Republican hate-filled cruelty is not a bug. It’s a feature.

Those of us who at least make a cursory attempt to separate fact from fiction often remain astounded at the wild beliefs of self-described “conservatives.”

They are not what formerly was considered to be normal. If Donald Trump told them the sky is green, they would attempt, not just to agree with him, but to murder you for claiming the sky is blue.

This combination of naivete and anger is confounding. Many normal human beings believe that exposing right-wing hate-filled cruelty will open Republican voters’ eyes and perhaps even shock them.

But, no. Right-wing hate-filled cruelty is not a bug. It is the feature followers find most attractive.

While, unfortunately, many people of all stripes support hatred and cruelty, here are a few examples of what Republicans, more than Democrats, tend to believe or support:

  • Separating children from their parents at the border to instill fear in prospective border crossers.
  • Long prison sentences as a deterrent to crime.
  • The death penalty
  • White supremacist groups (Proud Boys, neo-nazis, etc.)
  • Bullying
  • The elimination of ACA (Obamacare) thus depriving poor people of health care.
  • The reduction or elimination of Medicare, Social Security, food stamps, and other supports for the poor and middle  classes
  • Laws against abortion, particularly those with no exceptions for rape or incest.
  • Anti-teaching of factual history about slavery and bigotry.
  • Pro-guns, include military weaponry in everyone’s hands
  • Threats of civil war
  • Aggression, either by an individual or in a mob
  • Pro-monuments to rebel traitors and rebel flags as part of “southern heritage”
  • Bigotry against blacks, browns, yellows, reds, gays, and non-Christians.
  • Conspiracy theories, especially those promulgating hatred
  • Admiration for dictators
  • Love for God and America, along with hatred of people.
  • Anti-science
  • Anti-government
  • Belief that compassion is a weakness.

Yes, there is some meanness in even the best of us, but what kinds of people are particularly attracted to today’s conservatism?

I suggest the most common elements shared by right-wingers are feelings of fear, inferiority, and ignorance.

FEAR: The mother of hatred is fear.

You will find it challenging to hate someone or something unless you also fear them or it. Think of what you hate, and you will find you fear it to some degree.

You hate Russians because you fear them. You hate blacks, Jews, your neighbor, the police, bullies, child-abusers, gays, foreigners, strangers, Donald Trump, etc., because to some degree, you fear them.

When the Nazis march chanting, “You will not replace us,” they are tapping into white Christian fear that non-Christians and/or non-whites are “taking over,” a fear that spills over into hatred of immigrants.

How else would you explain the draconian exercise of ripping children from their parents, shipping the children away, and not even keeping track of them so they could be reclaimed by their parents?

This torture of children and parents requires a certain level of cruelty that cannot be explained away by any rational immigration policy.

The GOP stresses a border wall because it has instilled in followers, or taken advantage of, their fear of foreigners.

Every day the Republican party stresses fear. When Mar-a-Lago was searched, the Republican false mantra was, “If this could happen to him, it could happen to you.” (True, only if you keep secret government documents hidden in your home.)

And, you should carry guns, massive, powerful guns in public because you fear. And Donald Trump will protect you from “them.”

Conservatives fear change. They wish to conserve a mythical past. They are the most fear-ridden people on earth; change is fearsome to them.

INFERIORITY: Feelings of personal inferiority support all cults, including the cult of Trump. People join and defend the cause when they need to belong to something, lest they themselves will be invisible.

Hiding among like-minded people provides the strength that weaker people do not possess. It is the courage of the mob. Not one of the January 6th attackers would have had the courage for a lone foray. It was the mob that gave them the bravery they personally lacked.

The cult allows them to say, “I am somebody. I have meaning, strength, and power. I can accomplish. You cannot ignore me. You cannot replace me.”

Trump’s continual “they-are-picking-on-me” victimhood pretense can be empathized by those who feel the entire world is picking on them.

IGNORANCE: We are not talking about mere intelligence; we are talking about knowledge and education.

A new Pew Research survey shows that the less educated you are, the more likely you are to have Republican leanings.

Right-wingers are less exposed to mainstream media. They receive nearly all their information from Fox News, Breitbart, and other conspiracy theorists.

The more outrageous the claims, the more they are believed: Hillary has a pedophile ring in the basement of a fast-food restaurant. Kennedy still is alive. A mass murder never happened; it was all staged to blame Republicans. The moon landing was faked. 

Rather than learning facts, which are not to be trusted, the right-wing wants to know the “inside, secret facts.”

Republicans wish to say, “You may think I’m ignorant, but I know something you don’t know.” That more easily is said about outrageous claims than about facts.

Ignorance often comes from a lack of schooling. Trump has popularized the notion that not going to school embodies one with native, home-spun thinking ability that education eliminates. Trump himself has said, “I love the poorly educated.”

Indeed he does, for they are the most malleable.

Increase in the share of Americans saying colleges have a negative effect on the U.S. is driven by Republicans' changing views

Sneering at college is part of mocking education, science, and fact. Conspiracy theories fill the void. And when they demean all usual sources of factual information, they turn to unusual sources.

There seems to be, among right-wingers, particular pride in not being “spoiled” by a college education but rather having learned from street experience or from peers.

Again, where formal education is lacking, non-factual conspiracy theories tend to fill the void.

That tendency begets easier acceptance of lies, where facts matter less than the sources. 

