Today, Powell and his cronies debate whether to call where we are “a recession.” He’s worried about semantics as the economy tanks.
Please let me know if there is a more damaging, less effective way to fight inflation than what Powell now is doing.
Consider this: What action should the government take when there is a food shortage, causing food prices to rise?
Government price controls over food? Or,
Reduce federal benefits to the poor, so they will buy less food, thus curing the shortage. Also, reduce farm aid, so there will be even less food produced? Or,
Fund federal aid to farmers so they can produce more food and give people money so they can buy food?
Number 1 never works. It always leads to more shortages and a reduction in Research and Development, forcing even more shortages.
A classic example is rent controls, which reduce the number of new apartments and cause existing apartments to fall into neglect.
Yet politicians without knowledge of history or economics often turn to price controls.
Number 2 leads to recessions and depressions. Today, we have shortages of oil, food, housing, computer chips, and labor, and these shortages are causing prices to rise, what we call “inflation.” All those who are not rich starve.
Amazingly, the Federal Reserve has chosen solution #2. Raising interest rates makes many goods and services even less affordable, starving the poor and middle classes to cure inflation. Higher interest rates also make increased production more difficult, exacerbating shortages.
The federal government should provide aid to industries whose products are in short supply and to consumers so they can afford those products. Approach #3 is the only correct approach. Cure the shortages, and you cure the inflation.
Shortage of food: Federal aid to farmers. Education. Equipment. Insurance. Tax breaks.
Shortage of oil: Aid to drillers. Aid to electric car/truck makers. Support for R&D alternative energy
Shortage of labor: Eliminate FICA. Reduce tax rates on salaries. Provide Medicare for All.
Shortage of lumber: Aid growers. R&D for alternatives. Tax breaks for alternatives
Housing shortage: Aid home & apartment builders. Cut interest rates. Tax breaks for renters.
Notice how curing inflation, i.e., fixing shortages, requires morefederal spending, not less.
Of course, the expenditures must be targeted toward eliminating the scarcities.
Powell’s interest rate increases only make reducing shortages more difficult.
Those higher rates impoverish consumers and hinder the ability of suppliers to produce.
Powell has found the ultimate way to increase shortages, worsen inflation, and cause a recession.
In effect, Powell is applying leeches to cure anemia.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
As you read excerpts from the following article, keep several facts in mind.
Unlike state and local governments, the United States government uniquely is Monetarily Sovereign. It never can run short of dollars. Even if it collected zero tax dollars, the U.S. government could continue spending, forever.
The American people are running short of money, and many are entering a starvation phase they never before had experienced.
U.S. politicians, especially conservatives, claim that federal deficit spending (aka “money printing”) will cause inflation or will have to be paid for by our children. Neither claim is true. They both are part of what is known in economics, as “The Big Lie.”
It is a disgrace. The wealthiest government on earth, having infinite resources, is intentionally allowing its people to fall into starvation.
In the history of the United States, inflation never has been caused by federal deficit spending. Inflation always is caused by scarcity— shortages of vital products, usually food or energy (oil).
And the claim that aid given now will be paid for by our children later, not only is false, but makes no sense on the face of it.
State and local governments don’t operate that way. They are not Monetarily Sovereign. They use tax dollars to pay their bills. The federal government does not.
What becomes of those federal tax dollars you send to the Internal Revenue Service or the U.S. Treasury? They are destroyed upon receipt. They cease to exist in any money measure. That is why there cannot be a definitive answer to the question, “How much money does the federal government have?” The correct answer is: It has infinite money.
And as for worries about future children paying for federal stimulus dollars, our children are paying now, by sliding into poverty.
Many children and adults will die too soon, by not being able to afford medical care or by inadequate nutrition. Many brilliant brains will be wasted by not being able to afford college.
This is today’s America, the once “golden land,” that now has been turned into “misery land.” And it all is unnecessary.
At the touch of a computer key, our federal politicians could end poverty in America. Yet, because their own bellies are full, they focus only on being re-elected, not on the welfare of the people.
