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It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders..
The website called “Truthdig” published an article titled, If China Can Fund Infrastructure With Its Own Credit, So Can We, May 21, 2017, By Ellen Brown.
The article describes how the U.S. easily can fund infrastructure. That “how-to” applies to all federal spending, not just for infrastructure.
I’ll give you a few excerpts and my comments.
The estimated cost of fixing (America’s) infrastructure (is) $4.6 trillion.
While American politicians debate endlessly over how to finance the needed fixes and which ones to implement, the Chinese have managed to fund massive infrastructure projects all across their country, including 12,000 miles of high-speed rail built just in the last decade.
How have they done it, and why can’t we?
We can. Easily.
The Chinese government is Monetarily Sovereign. It is sovereign over the Renminbi. It never can run short of Renminbis.
The U.S. government also is Monetarily Sovereign. It never can run short of dollars.
Even if all tax collections fell to 0, the Chinese and American governments could spend, forever.
A key difference between China and the US is that the Chinese government owns the majority of its banks.
About 40% of the funding for its giant railway project comes from bonds issued by the Ministry of Railway, 10-20% comes from provincial and local governments, and the remaining 40-50% is provided by loans from federally-owned banks and financial institutions.
In other words, the Chinese government gets its funding from its own bonds. It “lends” to itself, and because lending creates money, this “left-pocket-to-right-pocket” faux transaction seemingly provides Renminbis.
The Chinese even more easily could press a few computer keys and create Renminbis from thin air, just as the U.S. government creates dollars from thin air, every time it pays a bill. No need for special banks or financial institutions.
The process is this:
When a federal agency pays an invoice, it sends instructions (checks or wires) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account. When the bank obeys those instructions, dollars are created and added to the money supply.
The creditor’s bank then clears the transaction through the Federal Reserve.
In short, the federal government creates dollars from thin air, by paying bills, and then has its own bank approve the creation of those dollars. The approval process is quite similar to what is described at: Does the U.S. Treasury really destroy your tax dollars?
Like private banks, state-owned banks simply create money as credit on their books. The difference is that they return their profits to the government, making the loans interest-free; and the loans can be rolled over indefinitely.
The federal government has no need for profits or for interest-free loans. It even has no need for loans. It can create dollars, endlessly.
In effect, the Chinese government decides what work it wants done, draws on its own national credit card, pays Chinese workers to do it, and repays the loans with the proceeds.
In true effect, the Chinese government and the U.S. government create their own sovereign money from thin air, and in unlimited amounts.
The US government could do that too, without raising taxes, slashing services, cutting pensions, or privatizing industries.
Correct. The U.S. government never needs to raise taxes in order to fund spending, never needs to slash services, never needs to cut pensions, and absolutely never should privatize.
It does these things because of the Big Lie — the lie that federal taxes fund federal spending.
The Trump administration, road privatization industry, and a broad mix of congressional leaders are keen on ramping up a large private financing component (under the marketing rubric of ‘public-private partnerships’), but have not yet reached full agreement on what the proportion should be between tax breaks and new public money—and where that money would come from.
“Private financing component” and “public-private partnerships” are weasel words for the privatization scam — a method for enriching political contributors.
Because the U.S. government can create unlimited dollars, there is no reason for privatization. Where special expertise is needed, the government can contract for it in the same way that it contracts for planes, guns, and bullets.
No need to make the profit-motivated companies managing partners. Just rent the expertise.
Koch-backed groups led by Freedom Partners . . . released a letter encouraging Congress “to prioritize fiscal responsibility” and focus instead on slashing public transportation, splitting up transportation policy into the individual states, and eliminating labor and environmental protections.
The rich don’t need public transportation, but the middle and the poor do. So naturally, the rich do everything possible to cut that benefit. The reason: Gap Psychology, the desire of the rich to widen the Gap between them and the rest of us.
In a November 2014 editorial titled “How Two Billionaires Are Destroying High Speed Rail in America,” author Julie Doubleday observed that the US push against public mass transit has been led by a think tank called the Reason Foundation, which is funded by the Koch brothers.
Their $44 billion fortune comes largely from Koch Industries, an oil and gas conglomerate with a vested interest in mass transit’s competitors, those single-rider vehicles using the roads that are heavily subsidized by the federal government.
Republicans – at the behest of their mega-bank/private equity patrons – really, deeply want to privatize the nation’s infrastructure and turn such public resources into privately owned, profit centers.
More than anything else, this privatization fetish explains Republicans’ efforts to gut and discredit public infrastructure . . . .
The Republicans are consistent in their desire to transfer dollars from the middle and poor, to the rich. That is the sole purpose of privatization.
If the goal is to privatize and monetize public assets, the last thing Republicans are going to do is fund and maintain public confidence in such assets.
Rather, when private equity wants to acquire something, the typical playbook is to first make sure that such assets are cheaper to buy.
Noam Chomsky said: [T]here is a standard technique of privatization, namely defund what you want to privatize. Then they don’t work and people get angry and they want a change. You say okay, privatize them . . . .
This is exactly what the Republicans are doing to the Affordable Care Act. They are chipping away at its funds, to make it less efficient.
Then, when the public believes it won’t work, the Republicans can sweep in with a plan that widens the Gap between the rich and the rest. That is their fundamental plan.