Having “learned” from Fox News that Trump won the 2020 election he lost, one may be more accepting when Fox News says Trump is an innocent victim of a crooked FBI or the FBI planted incriminating information at Mar-a-Lago.

Not being educated, right-wingers do not understand how science works.

They easily can be convinced that scientific ambivalence (“most scientists say,” “there is a 70% likelihood of”) is inferior to the 100% certain, dogmatic, false teachings of conspiracy theorists (the lie that “Trump was proven innocent by Mueller”).

Together, feelings of fear, inferiority, and ignorance lead to resentment, which manifests as hatred and cruelty instead of compassion.

To feel or demonstrate compassion requires a strength of character missing in right-wing followers.

They do not intervene in bullying situations but instead actively participate.

They do not correct false “facts” but knowingly promulgate patently false narratives.

They sneer at “sheeple” — those who follow mainstream beliefs — when it is they who are weak-minded.

As  Trump so presciently said, “I have the most loyal people — did you ever see that? I could stand in the middle of Fifth Avenue and shoot somebody, and I wouldn’t lose any voters, OK?”

Loyalty is a form of intentional blindness. It can be wonderful blindness when you are, for instance, loyal to your wife, i.e., blind to her weaknesses. But being blind to a politician’s or political movement’s facts and flaws evidences feelings of fear, inferiority, and ignorance.Rigid Justice is Injustice: The EU's Digital Markets Act should include an  express proportionality safeguard | Cleary Antitrust Watch

Those burdened with those emotions flock to the nonsensical, right-wing world of white supremacy and its partner, cruelty.

The GOP has become the party of straight, white, Christian, male, bigoted cowards who find their courage in guns, cults, and mobs.

Even our Supreme Court, the arbiter of fairness, no longer is blind justice.

It now is led by Clarence Thomas, a man who was appointed on a lie, and who has spent his life trying to prove he is not black.

They and their ilk are a cruel danger to all that is America.

Our great American experiment in democracy is failing.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

What if China dumps its U.S. Treasuries?

BACKGROUND

The number erroneously referred to as Federal “debt” is the total of outstanding Treasuries. When you buy a Treasury (T-bill, T-bond, T-note), you add to the so-called “debt.”

I say “so-called” because Treasuries are not debts of the United States, nor are they debts of taxpayers.

Treasuries are deposits into Treasury Security accounts.

They resemble bank safe deposit boxes in that the depositor, not the bank or U.S. government, owns the deposits, and the bank never touches them.

Similarly, the federal government neither uses nor even touches the dollars that are in Treasury accounts.

The federal government does not use tax dollars to pay off a T-bill, T-note, or T-bond. The dollars do not help fund federal spending. Nor are they owed by future taxpayers.

Upon maturity, the federal government returns the dollars in a T-account as though these dollars were in a safe-deposit box.

Thus the so-called federal “debt” cannot be too high, nor can it be “unsuitable” (another favorite word of debt worriers) any more than a safe deposit box’s contents can be too high or unsustainable.

The federal government pays its bills out of the General Fund, similar to a checking account, and by law, this fund cannot be negative.

As a bookkeeping device, the federal government sells enough T-securities to offset whatever would be a negative General Fund total.

This accounting trick has no practical significance because the Federal Reserve, now Monetarily Sovereign, has the unlimited ability to increase the dollar balance in the General Fund.

Quote from former Fed Chairman Ben Bernanke when he was on 60 Minutes:
Scott Pelley: Is that tax money that the Fed is spending?
Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.

Statement from the St. Louis Fed:
“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”

Treasury securities are not a form of borrowing; they are not owed by the government or taxpayers and do not help the government pay its bills. So what is their purpose:

  1. They provide the world with a safe, convenient, interest-paying place to store unused dollars. This helps stabilize the value of the dollar.
  2. Because the Fed arbitrarily determines the interest at which deposits will accumulate funds, these accounts help the Fed control overall interest rates.

Among those who don’t understand Treasuries (T-bills, T-bonds, T-notes), a persistent refrain is, “What if China dumps or stops buying Treasuries?” What would the federal government do?

That is like asking a bank, what if your big, safe-deposit-box customer started taking money out of his box? The answers are:

  1. Nothing, or
  2. If the government needed to add dollars to the total “debt,” the Monetarily Sovereign Federal Reserve would buy T-securities — as many as it wished, whenever it wanted.

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

The U.S. is not unique in its unlimited ability to create dollars. The European Union has the unlimited ability to create euros:

Press Conference: Mario Draghi, President of the ECB
Question: I am wondering: can the ECB ever run out of money?
Mario Draghi: Technically, no. We cannot run out of money.

All of the above brings us to these excerpts from an article that appeared online:

Memo to China: You Look Silly When You Threaten to Dump Treasuries, 

Americans often quote the saying of President Theodore Roosevelt, “Speak softly but carry a big stick.” In other words, it is important to make only realistic threats. 

(In that vein), threatening to dump US Treasuries is silly.

China is the second-largest foreign holder of US treasuries, only after Japan. China’s holdings of US treasury securities dropped to $980.8 billion in May, falling below $1 trillion for the first time in 12 years, according to data released by the US Department of the Treasury.

The further deterioration of China-US relations will likely have a direct impact on China’s risk appetite for holding US treasuries, and reducing holding of US treasuries could become a precautionary option.