The Democrats want to spend money into the economy; the Republicans refuse. It is that simple.
There is no apolitical way to sugar-coat this. It is the Republican Senate, led by Senator Mitch McConnell, that primarily is responsible for the currently growing poverty in America.
The Democrats are responsible for not explaining the facts to the American people, but at least they want to pump money into the economy. The Republicans don’t.
The blood of today’s impoverished and dying Americans is on GOP hands.
“Poverty is rising in the United States,” Zach Parolin, a researcher at the Columbia University’s Center on Poverty and Social Policy told Yahoo Finance (video above). “More families, once again, are struggling to put food on the table, struggling to provide for their families at a time when we have the means to be able to help them out.”
Eight million more Americans fell below the poverty threshold since May, a study by Columbia University found. A similar study from the University of Chicago and Notre Dame estimated 6 million Americans entered poverty for the same period.
Without further government intervention, more Americans could follow, facing food insecurity, utility shutoffs, and even homelessness.
What a disgrace, what a cruel disgrace.
Visualize that to the left is a vast pile of wealth — money, food, medicine, education etc. — and to the right are homeless, starving people.
In between is a wall, guarded by the U.S. Congress, intentionally preventing the impoverished people from receiving aid.
That is America, today.
Poverty in the U.S. actually declined at the beginning of the coronavirus pandemic, thanks largely to two provisions in the CARES Act: stimulus checks and the extra $600 in weekly unemployment benefits.
Since then, there has been no second round of checks, and the extra unemployment benefits expired at the end of July.
“That’s just a lot of money that they’re going to have to do without,” Bruce Meyer, a University of Chicago economist, told Yahoo Money. “It means people are going to be cutting back on what they can.”
While the funding provided under the $2.2 trillion CARES Act was the largest economic stimulus package in history, its effects won’t last long enough to support those in financial hardship, especially when the job market and the economy haven’t recovered.
“Unless we see a miraculous employment recovery,” Parolin said, “it’s certain that families are going to need some extra income support to be able to pay the bills and put food on the table.”
The fading effect of the stimulus comes as House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin continue talks for a bipartisan stimulus deal.
But disagreements on price tag and key provisions, lack of GOP support, and the proximity of the election all lower the prospects of a deal before the election.
So despite the fact that predictably, deficit spending for stimuli has been beneficial, with none of the politicians’ dire predictions realized, the GOP would rather see people starve than to admit they have been lying all along.
I hate to put this in such stark political terms, but there is no way around it: The Democrats want more stimulus; the Republicans want less. Period.
With no additional support, experts warned that the economy will slow and fewer jobs will be created. Protections for renters and borrowers also are set to expire, likely leading to another increase in poverty.
The so-called “protections for renters and borrowers” merely shifted the pain to landlords and lenders, who also are people suffering from the recession.
The solution is not to transfer pain from one group to another, but rather for the federal government to pump dollars into the pockets of all the people.
Only the federal government can spend money without feeling pain.
“Poverty is going to continue to rise,” Meyer said. “You’re going to have people having had more and more weeks out of work, and only a fraction of those lost earnings replaced. That’s going to accumulate over time.”
The financial hardships caused by this will likely mean a rise in people who can’t pay rent and utility bills, who will struggle to buy food, and who could even lose their homes.
“It’s sad to say,” Parolin said, “we can probably expect to see an increase in homelessness in the United States.”
The above article should make you furious. All this pain, all this hunger, all this tragedy in America, coming mostly from the party that promised to “Make America Great, Again,” is completely unnecessary.
There was a time recently, when even a recession was unthinkable. The latest Republican budget had indicated more than a trillion dollars in new deficit spending — more than a trillion new growth dollars added to the economy.
Then came COVID-19.
The economy was crushed and continues to be crushed, by many trillions of dollars. How many? No one knows.
Months ago, I wrote that at least $7 trillion in new deficit spending would be needed to save the economy.
Now, it could take at least ten trillion dollars, probably much more.
Whatever the actual number, it definitely is far more than the three trillion the government already has voted in, and even that came from great pressure by the Democrats.