Privatization means selling public utilities to private equity investors, who then rent them back to the public, squeezing their profits from high user fees and tolls.
And this is exactly what Mayor Daley did to Chicago, when he sold Chicago’s parking meters to a politically connected firm at a discount.
Not only did Chicago lose 99 years of revenue, but the parking rates immediately were increased, costing Chicago taxpayers millions more. (See: What President Obama learned from Mayor Daley)
Moving assets off the government’s balance sheet by privatizing them looks attractive to politicians concerned with this year’s bottom line, but it’s a bad deal for the public.
Decades from now, people will still be paying higher tolls for the sake of Wall Street profits on an asset that could have belonged to them all along.
Privatization “looks attractive to politicians,” not because they are “concerned with this year’s bottom line,” but rather because they are concerned with their own bottom lines, i.e campaign contributions.
Privatization is scam to take from taxpayers and give to the rich.
Countering the dogma that “private companies can always do it better and cheaper,” studies have found that on average, private contractors charge more than twice as much as the government would have paid federal workers for the same job.
Which is exactly why Republicans are so enamored of privatization.
In their 2015 report “Why Public-Private Partnerships Don’t Work,” Public Services International stated that “[E]xperience over the last 15 years shows that PPPs are an expensive and inefficient way of financing infrastructure and divert government spending away from other public services.
“They conceal public borrowing, while providing long-term state guarantees for profits to private companies.”
They also divert public money away from the neediest infrastructure projects, which may not deliver sizable returns, in favor of those big-ticket items that will deliver hefty profits to investors.
At this point, we should mention the fundamental difference between federal privatization vs. state and local privatization.
When the federal government privatizes, the private sector profits. Because of privatization inefficiencies, the private sector actually receives more money, when the privatization is more costly.
IF services or benefits are not cut, and/or taxes are not raised (huge “IF”), forcing the federal government to spend more pumps more stimulus dollars into the economy. Thus, ironically, an expensive deal can grow the economy.
The same cannot be said of state and local government privatizations. While federal taxpayers do not pay for federal spending, state and local taxpayers do pay for state and local spending. So expensive deals are costly to the public.
Past conceptions of an infrastructure bank envision a quasi-bank (not a physical, deposit-taking institution) seeded by the federal government, possibly from taxes on the repatriation of offshore corporate profits.
The bank would issue bonds, tax credits, and loan guarantees to state and local governments to leverage private sector investment.
No federal spending ever is funded by taxes.
To fund infrastructure work, all the federal government need do is send instructions to contractors’ banks, telling the banks to increase the balances in the contractor’s checking accounts — then have the FRB clear the transactions.
The federal government already has the Federal Reserve Bank. No special infrastructure bank is needed.
Contrary to conventional wisdom, money is not fixed and scarce. It is created when loans are made and extinguished when they are paid off.
The Bank of England report said that private banks create nearly 97 percent of the money supply today.
Whatever the percentage, it is true that banks create, from thin air, the vast majority of money in America as well as in the UK. Borrowing creates money; paying off loans destroys it.
This is something the Federal Reserve tried but failed to do with its quantitative easing (QE) policies: stimulate the economy by expanding the bank lending that expands the money supply.
Right, QE was a ridiculous exercise that did not expand bank lending. Bank lending is limited by bank capital and by borrowers’ needs, and QE did nothing to increase either.
Congress alone can stimulate the economy — by deficit spending, which adds dollars to the economy. Giving the Fed the task to stimulate the economy is merely an example of Congress shirking its own responsibilities.
The Fed really has but two assignments:
- Facilitate banking
- Moderate inflation.
That’s it. The economy is the responsibility of Congress and the President.
The stellar (and only) model of a publicly-owned depository bank in the United States is the Bank of North Dakota (BND). It holds all of its home state’s revenues as deposits by law, acting as a sort of “mini-Fed” for North Dakota.
The BND does not pay bonuses, fees, or commissions; has no high paid executives; does not speculate on risky derivatives; does not have multiple branches; does not need to advertise; and does not have private shareholders seeking short-term profits.
The profits return to the bank, which distributes them as dividends to the state.
A perfect solution for a monetarily non-sovereign state, which uses taxpayer dollars, but a wholly unnecessary Rube Golbergian solution for the federal government, which does not use taxpayer dollars.
The federal government could set up a bank on a similar model. It has massive revenues, which it could leverage into credit for its own purposes.
No. The federal government has no need to “leverage” anything. It has unlimited resources and total control over its ability to pay its bills.
Since financing is typically about 50 percent of the cost of infrastructure, the government could cut infrastructure costs in half by borrowing from its own bank.
There is no need for the federal government to cut infrastructure costs. In fact, the more the federal government spends, the better for the economy.
Public-private partnerships are a good deal for investors but a bad deal for the public. The federal government can generate its own credit without private financial middlemen. That is how China does it, and we can too.
Yes. The federal government can fund unlimited spending for infrastructure. It also can fund Medicare for every man, woman, and child. It can fund college tuitions for everyone who wants one. It can fund Social Security, also for every man, woman, and child.
The only limit to federal spending is an inflation that cannot be controlled via interest rate control.
There is no need to create special banks or circuitous money paths. Everything already is in place.
The federal government merely needs to deficit spend.
Rodger Malcolm Mitchell
The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.