This was the only large scale ultimatum the Global Times story presented and it’s bizarre to see that one mentioned. China and Japan have both been reducing their holdings of US Treasuries in recent years, with no adverse impact to the US government funding or the dollar.

Recent US Treasury reports show China’s holdings at $981 billion, down from a peak of $1,316 in November 2013. That current $981 billion represents only 3.2% of total US government debt.

….the real reason China cannot sell off its holdings of U.S. government bonds is because Chinese purchases were not made to accommodate U.S. needs.

Rather, China made these purchases to accommodate a domestic demand deficiency in China: Chinese capital exports are simply the flip side of the country’s current account surplus, and without the former, they could not hold down the currency enough to permit the latter.

To see why any Chinese threat to retaliate against U.S. trade intervention would actually undermine China’s own position in the trade negotiations, consider all the ways in which Beijing can reduce its purchases of U.S. government bonds…

China can buy other U.S. assets, other developed-country assets, other developing-country assets, or domestic assets. No other option is possible.

The first two ways would change nothing for either China or the United States. The second two ways would change nothing for China but would cause the U.S. trade deficit to decline, either in ways that would reduce U.S. unemployment or in ways that would reduce U.S. debt.

Finally, the fifth way would also cause the U.S. trade deficit to decline in ways that would likely either reduce U.S. unemployment or reduce U.S. debt; but this would come at the expense of causing the Chinese trade surplus to decline in ways that would either increase Chinese unemployment or increase Chinese debt.

By purchasing fewer U.S. government bonds, in other words, Beijing would leave the United States either unchanged or better off, while doing so would also leave China either unchanged or worse off.

China remains an export-depended economy (even though it is currently trying to shift its economic model).

Therefore, it needs to run a current account (or trade) surplus. If it does not, China will face either

more unemployment, for reduced exports mean that the Chinese exporters are forced to lay off workers,

or more debt, as Beijing will encourage large fiscal transfers to the households (social security, unemployment benefits, food stamps, etc.) or the creation of new businesses to mitigate the consequences of unemployment.

All this requires more money and, consequently, more debt.

This is why China purchases US Treasuries: to run trade surpluses and avoid higher debt/unemployment — not, as many think, to “help” American consumers so that they can purchase more Chinese imports.

China might make geopolitical waves by buying Japanese government debt. The yen is trading at very low levels and the Japanese central bank has had to buy over half the debt outstanding.

This is one of the steps the Federal Reserve could take and often has taken. The Japanese Central Bank is Monetarily Sovereign like the Fed and the EU.

Even if China wanted to buy Japanese debt to support Japan (as in make a point about the US failure to do much about its long-standing post financial crisis distress), it’s not clear the market is liquid enough for China to procure all that much. 

In other words, this idea of punishing the US by dumping Treasuries may be appealing to a domestic audience, which has long been unhappy about the magnitude of China’s dollar foreign exchange reserves.

But no one knowledgeable in the US will lose sleep over it.

SUMMARY

The so-called federal “debt” is not a debt. lt is the total of deposits into Treasury Security accounts, which are similar to bank safe-deposit boxes. 

Neither the federal government nor future taxpayers owe the “debt.” To pay it off, which is done daily, the Treasury simply returns the contents of these accounts to the account owners.

These accounts serve two purposes: To provide a safe, interest-paying repository for unused dollars (which stabilizes the dollar) and to help the Fed control interest rates.

Thus, there is no danger inherent in a “too-large debt.” Even if China stopped buying T-securities, the U.S. government and U.S. taxpayers would be just fine.

 

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socioeconomic 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Federal drug-price controls or divide pharmaceutical companies?

Should we have government drug-price controls? A good article exploring this subject is titled, “Government Regulated or Negotiated Drug Prices: Key Design Considerations.” This is from that article:

  1. What process should HHS use to set the price for a drug?
  2. Will the new system set prices only for a limited number of high-cost drugs that lack therapeutic alternatives or more broadly by including drugs that compete with other medicines?
  3. Does the specified price represent the actual price for all sales of a drug, or is it a “ceiling” price, with payers retaining the ability to negotiate lower prices?
  4. Will drug prices set by HHS apply to a narrow or broad population (e.g., only Medicare Part B or Part D beneficiaries or all patients, regardless of their insurance coverage)?
  5. How would HHS assess and incorporate the value of a drug when establishing its acceptable price?
  6. How should HHS select drugs for lowered prices?

The answers are complex, filled with “It depends” and “Maybes.”

The truth is we already have quite a bit of federal price controls, some helpful, some not. The question arises because many people now favor government negotiation of pharmaceutical prices.

Consider this brief video. It shows a woman weeping. She was suffering because the cost of a lifesaving drug was beyond her ability to pay.

In response to many thousands of similar, heart-rending stories:

U.S. Sens. Cory Booker (D-NJ) and Mark R. Warner (D-VA) reintroduced legislation to help lower the costs of needed medical care and prescription drugs for children.

The Fair Drug Prices for Kids Act would give states the ability to purchase prescription drugs at the lowest price possible, reducing the cost of prescription drugs for children who receive coverage through the Children’s Health Insurance Program (CHIP) and generatingimmediate savings for states and the federal government.

Actually, it’s not “the lowest price possible.” It’s the lowest price being offered, anywhere. And it’s state governments that would negotiate.

