds of Economic Policy is Warren Mosler's Neochartalist proposal:

http://www.scribd.com/doc/27633503/The-Seven-Deadly-Frauds-of-Economic-P...

Sun, 11/07/2010 - 17:28 | Link to Comment Disambiguation
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In "The Seven Deadly Innocent Frauds of Economic Policy" Mosler's proposal, similar to #3, begins with a payroll tax holiday. The other points:

  • Declare an Immediate ‘Payroll Tax Holiday’ — The U.S. Treasury will no longer deduct FICA, Medicare and other Federal payroll tax deductions from your paychecks, resulting in an immediate increase in take-home pay of roughly $650 per month for a couple with a combined income of $100,000 per year. That’s big money, and the extra cash will help you pay your mortgage and car payments, which helps the banks the right way, from the bottom up, and not through the top down bailouts of the recent past.
  • Give U.S. States Revenue Share Money Based on Population — Provide each State government with an immediate, unrestricted $500 per capita of revenue to spend where they decide they need it most.
  • Fund an $8/Hour National Service Job for Anyone Willing and Able to Work — This will provide transitional employment for the unemployed, preparing them to find new private-sector employment as businesses look to add millions of new jobs to meet the demand coming from a rise in spending due to the increased take-home pay from my first proposal.
Sun, 11/07/2010 - 17:21 | Link to Comment Akrunner907
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Just nuke the place.....only way to be sure!

Sun, 11/07/2010 - 17:18 | Link to Comment geno-econ
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You recognize many ills of our economic/political system but forgot the fact that the global trading system no longer works for developing nations and in fact forces the financial and political system into whoredom to supplant jobs without any so-called comparative advantage in return. China with a worse unemployment problem will never agree to a level playing field but will keep buying a minimum amount of US treasuries to keep the bankers happy and keep the bananna hanging. It seems there is no longer an interest in sustaining the US as a nation. Rather with a global economic priority the system only benefits those on top-----until the whole country topples and we are forced to adopt a more balanced economy. In that sense your suggestions have merit

Sun, 11/07/2010 - 17:19 | Link to Comment Heroic Couplet
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1. Democrats only in charge. No Republicans. During the recent election, I showed up for early voting. Three Republican candidates were standing way too close, actually in line with the voters, but the posted sign said "No campaigning beyond this point" so I guess all was in order. The Republican handed me his campaign card. I said "I am a Republican. I did not vote for George W Bush. I cannot think of a circumstance in which I would ever vote Republican again." Shoved his card back into his stack. For the next 15 minutes, I asked him over and over, loud enough for fellow voters standing in line to hear:  "Where are the jobs? The Bush tax cuts are in effect, unaltered. Where are the jobs?" He was so taken aback he literally had no answer for the next 15 minutes. The good news is evidently Rush Limbaugh is not coaching candidates to answer the jobs question. The candidate did state Bush was the worst President ever and the two unfunded wars were an unmitigated fiscal disaster. Finally he said "We need to cut taxes." Didn't make sense to me. I wanted him to account for the tax cuts already in place.

2. Transportation-you'd better make sure training for a skill or trade costs absolutely nothing. No gasoline, car maintenance, payment, brake repair, oil change, car payment. Absolutely nothing. Because the former middle class is going to pay no extra transportation cost. Same for "volunteering." No transportation cost.

3. Skill or retraining. You'd better make damn well certain you know the lay of the land: where the community colleges are, where the universities are, what programs they offer, and the wait list for the programs.

The Republican candidate lost his election bid.

Sun, 11/07/2010 - 21:15 | Link to Comment seadragonconquerer
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"Democrats only in charge". We just had that. For two years. Worked well, didn't it. Now here come the neo-cons. Again. That'll work equally well. Time to give up on the Party System. Only change that's going to work will come out of the barrel of a gun.   

Sun, 11/07/2010 - 20:38 | Link to Comment fxrxexexdxoxmx
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Obama already gets fellatio from young men without ideas. What will you do now?

Sun, 11/07/2010 - 18:30 | Link to Comment mtomato2
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With no due respect, you are a partisan fool.  I can't believe there are still people like you out there intelligent enough to answer the captcha.

The "R" and the "D" are either irrelevant or both relevant. 

Grow a set and start THINKING for once in your ridiculous excuse of a life.

 

One rock-solid JUNK from me.  Use it in good health.

 

Sun, 11/07/2010 - 17:36 | Link to Comment -Michelle-
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1. Democrats only in charge.

How did that work over the past two years?

Sun, 11/07/2010 - 16:43 | Link to Comment Clapham Junction
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Saving the economy?

For the folks in control, everything is working out just fine.

Oh, you mean for the guy who has to work for a living?  Well, the first step is to get the hell off the internet.  Get involved with the other human beings, face to face.  Talk to each other for more than a minute without getting a cell phone call.

Stop making Steve Jobs rich is a good first step towards social and political change.

That, and maybe get the young people's attention by let's say...A DRAFT.

Sun, 11/07/2010 - 18:23 | Link to Comment Aristarchan
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I assume you are too old to be drafted?:)

Sun, 11/07/2010 - 16:19 | Link to Comment greenewave
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For more on the collapse of the U.S. economy, please watch the YouTube documentary RIGGED: Wall Street's Leveraged Buyout of America (http://youtu.be/syvI1hRKDrw).