Yes, to prevent a recession, or even a depression, many more trillions are needed.
For the first time since the coronavirus pandemic struck, we now have a pretty decent jobs report.
There were 2.5 million new jobs in May, the biggest number recorded since statistics started being recorded in 1939.
The unemployment rate fell somewhat to 13.3 percent. Republicans were jubilant. “It’s a stupendous number. It’s joyous, let’s call it like it is. The Market was right. It’s stunning!” President Trump posted during his usual morning cable news live-tweet.
White House economic adviser Stephen Moore told the Washington Post‘s Jeff Stein that no more rescue was needed: “There’s no reason to have a major spending bill. The sense of urgent crisis is very greatly dissipated by the report.”
A Senate Republican aide added: “This definitively kills any chance of trillions of new spending.”
At the May rate, we will not reach the pre-crisis employment level for about eight months — or January of 2021.
But there is little reason to suspect even that will happen. The economic rescue payment has long passed, applications to the small business grant program will end at the end of June, and super-unemployment is set to expire at the end of July.
The gigantic austerity and layoffsfrom state and local governments will be a further ongoing drag on recovery.
And there it is, folks. The suicide pact between Donald Trump and the Republican party now is signed, sealed, and delivered.
The Republicans — Moscow Mitch McConnell, Bill Barr, Lindsey Graham, et al — eventually will disavow their allegiance to Trump, i.e. claim they never were his puppets. But it will be too late.
Ironically, it is the Democrats who are calling for more growth trillionsto be added to our economy. Seemingly, they are the sole party that actually cares about the futures of the planet, the nation, the states, and the people.
The Republicans care about the rich and votes, but will lose both by the time November rolls around.
Just as Donald Trump and the GOP are crowing about the current rebound from the deep depths to the shallower depths — a rebound which federal deficit spending made possible — the right-wing will try to distance themselves from the coming crash.
And if by some miracle, the GOP-led Senate adopts enough Democrat recommendations to cause even a tiny growth bump in our shattered economy, Trump and the GOP will crow about that, too.
But it will be too late. Too late for the economy, too late for Trump, too late for the GOP, and too late for suffering Americans.
Destroying is much easier than building. Trump and the trumpers will have destroyed what was America, and only an heroic effort by people of wisdom and vision could have any chance to rebuild us.
The irony of Trump’s slogan “Make America Great Again,” will not be lost.
Later, in an amazing display cluelessness, the rich will demand tax increases — on the poor, of course — to “pay for” the deficits.
Ray Dalio, founder of the investment management firm Bridgewater Associates LP told JPMorgan Chase & Co.’s private-banking clients to expect higher tax rates no matter who wins November’s race for the White House.
The above are examples of the rich “grooming the public” for tax increases (together with new tax avoidance mechanisms available only to the rich).
The truth is: Our Monetarily Sovereignfederal government has no need for taxes. Even if all federal tax collections totaled $0, the federal government could continue deficit spending forever.
Federal tax collects fall most heavily on the not-rich. Even corporate taxes batter the employees and the customers, far more than any effect on rich corporate executives.
The current administration will cause a depression by telling the Big Lie, that federal deficits are “unsustainable.
Trump will take no blame, but will boast about any slight uptick in the long fall.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
There is something of a rule in problem-solving that questions beginning with “How” are to be preceded by a thorough examination of questions beginning with “Should.” President Bush II failed to do that when he asked his advisors questions like, “How do we fight a war in Iraq and Afghanistan” and “How do we arrest Saddam Hussein.” The correct questions were “Should we fight a war in Iraq and Afghanistan” and “Should we arrest Saddam Hussein.”
A football coach does not begin with “How can we increase our passing yardage?” He begins with “Should we increase our passing yardage?” A company does not begin with, “How can we increase the number of our stores?” It begins with a thorough examination of “Should we increase the number of our stores?”