But that is a digression from our real question. Should the federal government determine prices for pharmaceuticals?

Senior living: Medicare could get to negotiate drug prices under Democratic bill By KAISER HEALTH NEWS | PUBLISHED: July 25, 2022 Democratic senators recently took a formal step toward reviving President Joe Biden’s economic agenda, starting with a measure to let Medicare negotiate prices with drugmakers and to curb rising drug costs more broadly.

A similar proposal died in December when Sen. Joe Manchin, D-W.Va., decided to oppose Biden’s $1.9 trillion Build Back Better bill, which also included provisions allowing for Medicare drug negotiations.

Reining in drug costs has long been wildly popular with the public, with more than 80% of Americans supporting steps such as allowing Medicare to negotiate and placing caps on drug price inflation.

The bill revealed in early July would do both. It would also limit annual out-of-pocket drug costs for Medicare beneficiaries to $2,000, make vaccines free for people on Medicare and provide additional help for lower-income seniors to afford their drugs.

The heart of the bill is the negotiation provisions.

Under the legislation, Medicare could start the new pricing procedures next year, with the secretary of Health and Human Services identifying up to 10 drugs subject to bargaining. The resulting prices would go into effect in 2026. As many as 10 additional drugs would follow by 2029.

The use of the word “negotiate,” when talking about the federal government, is ludicrous if one side has all the power.

The federal government arbitrarily can set an unprofitable price for any drug. But, that drug won’t be sold, which is unacceptable to the public or drug companies.

The populace, which has a limited amount of money available for any spending, always wants, often needs, feels it deserves, and usually will vote for, lower prices.

The federal government, being Monetarily Sovereign, has an unlimited amount of spending money.

With no more effort than to touch a computer key, it can pay the full, asking prices for any drugs, or it can set prices by law. Clearly, when people are made to suffer from high prices, market forces are not working.

So why not either:

  1. Have the federal government pay the asking price for all drugs and offer them free to the people or,
  2. Have the government set an “affordable” price for all drugs, despite what the drugmakers want.

Solution #1 has problems: Healthcare providers, including pharma makers, would jack up prices to astronomical levels, and simply feed off the government’s trough.

There would be no profit motive for the Research & Development of new drugs, because the current drugs would provide infinite profits.

Government price-setting is a risky business. It often has the opposite results from what one would hope. Rent controls are a perfect example.

Limit rents, and landlords will refuse to maintain or upgrade apartments.

Research & Development World
Costly, time-consuming, not itself profitable.

Limit profits, and fewer people will become doctors; fewer hospitals will upgrade ; fewer new drugs will be created; fewer patients will be served.

Solution #2  also has problems. It too would not provide the profits needed for the Research & Development of new drugs, especially drugs for rare diseases and low-profit categories (anti-biotics, for example).

Since the Orphan Drug Act was signed into law in 1983, the FDA has approved hundreds of drugs for rare diseases, but most rare diseases do not have FDA-approved treatments.  

The FDA works with many people and groups, such as patients, caregivers, and drug and device manufactures, to support rare disease product development. 

In one sense, Medicare already does #2.

Without negotiation, it sets the healthcare prices it is willing to pay, on a take-it or leave-it basis with healthcare practitioners.

That policy has generated the “concierge doctor” system. For annual fees, primary care (usually) doctors can limit their practices to a manageable 600-800 patients, allowing plenty of time to devote to each patient.

This compares with the more typical 2500+ patient load, characterized by quick, robotic diagnoses, treatments, then on-to-the-next.

There is a commonality to the problem of all federal price setting. It doesn’t pay for improvements.

When rents are controlled, landlords don’t maintain or upgrade. When doctor’s fees are controlled, doctors are not rewarded for being better doctors. They are not rewarded for doing the daily “R&D” to keep themselves up to date with the latest procedures. Nor are they rewarded for taking more time with patients.

When the primary reward is numbers sold — how many apartments, how many patients, how many sales — hospitals, convalescent homes, pharmaceutical companies, etc. are rewarded for more, but not for better.

All businesses, including the healthcare business — the doctors, nurses, hospitals, equipment manufacturers, all the way to ambulance services — can be thought of as divided into two related businesses:

    • Research and Development of better products.
    • Manufacture and marketing of more products.

Doctors and nurses are not financially rewarded by the market for staying current with the latest procedures and drugs. Nor are hospitals rewarded for improvements. Nor are equipment manufacturers and ambulance services rewarded for R&D.

The tacit assumption is the mousetrap theory. “Build a better mousetrap, and the world will beat a path to your door.” Your R&D will be rewarded indirectly through more, and more profitable sales.

But it doesn’t work with healthcare, where the customer has little choice and even less knowledge. A story:

For many years, I rescued small companies struggling to profit. One such company was a software developing group whose customers were businesses that needed certain software apps. 

We created the software and they paid us on a job/time basis. We did a lot of work for a one-project payment. Because we had no other source of income (for example no government help) our profits were lean.

Finally, we focused on one piece of software and marketed it to the public. That proved profitable for us, because the same software generated profits for us, year after year. We no longer provided R&D to other businesses.

But it reduced, by a small amount, the total amount of software R&D being done in America. We no longer were creating new programs.

Had the federal government compensated us for our ongoing software R&D efforts, we would have continued in that vein, and added to the software available to businesses.

Imagine a pharmaceutical company divided into two companies: One is called ABC R&D. The other is called ABC Sales.

