Billionaires Get Bailed Out by Free Money From the Fed. A Green New Deal Has to be Funded by Increased Taxes? What's Wrong With This Picture? Socialism for the Rich. Capitalism for the Middle Class and Poor.
by John Lawrence, August30, 2020
The Federal Reserve has printed trillions of dollars to bail out Wall Street banks and billionaire Hedge Funds so they can continue to gamble in risky derivatives, interest rate swaps, collateral loan obligations, pooled mortgages, futures, options and other financial manipulations that do nothing except move money from one rich person's portfolio to another's. Meanwhile, those who advocate building and repairing crumbling bridges, dams, railroads, levees and airports and doing so by creating millions of good paying jobs are demonized by those who have received the free money - rich people and the politicians sucking at their teats. How ya gonna pay for it, they say. Y'all are going to have to raise taxes. Not necessarily if we use the same means and methods that the rich have used to balance their portfolios - the Fed printing trillions of dollars and then swallowing it in the Fed's black hole - no taxes necessary.
Modern Monetary Theory states that a nation can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases. In short deficits don't matter which is based on observation of the real world in which the US adds at least another trillion to its national debt every year. The budget is never balanced nor need it be. The US can never be made to default because the Federal Reserve issues fiat money with debt being denominated in its own currency. Therefore, it can always print more money to pay its own debt. However, much of the US debt is held by foreign countries because the US dollar is the world's reserve currency. That means that most if not all financial transactions world wide are done in dollars. When the US treasury sells bonds, the Fed remains willing to buy them if the market does not provide buyers for all of them. So far this year during the pandemic, the Fed has seen to it that the richest Americans did not see any decreases in wealth. It did this by printing $3 trillion and basically giving it to the rich.
Between mid-March and mid-May, during the lockdown, the wealth of America’s 600-plus billionaires ballooned by $434 billion, according to a report by Americans for Tax Fairness, pushing the wealth of those 600 Americans to a combined $3.4 trillion. The Fed accomplished this by making sure asset prices, mainly the stock market, did not go down during the lockdown. The richest 10% of American households own 84% of the value of stocks, according to Federal Reserve data. When Fed Chairman Powell admitted that the Fed’s nearly $3 trillion in asset purchases caused asset prices (again the stock market) to increase, he said the goal was to “restore functioning markets,” which means markets where prices are rising, and markets where price discovery is not allowed to happen, and markets where investors are spared any losses.
So there we have the reason why the current pandemic caused depression did not result in the stock market tanking like it did in the infamous 1929 crash which led to the Great Depression. The Fed printed money and bought stocks. It's as simple as that. Yet the Fed resists doing the same thing for the middle class such as printing $3 trillion and spending it on a Green New Deal. Oh no, politicians whine, that would mean taxes would have to be raised. No they wouldn't if the Fed prints the money and spends it on infrastructure rather than buying stocks. The limitation on this money printing is only when the economy reaches full employment and/or inflation starts to rise. So far we're a long way from either of those events occurring.
The fact is that a Joe Biden Presidency could institute a program of Medicare for All and a Green New Deal and the forgiveness of student loan debt without increasing taxes. It would lead to huge deficits to be sure. Those deficits represent US Treasury bonds sold to the public. To the extent that the public doesn't want to purchase all of them, the Fed can step in, buy them up and disappear them on its balance sheet in just the same way it has propped up Wall Street after the Great Recession and the stock market presently during the Pandemic Recession. There is no reason why US policies should add huge amounts of wealth to the already rich while starving the country and most of its citizens of good paying jobs creating a green infrastructure. Both income and wealth taxes on the rich (but not on the poor or middle class) can then function to decrease economic inequality and mitigate the need for Fed money printing.