This is the film Wall Street, Washington and your financial advisor don't want you to see.

"Absolutely brilliant and provocative film on the collapse of the United States."

-Anonymous 

Sun, 11/07/2010 - 20:02 | Link to Comment Fearless Rick
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I watched your little film and won't waste any more time on anything you produce. It was not at all instructive and wasted my time. I also junked you. Now, go away.

Sun, 11/07/2010 - 15:31 | Link to Comment hooligan2009
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I applaud the constructive attitude and cannot find any impacts that would be worse than that currently being enacted by the ruling classes. I say you should start a political party and get campaigning. I do not recommend that you call it the "kool aid party". Perhaps the "reset party", while we figure out something better.

:)

Sun, 11/07/2010 - 20:38 | Link to Comment doolittlegeorge
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how about the "electric kool aid acid test" party?  or is it "party."

Sun, 11/07/2010 - 15:22 | Link to Comment Sudden Debt
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I propose this : Enslave all the unemployed slackers and get them to carve out another mount rushmore.

1. No more unemployment

2. Extra tourist attraction

 

 

Sun, 11/07/2010 - 22:50 | Link to Comment Aristarchan
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Whose face are all these no-sculptures gonna carve....yours?

Sun, 11/07/2010 - 20:36 | Link to Comment doolittlegeorge
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make it real by carving a BHO face--with 10 times the size as the other four.  I think even he would get a laugh out of that.

Sun, 11/07/2010 - 16:04 | Link to Comment Djirk
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I'm in....let's carve Obama on El Cap in Yosemite

Sun, 11/07/2010 - 15:27 | Link to Comment Anal Picnic
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Make people work for pay? What are you some kind of extremist?

Sun, 11/07/2010 - 15:32 | Link to Comment Everyman
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He's craaaawzzzzy!  Making people work for pay, what a novel idea.

Sun, 11/07/2010 - 18:34 | Link to Comment chopper read
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can they at least get a free lunch?

Sun, 11/07/2010 - 15:16 | Link to Comment yourmomma
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#2 in some form should happen --- I believe that Jefferson would agree with this.  The citizenry, for the most part, never agreed to do the various things.  And if we are going to either borrow a ton of money on the indirect, general credit of said citizenry, or we are going to inflate the currency, which has the same effect, then all that money should go to the citizenry, not any bank or other organization.  That is the stupidity and criminality of our national debt.  We've run it up but the benefits have flowed to large banks, large corporations, unions, the politicians themselves, the military, and all the other middlemen on the rent-seeking machine.  Granted, many of these people would double dip but the past is a sunk cost.  Doing this would also make it much harder for the government to borrow on its general credit and this is a good thing.  If the government couldn't borrow so easily then it wouldn't spend as much.  

 

I'm not sure I agree with 3 or 4.  There is something to be said about protecting your citizens from 'unfair' competition.  The problem is that this is a static analysis and other countries would match us -- leading to a really bad spiral of anti-free trade.  So, I don't think this is a good idea.  I think a sound currency outside the power of the government to debase, reducing regulations (I fail to see why simply nuisance law is insufficient to regulate most forms of polution), improving the rights of property vis a vis the government and/or third-parties (i.e., fewer rights of various merchant associations, neighborhood councils, old ladies whining, etc to stop owners from using their land as they see fit absent real evidence of unreasonable use), and reduced taxation (in the long run) wouldn't work.  

 

Sure, the low end of U.S. labor cannot compete w/ China.  That will never change.  China can't compete w/ Vietnam.  But there is no excuse for any non-retarded American, non-disabled American, who has the advantage of living their entire lives in a capitalist system and surrounded by so much capital and educational opportunity, to not have a single useful skill -- whether that is only showing up on time to work or answering a phone (ex-communists aren't exactly good at these things).

I also agree with directing most government spending to the poor.  If we are going to have it then that is where it should go.  And the Federal Arbitration Act should be greatly expanded to enable most disputes to go outside of the court system, which is overpriced, inefficient, and filled with political hacks and cronies.  

But we cannot do anything until the TBTF/Fed system is destroyed; our ability to borrow infinite money is gone, the public employment system of graft is shrunken,  the regulatory/tax scheme is reigned in. and the unavoidable de-leveraging process has run most of its course.   

Sun, 11/07/2010 - 15:16 | Link to Comment deez nutz
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#2 leads to massive inflation as Americans go on a spending jubilee and re-debt themselves to death.

Sun, 11/07/2010 - 18:32 | Link to Comment chopper read
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so fucking true. funny. +1

Sun, 11/07/2010 - 15:09 | Link to Comment Money_for_Nothing
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#2 is unworkable. It could be changed to something like giving each person filing an income tax form for some number of years a $20000 warant that could be deposited at an FDIC insured institutions.

That would be allowed as collateral or would turn into actual money after some number of years of vesting.

 

 

Sun, 11/07/2010 - 15:11 | Link to Comment AssFire
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I was going to write some doucebag comment; then, the masterpiece "Pieces of Eight" from GoLD, BLiNG and PiRaTE THiNGS came to mind at I forgot my comment..probably a win/win

Sun, 11/07/2010 - 14:49 | Link to Comment Anal Picnic
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Eliminate the Federal Government and give D.C. back to Maryland.

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