Each has its own officers and balance sheets.

ABC R&D is financed by the federal government and by sales of its research results to pharmaceutical companies. Any patents developed by ABC R&D would be owned and licensed by them, not by ABC Sales.

This would be comparable to the way university patents are handled:

America’s universities are the nation’s principal source of the basic researchthat expands the frontiers of knowledge and produces discoveries that enhance national security, strengthen economic competitiveness, and enrich the lives of our citizens.

Although university research results are disseminated primarily through peer-reviewed publications, conferences, and other forms of open communication, they also are distributed through technology transfer, whereby fundamental discoveries are moved into the commercial sector for development into products and services that benefit society.

The landmark 1980 Bayh-Dole Act, which authorized universities and small businesses to retain patent and licensing rights to inventions resulting from federally funded research, has been an extraordinarily successful mechanism for facilitating the transfer of basic discoveries into the commercial sector for development. The patent system is an integral part of this process.

While the principal motivation of ABC Sales would continue to be profits, the principal motivation of ABC R&D would be more skewed toward discovery.

Researchers have a scientific bent and find joy in the discovery process. Funding would be supplemented by the government, so dollars would be a much less important goal.

Consider NASA’s rocket scientists, who are financed by the federal government. Their primary goal is scientific accomplishment, not selling the results of their work. That would be a pattern for ABC R&D.

By contrast, ABC Sales would be financed by its manufacturing and marketing of products. In such an arrangement, the government would not set product prices. Nor would prices need to evolve from R&D costs.

ABC R&D could afford to spend time and money creating drugs that cure rare diseases, and ABC Sales could profit, even from the resultant limited sales.

The government would reward “scholarships” to R&D companies simply for doing R&D. This would lead to more/better R&D that is not dependent on product sales. 

There is some precedent for this idea:

In developing new drugs for rare diseases, this non-profit steps in when pharmaceutical companies won’t In Silicon Valley, scientific altruism meets entrepreneurship in the race for ne By Dr. Edith Bracho-Sanchez, January 05, 2019

A research team has reason to celebrate after the Food and Drug Administration granted it approval on Friday to begin a clinical trial for a new pediatric brain cancer drug, one that might have ended up overlooked by pharmaceutical companies.

The lead researcher on the team, Dr. Teresa Purzner has already beat impossible odds. The neurosurgeon and mom of three managed to get the approval in record time and with little money thanks to the help of a team of ‘scientific altruists’ called SPARK.

The development of new medications in the United States is driven by pharmaceutical companies; researchers at universities rarely bring their discoveries to the bedside.

For every 10,000 potential new medicines sitting on laboratory shelves around the country, only one will ever reach patients in need, according to the National Institutes of Health.

Why? Because the process can take 10 to 15 years, costing upwards of a billion dollars per drug.

If profit is your primary motive, engaging in a high-risk enterprise that takes 10-15 years for approval, and costs a billion dollars, must be highly selective in its choice of projects.

That selectivity reduces the opportunity for serendipitous discovery. Research requires failure. The evolution of life on earth has taken millions of years and trillions of failures to get where we are now.

Research is the science of learning from failures.

As a result, the number of new medications approved by the FDA has remained stagnant at about 31 per year over the past 10 years.

The majority of these medications are similar to already existing ones, and many target diseases for which there are large markets— like hypertension and high cholesterol — and therefore, a return on investment.

Enter SPARK, a non-profit program created in partnership between Stanford University and volunteers from the biotechnology, pharmaceutical, and investment industries, which helps academic researchers bring their discoveries to patients.

Since its founding, SPARK has given special consideration to projects typically neglected by pharmaceutical companies, including rare diseases and diseases affecting children.

Purzner put her neurosurgery practice on pause to study medulloblastoma, a type of childhood brain cancer.

Compared to diseases like hypertension and high cholesterol, which affect millions of Americans, medulloblastoma is rare, affecting only 250 to 500 children every year.

America should not rely on profit-making companies to develop medicines. The federal government can afford repeated failures and long-term investment. The private sector rarely can.

Without government sponsorship, we never would have gone to the moon, or received the many benefits of that effort. (See: Going to the Moon Was Hard — But the Benefits Were Huge, for All of Us

Thanks in part to the massive, 400,000-person effort that put astronauts on the Moon, our knowledge of the solar system has increased dramatically in the decades since.

The many challenges NASA overcame forced the agency and its partners to devise new inventions and techniques that spread into public life, many of which are taken for granted today.

Here is a small selection of Apollo technologies still in use 50 years after the first Moon landing.

Digital Flight Controls Maybe the clearest illustration of Apollo’s contributions to the state of the art is the digital fly-by-wire control system that guided its path. The technology was unheard-of at the time, but it is now integral to airliners and is even found in most cars.

Food Safety One of the many problems NASA faced planning space missions was the need to ensure all food astronauts took with them was free of microbes that could make them sick. The Hazard Analysis and Critical Control Point (HACCP) system was in place in time for the first Moon missions.

For the past couple of decades, the U.S. government has required meat, poultry, seafood and juice producers to use HACCP system procedures across the entire food industry today.

Space Blankets One of the most prevalent spinoffs from the entire space program was invented for Apollo-era spacesuits. It might be best known as the “space blankets” found in emergency kits and handed out at the end of marathons, but multilayer reflective insulation is more often used in less visible applications.