Sadly, President Obama, Congress, the media and the old-line economists work feverishly to answer the question, “How can we reduce the federal deficit?” They believe a thorough examination of “Should we reduce the federal deficit?” is unnecessary. They already “know” the answer, despite massive evidence to the contrary.
When you ask the wrong question, you find the wrong answer. Congress and the President can’t agree on an answer, because the question is wrong. It’s akin to asking, “How should we sail a ship without falling off the edge of the world?”
The correct question is, “Should we reduce the federal deficit?” Many people give perfunctory, knee-jerk answers, such as, “The deficit is not sustainable” or “Our children will pay for it.” But no answers have been based on the one, overriding, undeniable fact:
Federal deficits = net non-federal saving
Cut deficits and you cut saving. Cut saving and you cut economic growth. Cut economic growth and you enter recessions and depressions and the unemployment that accompanies them. The facts are that simple and undeniable. But, the President and members of Congress do not work from facts; they work from what each believes is common sense.
Common sense consists of beliefs most people consider obvious and sound, things “everyone knows.” Yet, your common sense may be different from my common sense, because it is affected by our different personal experiences, as well as by analogy, religion, social mores, history, logic, teaching, folklore, aphorisms, leaders and every form of information transfer, all of which vary from person to person.
The earth must be flat, not round, else the oceans would pour out. Nothing can be in two places at the same time – except in Quantum Mechanics. Running fast does not make your watch run slower – except in Relativity. If a roulette wheel lands on red five times in a row, it is more likely to land on black the next spin. Common sense.
Because common sense does not require research, it allows for fast decisions and is powerfully built into our genes. We have great difficulty departing from our common sense beliefs, because they are evolutionarily valuable. We experience and use common sense every day of our lives. We do not need research to tell us to avoid walking blindly into a street or reaching into a fire. Anyone who intentionally does these things is a “fool.”
So powerful is common sense, we angrily consider all those who depart from of our visions of common sense to be fools. Here are examples of common sense for most Americans:
1. Debt is a burden on the debtor; the more debt, the greater the burden. Debtors can be forced into bankruptcy by creditors.
2. A deficit is worse than a surplus. Outgo requires income. Taxes and borrowing pay for government spending.
3. Everything has a cost and a limit. Nothing can be created from nothing. Nothing goes on forever. There is no such thing as a free lunch. No pain; no gain. If it sounds too good, it is.
4. The greater the supply, the less the value. “Printing” money causes inflation. You can have too much of a good thing.
5. Dollars are real and scarce. They can be held, stored and moved.
Every one of these common sense beliefs either is always false or often false, when applied to the U.S. federal government, because:
1. Federal debt is not a burden. Unlike state and local governments, the federal government cannot be forced into bankruptcy (except by Congress). It can service any debt of any size, any time.
2. Federal deficits stimulate the economy while surpluses cause recessions and depressions. The federal government, being Monetarily Sovereign, neither needs nor uses taxes or borrowing to pay its bills.
3. The federal government creates money by marking up the bank accounts of creditors, in a cost-free, pain-free, limit-free process. To the federal government, money is a “free lunch.”
4. Increasing the supply does reduce value, unless demand increases more. Money demand is increased by interest rates. Since we went off the gold standard, there has been no relationship between federal deficit spending and inflation.
5. Dollars have no physical reality. They are nothing more than numbers in bank accounts. Even dollar bills are not dollars; they are receipts or titles for dollars. Dollars are not scarce to the federal government.
These truths are counter to intuition, counter to common sense and counter to the beliefs of most Americans, yet they are truths, nonetheless.
Very soon, Americans will face the cold reality of recession or depression, caused by Congress’s and the President’s following their “common sense,” rather than economic fact. Federal spending for Social Security, Medicare, Medicaid, and many other vital federal services will decline. We will suffer “invisible” pain from the loss of scientific and medical research, declining infrastructure, a weaker military, poorer schools, less food and drug inspection, and worse investment protections. Our standard of living will decline. Unemployment will worsen. Destitution will increase. Our children and our grandchildren will lead meaner lives. Their futures will be impoverished.
And most Americans will not realize what has been done to them.