The insulation has become a ubiquitous spinoff found in clothing, firefighting and camping gear, building insulation, cryogenic storage, magnetic resonance imaging machines and particle colliders, to name a few applications.

Quake-Proofing A technology that started with Apollo-era shock absorbers and computers now protects buildings and bridges around the world from earthquakes. The same technology now reinforces hundreds of buildings, bridges, and other structures around the world, particularly in quake-prone regions.

Rechargeable Hearing Aids Even decades after the Moon landing, new spinoff technologies from the Apollo program continue to arrive on the market. The world’s first practical rechargeable hearing aid batteries, which debuted in 2013, built on extensive work NASA did during and after Apollo.

The batteries have also made their way into a bone-anchored hearing system and a line of noise-canceling wireless earbuds. It is likely that we will see many more silver-zinc battery applications in the future.

See more at the NASA Spinoff website.

The federal government should focus on financing R&D. That is the real benefit to America. The federal government has taken small, tentative steps in this direction:

The Orphan Drug Act is a law passed by Congress in 1983 that incentivizes the development of drugs to treat rare diseases.  Companies and other drug developers can request orphan drug designation and FDA will grant such designation if the drug meets specific criteria.  Orphan designation qualifies sponsors for various incentives, including: 

    • Tax credits for qualified clinical (in humans) testing
    • Waiver of the Prescription Drug User Fee (currently at almost $3 million for a new drug)
    • Potential 7 years of market exclusivity after approval

In addition, the Orphan Drug Act established the Orphan Product Grants Program to provide funding for developing products for rare diseases or conditions. 

The FDA’s Orphan Products Grants Program awards grants to clinical investigators to support the development of safe and effective medical products for patients with rare diseases. The program has supported clinical research since 1983 and has funded clinical trials that have facilitated the approval of more than 70 products.

Although the direction is good, the process still lies in the hands of profit-oriented pharmaceutical companies.

Progress will be made only when the process is in the hands of discovery-oriented R&D companies, separate from the pharmaceuticals.

Despite all its brilliance, Space X rode on NASA’s shoulders. No government, no Space program. No government, no COVID vaccine.

For the federal government, money, time, and profits are not the primary consideration. An intelligent government leadership can keep its eyes on the real goal: Medical solutions.

In summary, R&D is essential for all of America. Many of our most significant discoveries came when someone was looking for something else. One never knows where serendipity will lead.

But R&D is expensive in terms of money and time, and failure is the most common result.

A Monetarily Sovereign government can afford to invest the money and time in R&D projects. The government should do far more to fund medical research, not by supporting traditional pharmaceutical companies but by funding R&D companies that would replace pharmaceutical companies’ R&D departments.

The government can encourage and reward such companies via direct grants. After government-funded R&D has done all the drug heavy-lifting (including FDA approvals), the sales/marketing companies can profit from the lower-risk end of the business and thereby provide lower-cost medicines.

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most critical problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socioeconomic ranking and to come nearer those “above.” The socioeconomic 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Inflation and its fake interest-rate solution

You have heard that the Federal Reserve is trying to cure inflation by raising interest rates slowly.

And you may repeatedly have read on this site (here, and here, and here, and here) that the Fed does not have the best tools to stop inflation, and that despite their best efforts, inflation will continue and be joined by recession..

The Fed has two tools: Raising interest rates and to some degree,  reducing money-supply growth.

Contrary to popular belief, neither can cure inflations, but both are very good at creating recessions.

Sadly, a recession is not the opposite of inflation. (Deflation is.) A recession is the opposite of growth and prosperity. The Fed is trying to cure inflation via recessionary means.

Today, as we predicted, the Fed is failing miserably in its assigned task.

The annual inflation rate for the United States is 9.1% for the 12 months ended June 2022, the largest annual increase since November 1981 and after rising 8.6% previously, according to U.S. Labor Department data published July 13.

Since the Fed doesn’t have the tools to cure inflations, who does? As you will see, Congress and the President have that power. But, out of ignorance, intent, or political chicanery, Congress and the President won’t use their power of the purse to prevent or end inflation.

To explain this, we first must discuss the myth that raising interest rates cures inflation.

Interest Rates Go Up Soon — How Does Raising Rates Help Fight Inflation? By Kathryn Underwood, MAR. 11 2022

It isn’t a secret that prices have risen over the past year. Americans have seen the highest inflation rates since 1982, based on the CPI (Consumer Price Index), which increased by 0.8 percent in February and 7.9 percent YoY.

Now, the Federal Reserve is about to raise interest rates.

The CPI measures the average change over time in the prices for urban consumers on typical consumer goods and services.

Although raising interest rates might seem harsh when prices are already high, it’s intended to eventually lead to a drop in inflation.

The primary reason the Federal Reserve (or the Fed) raises interest rates is to cause a slowdown in economic growth.

Interest rates determine how costly it is for consumers and businesses to borrow.

Economic growth is not the same as inflation. We can have fast economic growth without inflation, so slowing growth is not a cure for inflation.

Yet, the purpose of raising interest rates is to slow growth, and that is recessionary.

When no one is rich or poor.

A recession is “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”

The Fed does not want to cause a recession, so its interest rate increases must slow economic growth (i.e., GDP growth) while not causing GDP to fall.

The Fed hopes that by raising interest rates, consumers and businesses will delay new investments, which will help lower demand and temper prices.

The Gap between the rich and the rest is what makes them rich. Without the Gap, no one would be rich. We all would be the same. The wider the Gap, the richer they are.

Although that is what the Fed claims to hope, delaying new investments does not lower demand.

It likely will lower supply by discouraging investment in Research & Development and production.

Let’s examine the logic. Inflation exists when the demand for critical goods and services exceeds the supply of those goods and services, creating shortages.

Shortages cause all inflations. ALL.

Because reducing demand leads to recessions, the non-recessionary prevention/cure for inflation is to increase the supply of scarce, critical goods and services.

Here are some of the critical goods and services for which supply must be increased:

I. Oil. As we have shown in several previous posts (here, here, here, here, etc.), inflation is highly impacted by the price of oil. It is the most critical product affecting inflation.

Oil prices are determined by scarcity. Inflation (red) closely parallels oil scarcity (blue).

Every industry and virtually every product and service uses oil in some way. Any increase in oil prices will cause a general rise in product/service prices (aka inflation).

Oil prices are determined by scarcity.

It is essential to reduce the oil shortage to fight inflation.

The oil shortage could be cured by reducing demand, but that would be recessionary.

The non-recessionary method for reducing the oil shortage involves federal funding for oil research, exploration, drilling, refining, and distribution, plus federal funding for oil substitutes like solar, wind, geothermal, electrical, nuclear, etc. power.

More federal funding, not less, could cure inflation. Interest rate manipulation does nothing to increase the supply of oil.

Higher interest rates could exacerbate the oil scarcity situation by negatively affecting the oil supply.

Interest rate manipulation can affect the oil demand only to the degree that it depresses the economy.  Exchanging recession and depression for inflation is a bad tradeoff, yet that is the Fed’s solution.

II. Food. Second to oil, food is the next most crucial inflation-related product. Food shortages have caused many hyperinflations around the world.

The infamous Zimbabwe hyperinflation began when the government took farmland from experienced white farmers and gave it to inexperienced black farmers. The predictable result: A massive food shortage leading to an equally massive increase in food prices.

Raising interest rates will not help farmers grow more food.

All food prices now are predicted to increase between 7.5 and 8.5 percent.

An ongoing outbreak of highly pathogenic avian influenza (HPAI) reduced the U.S. egg-layer flock and drove a 5.0-percent increase in retail egg prices in May 2022 following a 10.3-percent increase in April.

Higher interest rates will not cure the meat and egg shortage.

The ongoing HPAI outbreak has also contributed to increasing poultry prices as over 40 million birds in 36 States have been affected.

The disease prevalence also impacts international demand for U.S. poultry. Price impacts of the outbreak will be monitored closely.

Poultry prices are now predicted to increase between 13.0 and 14.0 percent, and egg prices are predicted to increase between 19.5 and 20.5 percent in 2022.

Higher interest rates will not solve the poultry shortage.

Fish and seafood prices are now predicted to increase between 8.5 and 9.5 percent in 2022.

Higher interest rates will not cure the fish and seafood shortage.

Rapid increases in the consumption of dairy products have driven increases in retail prices in recent months.

This trend continued in May 2022 with a 2.6-percent increase in the prices for dairy products. 

Dairy product prices are predicted to increase between 10.5 and 11.5 percent in 2022.

Higher interest rates will not cure the dairy shortage.

Following large price increases in January–May 2022, forecast ranges for fats and oils, processed fruits and vegetables, sugar and sweets, cereal and bakery products, and other foods have been adjusted upward.

In 2022 compared with 2021, fats and oils prices are predicted to increase between 14.0 and 15.0 percent, processed fruits and vegetables prices between 7.5 and 8.5 percent, sugar and sweets prices between 6.5 and 7.5 percent, cereal and bakery product prices between 10.0 and 11.0 percent, and other food prices between 10.0 and 11.0 percent.

Higher interest rates will not cure food shortages unless the plan is to force people to starve because of food scarcity and unaffordability.

A plan to solve inflation by forcing people to eat less food is repugnant to any but the most heartless demagogue. Yet that is exactly the Fed’s plan.

Interest rates are the Fed’s primary tool for impacting inflation. Borrowing is more expensive, but on the plus side, earnings on high yield savings accounts increase.

An increase in earnings on high-yield savings accounts cannot begin to offset the damage of inflation. It’s like using a sponge to offset the floods caused by global warming.

The food shortages can be moderated by additional federal deficit spending to support farming.

The government should pay farmers to grow rather than pay them not to grow, as was done when there were surpluses.

Additional federal funding for farmer education, the use of more efficient land use and crops, farm insurance, modern farm equipment, and shipping would reduce the shortage of farm products.

Strangely, the Fed focuses on “core inflation” which eliminates consideration of oil and food, the primary inflationary instigators. It’s like eliminating thoughts about hitting and pitching to arrive at “core” baseball wins.  

III. Labor. COVID precipitated a labor shortage that has not abated. Federal deficit spending for the development and administration of vaccines and other healthcare helped moderate the shortage of labor.

Although the shortage, which manifested during COVID, and still continues, other factors were involved, notably compensation.

The salaries and benefits being offered were not tempting enough for many potential workers.

While the right-wing favors cutting benefits to force employees back to work, the more humanitarian approach is to increase remuneration.

First, FICA should be eliminated.

Despite myths to the contrary, FICA pays for nothing. FICA dollars are destroyed upon receipt by the Treasury. Because employers must pay half of FICA, this tax is an employment cost consideration.

Not only are employers forced to cut salaries to make room for FICA, but employer-provided healthcare insurance is an additional employment cost that must be considered when determining salaries.

These costs could be eliminated, salaries could be raised, and more people would come to work, if the federal government funded comprehensive, no-deductible Medicare for all, and took that burden from the salary consideration.

That reduction in labor scarcity would require additional federal deficit spending.

The Federal Reserve plans to raise interest rates several times in 2022.

The Fed’s main objectives are maximum employment, stable prices, and moderate long-term interest rates.

2 percent is the target interest rate, so 7.9 percent over the past year is nearly quadruple that rate.

Interest rate increases will do nothing to achieve maximum employment, nothing to stabilize prices, and of course, nothing to achieve 2% interest rates.

The Fed currently is doing nothing to achieve its three goals. Quite the opposite. The Fed is doing the exact opposite of its stated goals by hoping to “cool” the economy (Fedspeak for recessing the economy).

In short, the Fed is applying leeches to cure anemia.

To fight the economic impacts of the COVID-19 pandemic, the Fed dropped rates to zero.

The Fed has been talking about rate hikes for months. Increases were expected even before Russia invaded Ukraine and impacted oil and raw material costs.

Economists expect up to seven incremental rate increases, beginning with a likely quarter-point raise (25 basis points), according to CNBC. Some economists have suggested the Fed may add 50 basis points on some of these increases.

Why seven increases? How did the Fed arrive at that number? No one knows. 

Consumers have already been hit with high prices on goods like groceries, furnishings, clothing, airline fares, and especially high fuel prices.

IV. Other shortages. Lumber, housing, computer chips, shipping, cars, clothing, airline seats, etc. all are in short supply, and each scarcity could be moderated by well-directed federal spending.

Think of any scarcity, and you will have no trouble imagining how the federal government could help cure that scarcity via additional federal spending.

The federal government’s greatest skill is to throw money at a problem. It costs taxpayers nothing; it stimulates the economy; and when properly planned, can help solve the problem.

The proposed interest rate hikes will not increase the supply of oil or food. Nor will they increase the supply of housing, lumber, computer chips, cars, clothing, airline fares, furnishings, shipping, or labor, all of which are in short supply.

Additional deficit spending, not reductions in deficit spending, can reduce the shortages of scarce goods and services. Inflations always are caused by shortages. 

Interest rate hikes will exacerbate those shortages, thus exacerbating inflation. The only possible “benefit” of rate increases (if one can call it a “benefit”) is that it will cut Gross Domestic Product and recess the economy.

A recession isn’t expected due to promising labor markets, but low-income workers will likely suffer.

And there we have it. The usual government response to any emergency is to punish the poor and middle-income classes. When deficits (wrongly) are deemed too high, the first instinct is to cut Social Security, cut medicare, and cut all poverty aids.

So far, it appears that a recession is unlikely in 2022, largely due to the fact that the labor market is strong.

Diane Swonk, the chief economist at Grant Thornton, told CNBC the employment market continues to improve.

However, the Fed must be cautious to avoid raising rates too quickly, which could slow down the economic recovery and lead to higher unemployment.

The labor market is “strong” (i.e., low unemployment) because people must work to pay their high bills. But the labor market is “weak” because there is a shortage of labor.

Raising interest rates will not reduce the shortages that cause inflation. Cutting federal spending only will recess an economy already weakened by scarcity and previous interest rate increases.

The government could end the inflation with more, not less, government spending to eliminate shortages and with lower, not higher, interest rates.

But the government, ruled by the rich, prefers to pretend that inflation must be cured at the expense of the poor and middle classes.

By beating down the “not-rich,” the rich widen the income/wealth/power Gap between them and the rest of us.

The Gap makes them rich, and the wider the Gap, the richer they are. Everything the Fed does is in service of a wider Gap.

At the start of this post, we told you that Congress and the President could prevent and cure inflations. But they pretend federal spending causes inflation.

For many in Congress, this is sheer ignorance. For others it is politics. Neither side wants the other side to succeed, and because Congress now is evenly divided, no one can overcome the minority rule system.

America’s founders created the minority rule system to entice the low-population states to join the union, so between the two-Senators-per-state voting system and the filibuster, a minority can prevent any progress unless one party has a super majority.

Add in House gerrymandering and the Presidential electoral college, and you have a creaky, arthritic government designed for obstruction, not for progress.

If all that were not bad enough, we are burdened with a Supreme Court that claims money is free speech and should not be limited, so money in politics has reached outrageous levels.

Finally, we also have a Supreme Court that now does not want agencies making decisions that offend the right wing, when in reality, agencies are the only ones capable of making decisions, thus tossing so many wrenches into the gears of progress, we are frozen.

In short, the Fed doesn’t have the tools, Congress doesn’t have the will, and the President doesn’t have the Congress or agencies.

Inflation will charge along with no one solving the scarcity problem until the private sector does it.

Capitalism, with its focus on profits and competition, eventually will reduce scarcities, at which time the Fed, Congress, the President, and both political parties will claim credit for “getting us out of this mess.”

The rich will prosper and the rest will suffer, and life will return to its normal domination by the rich.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY