California Free Press

Socialism at Its Finest after Fed’s Bazooka Fails

Posted on March 21, 2020 by Ellen Brown

Web of Debt blog

In what is being called the worst financial crisis since 1929, the US stock market has lost a third of its value in the space of a month, wiping out all of its gains of the last three years. When the Federal Reserve tried to ride to the rescue, it only succeeded in making matters worse. The government then pulled out all the stops. To our staunchly capitalist leaders, socialism is suddenly looking good.  

The financial crisis began in late February, when the World Health Organization announced that it was time to prepare for a global pandemic. The Russia-Saudi oil price war added fuel to the flames, causing all three Wall Street indices to fall more than 7 percent on March 9. It was called Black Monday, the worst drop since the Great Recession in 2008; but it would get worse. 

On March 12, the Fed announced new capital injections totaling an unprecedented $1.5 trillion in the repo market, where banks now borrow to stay afloat. The market responded by driving stocks 8% lower.

On Sunday, March 15, the Fed emptied its bazooka by lowering the fed funds rate nearly to zero and announcing that it would be purchasing $700 billion in assets, including federal securities of all maturities, restarting its quantitative easing program. It also eliminated bank reserve requirements and slashed Interest on Excess Reserves (the interest it pays to banks for parking their cash at the Fed) to 0.10%. The result was to cause the stock market to open on Monday nearly 10% lower. Rather than projecting confidence, the Fed’s measures were generating panic.

As financial analyst George Gammon observes, the Fed’s massive $1.5 trillion in expanded repo operations had few takers. Why? He says the shortage in the repo market was not in “liquidity” (money available to lend) but in “pristine collateral” (the securities that must be put up for the loans). Pristine collateral consists mainly of short-term Treasury bills. The Fed can inject as much liquidity as it likes, but it cannot create T-bills, something only the Treasury can do. That means the government (which is already $23 trillion in debt) must add yet more debt to its balance sheet in order to rescue the repo market that now funds the banks.

The Fed’s tools alone are obviously incapable of stemming the bloodletting from the forced shutdown of businesses across the country. Fed chair Jerome Powell admitted as much at his March 15 press conference, stating, “[W]e don’t have the tools to reach individuals and particularly small businesses and other businesses and people who may be out of work …. We do think fiscal response is critical.” “Fiscal policy” means the administration and Congress must step up to the plate.

What about using the Fed’s “nuclear option” – a “helicopter drop” of money to support people directly? A March 16 article in Axios quoted former Fed senior economist Claudia Sahm:

The political ramifications of the Fed essentially printing money and giving it to people – there are ways to do it, but the problem is if the Fed does this and Congress still has not passed anything … that would mean the Fed has stepped in and done something that Congress didn’t want to do. If they did helicopter money without congressional approval, Congress could, and rightly so, end the Fed.

The government must act first, before the Fed can use its money-printing machine to benefit the people and the economy directly.

The Fed, Congress and the Administration Need to Work as a Team 

On March 13, President Trump did act, declaring a national emergency that opened access to as much as $50 billion “for states and territories and localities in our shared fight against this disease.” The Dow Jones Industrial Average responded by ending the day up nearly 2,000 points, or 9.4 percent.

The same day, Democratic presidential candidate Rep. Tulsi Gabbard proposed a universal basic income of $1,000 per month for every American for the duration of the crisis. She said, “Too much attention has been focused here in Washington on bailing out Wall Street banks and corporate industries as people are making the same old tired argument of how trickle-down economics will eventually help the American people.” Meanwhile the American taxpayer “gets left holding the bag, struggling and getting no help during a time of crisis.” H.R. 897, her bill for an emergency UBI, she said was the most simple, direct form of assistance to help weather the storm.

Democratic presidential candidate Andrew Yang, who made a universal basic income the basis of his platform, would go further and continue the monthly payments after the coronavirus threat was over.

CNBC financial analyst Jim Cramer also had expansive ideas. He said on March 12:

How about a $500 billion Treasury issue … [at] almost no interest cost, to make sure that when people are sick they don’t have to go to work, and companies that are in trouble because of that can still make their payroll. How about a credit line backstopped by … the Federal Reserve. I know the Federal Reserve is going to say they can’t do that, Congress is going to say they can’t do that, everyone is going to say what they said in 2007, they can’t do that, they can’t do that — until they did it. … [W]e heard all that in 2007 and they ended up doing everything.

And that looks like what will happen this time around. On March 18, as the stock market continued to plummet, the administration released an outline for a $1 trillion stimulus bill, including $500 billion in direct payments to Americans, along with bailouts and loans for the airline industry, small businesses, and other “critical” sectors of the U.S. economy.

But the details needed to be hammered out, and even that whopping package buoyed the markets only briefly. In the bond market, yields shot up and values went down, on fears that the flood of government bonds needed to finance this giant stimulus would cause bond values to plummet and the government’s funding costs to shoot up.

Extraordinary Measures for Extraordinary Times

There is a way around that problem. To avoid driving the federal debt into the stratosphere, the Treasury could borrow directly from the central bank interest-free, with an agreement that the debt would remain on the Fed’s books indefinitely. That approach has been tested in Japan, where it has not generated price inflation as austerity hawks have insisted it would. The Bank of Japan has purchased nearly 50 percent of the government’s debt, yet consumer price inflation remains below the BOJ’s 2 percent target.

Virtually all money today is simply “monetized” debt – debt turned by banks into something that can be spent in the marketplace – and the ultimate backstop for this sleight of hand is the central bank and the government, which means the taxpayers. To equalize our very unequal system, the central bank and the government need to work together. The Fed needs to be “de-privatized” – turned into a public utility that serves the taxpayers and the economy. As Eric Striker observed in The Unz Review on March 13:

The US government’s lack of direct control over the nation’s central bank and the plutocratic nature of our weak state means that common sense solutions are off the table. Why doesn’t the state buy up majority shares in large corporations (or outright nationalize them, as happened with the short successful experiment with General Motors in 2009) and use the $1.5 trillion at low interest to develop American industrial independence?

Interestingly, that too could be on the table in these extraordinary times. Bloomberg reported on March 19 that Larry Kudlow, the White House’s top economic adviser, says the administration may ask for an equity stake (an ownership interest) in corporations that want coronavirus aid from taxpayers. Kudlow noted that when this was done with General Motors in 2008, it turned out to be a good deal for the federal government.

While traditionally considered “anti-capitalist,” the government taking an ownership interest in bailed out companies may be the only way the proposed bailouts will get approval. There is little sentiment today for the sort of no-strings-attached “socialism for the rich” that the taxpayers shouldered in 2008 without reaping the benefits. Bloomberg quotes Jeffrey Gundlach, chief executive officer at DoubleLine Capital:

I don’t think government bailouts of over-leveraged companies that got over-leveraged by share buybacks at all-time highs, enriching executives and hedge fund investors, will sit well with the American people.

The Bloomberg article concludes with a quote from another chief investment officer, Chris Zaccarelli of Independent Advisor Alliance:

I like how [the administration is] thinking a little bit outside of the box. Something big and bold like that could potentially be what turns the market around ….

Long-term Solutions

Rather than just a stake in the profits, the government could think a bit further outside the box and turn insolvent airlines, oil companies, and banks into public utilities. It could require them to serve the people and the economy rather than just maximizing the short-term profits of their shareholders.

Concerning the banks, the Fed could do as the People’s Bank of China is doing in this crisis. The state-run PBoC is giving regional banks $79 billion in stimulus money, but it is on condition that they lend it to small and medium enterprises and forgive late payments, so that economic damage is reversed and production can recover quickly.

Another model worth studying is that of Germany, which also has a strong public banking system. As part of a package for coronavirus aid that the German finance minister calls its “big bazooka,” the government is offering immediate access to loans up to €500,000 for small businesses through its public bank, the KfW (Kreditanstalt fuer Wiederaufbau), administered through the publicly-owned Sparkassen and other local banks. The loans are being made available at an interest rate as low as 1%, with interest only for the first two years.

Contrast that to the aid package President Trump announced last week, which will authorize the Small Business Administration to offer business loans. After a lengthy process of approval by state authorities, the loans can be obtained at an interest rate of 3.75% – nearly 4 times the KfW rate. German and Chinese public banks are able to offer rock-bottom interest rates because they have cut out private middlemen and are not driven by the insatiable demand for shareholder profits. They can lend countercyclically to avoid booms and busts while supporting the economy as a whole.

The U.S., too, could create a network of publicly-owned banks backed by the central bank, which could lend into their communities at below-market rates. And this is the time to do it. Times of crisis are when change happens. When the Covid-19 scare has passed, we will have a different government, a different economy and a different financial system. We need to make sure that what we get is an upgrade that works for everyone.

_______________________

Ellen Brown chairs the Public Banking Institute and has written thirteen books, including her latest, Banking on the People: Democratizing Money in the Digital Age.  She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.

Off the Top of My Head

China Out Capitalizes Capitalist Nations

by John Lawrence, March 23, 2020

Who would have thunk it? China has taken capitalist financial methods to the next level with the result that it is progressing more rapidly in material abundance and a consumer society than the proto-capitalist nations of the world: the US and Europe. Sure, politically, they are an authoritarian nation. But that expedites their development since all institutions are on the same wavelength. In particular their central bank, the People's Bank of China (PBC) funds infrastructure projects all over the world. This keeps China a full employment society. They put all the Chinese people to work building infrastructure which expands the money supply in a very widespread way. Essentially the PBC provides loans for all these projects which means it creates the money just as US banks do when they create loans or the Federal Reserve does when it provides "liquidity" to the markets through quantitative easing (QE).

The Federal Reserve has actually expanded the range of market interventions it can do. It used to be that the Fed could only set interest rates. That was it. Now it can buy corporate bonds, state and local bonds and give money directly to corporations to keep them afloat. In fact it can act more like the PBC which interacts directly in the Chinese economy. The Fed can take debts directly onto its balance sheet where they may remain forever. This is exactly what it did in the 2008 financial crash. It provided cash directly to banks in return for mortgage backed securities and Treasury bonds thus providing liquidity to the banks so that they would not go under. Now the banks are well capitalized, and, since they know that the Fed stands ready to bail them out again, they have no worries. In fact the term "bail them out" is actually a misnomer at this point. It can be replaced with "provide them with cash" as necessary.

There was an interesting interview on 60 Minutes with Neel Kashkari, Obama's Assistant Secretary of the Treasury, who was in charge of the Troubled Assets Relief Program (TARP) during the Great Recession. He noted that TARP, which was supposed to help out actual people with their mortgages did not go far enough. They were too stingy with it, and not very many people got helped. He says that this prolonged the recession. Instead of being stingy as they were, they should have been "overly generous." That is the lesson he learned. So now in the coronavirus recession, his advice is that the Fed should be overly generous in providing relief to actual everyday people and not just to banks. At this time the banks are doing very well, thank you.

It is well known that money is created by the banks themselves when they create a loan which they do with a couple of keystrokes on a computer. Why is this possible? Because money has no relationship to gold or any other precious metal any more. That's why it's called "fiat money." So what bankers and economists are realizing (which has been the secret of China's success all along resulting in their bringing 800 million people out of poverty in 40 years) is that the US central bank, the Federal Reserve can do the exact same thing. It can create fiat money just like the banks do, like Wall Street does. The only concern is that money so created would lead to inflation, but, as Kashkari noted, there was no inflation even after the Fed created trillions of dollars in 2008 most of which went directly to bankers, hedge funds and rich individuals and not to the average American. Now Kashkari, who is President of the Minneapolis branch of the Federal Reserve, is saying that the Fed could provide liquidity to the American people and not just to the banks. How this will probably happen is by Congress passing a bill on the "fiscal side" as they say. Then they will sell more Treasury bonds to cover the increased deficit. Wall Street banks will buy them since other countries are decreasing their purchase of US debt, and then the Fed will provide liquidity (cash) to Wall Street taking the Treasury bonds onto its balance sheet where they will reside forever probably. This is why the national deficits and debt are no problem because the Fed can print money to cover them ad infinitum. It's as if the Fed provided money directly to the US economy, but, by law, they have to do so indirectly.

Ellen Brown understood this possibility long before Neel Kaskari had his "awakening."

America’s chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. Typically, if the businesses cannot repay the loans, neither the banks nor the businesses are put into bankruptcy, since that would mean losing jobs and factories. The non-performing loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government, and the loans were created on the banks’ books in the first place (following standard banking practice globally).

Precisely! So no need to worry about another Great Recession or Depression. The US could effectively provide a Universal Basic Income (UBI) to its citizens indefinitely as Andrew Yang proposed.

As observed by Jeff Spross in a May 2018 Reuters article titled “China’s Banks Are Big. Too Big?”:

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever.…

It may sound weird to say that China’s banks will never collapse, no matter how absurd their lending positions get. But banking systems are just about the flow of money.

Spross quoted former bank CEO Richard Vague, chair of The Governor’s Woods Foundation, who explained, “China has committed itself to a high level of growth. And growth, very simply, is contingent on financing. Beijing will come in and fix the profitability, fix the capital, fix the bad debt, of the state-owned banks … by any number of means that you and I would not see happen in the United States.”

There is no reason why the US could not emulate China. From an economic point of view QE or a UBI would not be inflationary as long as the dollars provided to the system were either invested in new plants and equipment, infrastructure or consumption. What is needed now is about $10 trillion worth of Green Infrastructure, a Green New Deal funded indirectly by the Fed. This money can be provided to the American people and not only rich billionaires as was done in 2008 and as China is providing directly to its workers who are kept busy building infrastructure in the Belt and Road initiative. It would also ease economic inequality and not induce inflation as long as the money is widely distributed.

Off the Top of My Head

The Fed Keeps On Bailing Out Failing Businesses

by John Lawrence, March 17, 2020

The Fed announced recently that it would cut interest rates to zero. It has also promised to insert $1.5 trillion of "liquidity" into the markets. It's clear that the US is a society that runs on debt, and the biggest non profit producing industry that has gorged itself on humungus amounts of debt is fracking. But investors are getting weary. S&P Global Ratings this month cut credit ratings of six shale gas producers citing the outlook for natural gas prices. "We are particularly concerned about some of the issuers' ability to access the capital markets given investor aversion to the space," S&P said. But no worries. A Fed bailout is on the way. Zero percent interest. Free money. Whoopee. Frack away.

Just a few days ago, CNBC host Jim Cramer exclaimed, "I'm done with fossil fuel," after disappointing earnings reports from Dow Jones energy giants Chevron and Exxon Mobil. "We're in the death knell phase," he warned. The fracking industry is deathly afraid that, if Bernie Sanders is elected, the gravy train will be over. Fracking has provided a lot of jobs for a lot of people, but it is not profitable if the world oil price is less than $40 a barrel. Right now, thanks to Russia and Saudi Arabia, the price of oil is $30 a barrel. A Green New Deal would have to provide jobs for all those workers in the fracking industry who have been making pretty good money even though the industry as a whole is unprofitable.

The Fed is doing its job to create another tower of debt in the US. Alexandria Ocasio-Cortez has pointed out that the $1.5 trillion the Fed has injected into the system for "liquidity" could wipe out all the student loan debt in the US which now stands at $1.5 trillion. But the Fed insists that any stimulus to the economy which would actually help working people as opposed to investors has to come from the fiscal side meaning that Congress would have to appropriate the money. The Fed's job is to make sure that no major business player in the US economy goes bankrupt including the US government itself which is wallowing in debt to the tune of $1 trillion a year thanks to Trump's tax cuts for the rich similar to Ronald Reagan's tax cuts for the rich which quintupled the national debt. It took a Democrat, poor old Clinton, to reduce the deficit to zero.

The question naturally arises of why can't the Fed bail out American workers to the tune of $1000 a month as Andrew Yang has suggested especially now that the coronavirus has put a huge damper on consumption which is 70% of the economy. The Fed says, "Not my job. That's Congress' job." The Fed as it turns out is a wholly owned subsidiary of Wall Street. It is not a publicly owned entity. Congress will do nothing to bail out the American people because of the Republican controlled Senate led by Mitch McConnell. Even if Democrats were to attain a majority in the Senate, the filibuster would prevent them from doing anything. So Joe Biden, even if elected, will get nothing substantial done including building on Obamacare. The only reason Obamacare was even passed in the first place was that Democrats had a majority in both Houses and a filibusterproof majority in the Senate (60 votes) for a very short period of time (4 months) during which Obamacare was passed. Good luck Joe.

If the Fed, instead of being privately controlled by Wall Street, were to become a truly public institution controlled by Congress, then maybe it could bail out the general American public instead of failing businesses. According to the rules of capitalism, failing businesses at some point should go bankrupt. The Fed is essentially preventing that from happening thus fueling the stock market. However, the stock market senses that at this point the Fed has used up all its tools and can do nothing further. There is probably too much liquidity in the markets already. Providing more wouldn't do any good. Interest rates are already at zero. The Fed could go to negative interest rates, but that would screw the economy up even more. Perhaps we'll all have to settle for a good old recession after all. But one thing is for certain. About six months from now, Trump will pull out all the stops to get the economy moving again just before the election since he is basing his reelection on a robust economy. However, it all depends on whether or not the coronavirus is under control at that point. If it is, Trump will take credit.

Off the Top of My Head

Russia and Saudi Arabia Selling Oil at $40 a Barrel. US Fracking Industry in Deep Debt. Can't Survive at That Price.

by John Lawrence, April 11, 2020

As if the coronavirus was not a big enough threat to the US economy, Russia and Saudi Arabia are in a price war over oil driving the price down to $40 a barrel. The world now needs less oil because of the coronavirus, but Russia is still producing at the same rate. Not to be outdone Saudi Arabia is also maintaining its same level of production producing a glut on the world market. To be profitable at all the US shale oil industry needs prices to be at least $60 a barrel. So effectively, Russia is forcing the US fracking industry, which is totally overleveraged in the first place, into bankruptcy. To boot Russia can produce oil for less money than Saudi Arabia. The US has sanctioned Russia's oil industry in terms of the NORD II pipeline to Europe and its Turkstream pipeline to Turkey, but there is no way that Trump can sanction the price of a barrel of oil if Russia floods the market.

Market Watch reported:

The rapid growth of the U.S. shale industry is at the heart of a Russia-versus-Saudi Arabia crude-oil price war that threatens to upend a global economy already under threat from the spread of the coronavirus, experts said Monday.

“Russia has made no secret of the fact that it is concerned about the growth of the U.S. shale industry and of its view that repeated output cuts by OPEC were effectively handing market share to U.S. producers,” said Caroline Bain, chief commodities economist at Capital Economics, in a Monday note.

Russia’s rejection last week of a Saudi push for additional production cuts prompted Saudi Arabia over the weekend to slash prices on crude exports in a move analysts said was aimed at taking market share from Russia. But it was Russia’s longstanding frustration with rapidly growing U.S. shale industry that prompted Moscow to resist the push for additional production curbs.

Saudi Arabia over the weekend slashed prices on oil exports, a move that traders took as a sign that the Riyadh was ready to take on Russia in a global price war that would flood the world with crude at the same time demand is curtailed by the COVID-19 outbreak.

The fracking industry has survived basically on zero percent interest loans from Wall Street. The whole American economy is based on no interest loans with the Federal Reserve providing quantitative easing whenever banks or major industries needed money. The average American pays through the nose for a loan. The whole economy is on life support, and it would collapse unless it is continually salvaged by government deficit spending and the Fed flooding the markets with liquidity. The fracking industry and the banks that carry its loans are in trouble now because Russia is essentially controlling the price of oil and pricing it below what the fracking industry needs just to pay on its debts. Now that the world needs to consume far less oil because of restrictions on travel, less greenhouse gasses are going into the atmosphere. This is the silver lining which is not being talked about.

So now the world is at war, not one nation towards another nation, but the whole world vs the coronavirus. Finally the world is coming together against a common enemy. So far the world has not come together in the same way in the common fight against global warming. If it can come together in the fight against the coronavirus, why can't it come together in the fight against global warming which is far more serious. The coronavirus is so far only killing the elderly with underlying conditions. So nursing homes have to be very concerned about their patients, but so far in the US young people that have acquired the virus generally get over it just as they would with the flu virus. The coronavirus may kill millions, but global warming has the potential of killing billions.

Off the Top of My Head

Les Nouveaux Pauvres

by John Lawrence, January 9, 2020

The new poor are basically millennials who have gone to college and acquired a huge amount of student loan debt. They were promised that graduating college would catapult them into the middle class. Instead, whatever job they were fortunate enough to get (and many of them landed at Starbucks or equivalent) does not pay enough to make debt payments and also provide the normal amenities of life. Most of their budget consists of paying interest on their debts. Student loan debt has soared from $260 billion in 2004 to $1.4 trillion in 2017; average debt jumped from $18,650 to $38,000 over that same period; and the number of people over 60 with student loan debt has quadrupled in the last decade from 700,000 to 2.8 million.

It used to be that the majority of the working class were either farmers or unionized manufacturing workers who were protected by unions. Then the propaganda machine got busy and told all those farm children that they would be much better off, instead of going to work on their father's farm, going to college instead. Many proudly became "the first in their family to graduate college." What did it matter that, in order to do so, they had to take out massive student loans. Workers, who had lost their unionized jobs, were told the same thing. Go to college and become part of the new (nonunionized) economy because everyone knows that college graduates don't need unions. While farmland may stretch far and wide, farmers and ranchers themselves make up just 1.3% of the employed US population, totaling around 2.6 million people. Today, there are about 2 million farms in operation in the US, a steep decline from 1935, when the number of farms peaked at nearly 7 million. Why milk cows and shovel manure when you can have a professional desk job!

Manufacturing historically created good paying jobs for workers without a college education, particularly for men. The jobs paid well enough so that women did not have to work when they had young children. Unions were strong and owners did not want to risk strikes in their factories due to large capital investments and significant on the job training. Such jobs are much less available in the post-2001 era in the U.S. though they remain available in Germany, Switzerland and Japan. So the solution we are told is for those workers and especially their childrenn since there is no future in being a worker in the manufacturing sphere, to go to college. It's the American way. Each generation has to move a step up the ladder, and the step up for children of manufacturing workers without college educations is to be "the first in their families" to get one. Of course this necessitates their taking on a huge amount of student loan debt, but no worries, this step up will make them better off even if their spouse has to work to afford a house and pay off student loan debt.

However, much student loan debt goes into default because the debt burden is just too big a load to carry. More than 1 million student loan borrowers each year go into default. For many, the payments are proving unmanageable. By 2023, nearly 40 percent of borrowers are expected to default on their student loans. That’s when a person has not made a payment toward their education debt in roughly a year, triggering it being sent to a third-party collection agency. They are les nouveaux pauvres, the New Poor. That's in contrast to les nouveaux riches, the likes of Jeff Bezos and Mark Zuckerberg who have made billions off the high tech industry. But for many whose parents were farmers or manufacturing workers, they were sold a bill of goods that getting a college degree would not only resolve the stigma of being "uneducated," it would also land them a good paying job. Today most plumbers and electricians are doing better precisely because they don't have student loan debt.

Instead, many young people, and millennials especially, have not only a gargantuan load of student loan debt but credit card debt, and car loan debt as well. It's no surprise that the New Poor are mainly young people who can't afford either to buy a house or pay skyrocketing rents. Their parents and grandparents, however, are sitting pretty with assets consisting of a house which is skyrocketing in value and either a defined benefit pension (nonexistent today) or a 401k consisting of stocks which have also skyrocketed in value.They will naturally vote for Trump because of a booming economy (for them).

Meanwhile, the Democratic party, whose base used to consist of farmers and unionized workers, has lost them due to a change in demographics. Their new base naturally should be the New Poor, young people, millennials, student loan debtors and those who are concerned about the planet they're inheriting after climate change ravages it. They are turning to the progressive Democrats like Bernie Sanders and Elizabeth Warren. They are smart enough to figure out that every other advanced industrialized country has a government sponsored public health care plane. They know that the rich are not paying their fair share of taxes which would alleviate them from some of the horrendous economic burdens they are now experiencing, that is if those increased taxes on the rich were used by government to pay for college and health care for all. They want government expanded to provide more benefits not contracted to the point where you could drown it in the bathtub which arch conservative Grover Norquist so famously said.

Les nouveaux pauvres want a Green New Deal, relief from student loan debt, a New Economy. They aren't committed to the capitalism which has made three billionaires more wealthy than 150 million lower income Americans. They want the elimination of the fossil fuel economy replacing it with renewable energy. They want the end of a military-industrial complex which has spent a trillion dollars on disastrous wars in the Middle East. There is a better way these New Poor millennials are finally figuring out, a way out of the mess created by short term profits and rugged individualism, a way that might just win back America's high moral position and leadership in the world.

Off the Top of My Head

The Two Gilded Ages

by John Lawrence, December 8, 2019

The first Gilded Age was in the 1890s. The second Gilded Age is today. By the midpoint of the first Gilded Age about 4000 families owned as much wealth as the remaining 11.6 million. Today in the second Gilded Age the 3 richest Americans own as much wealth as 50% of the rest of the population or 160 million people. In the first Gilded Age 87% of private wealth belonged to 20% of the population and the bottom 40% had no wealth at all. Today in the second Gilded Age the top 0.1% of the population own as much wealth as the bottom 90% while the bottom half of Americans own negative net wealth meaning they're actually in debt.

In the first Gilded Age student loan debt was zero. Today there is $1.6 trillion in student loan debt. Authorities don't want you to know this but as late as 1980 the total amount of student loan debt was zero. During the 1980-1981 school year, an average student paid just over $2,000 each year for tuition, room and board at a public, four-year school. People could work their way through college or their parents could afford to help them on a middle class income. I was on a work-study program in the 1960s where I went to school a quarter and worked a quarter. I graduated in 5 years instead of 4. There was no grade requirement to participate in this program as I was barely in the upper third of my class and just barely gained entrance to Georgia Tech. I did do well on the SAT test or whatever the college admission tests were called at that time.

Today there are much better options to gain an education than going to a 4 year college and taking on an enormous amount of debt that you will never be able to pay off. That means you will never be able to get a mortgage and own a house. You will be in debt peonage for the rest of your life. The college industry has falsely advertised that you will make more money over a lifetime than a non college graduate. That is simply not true, but no matter how much money you make, what difference does it make if all you do with that money is to pay on your student loan plus paying rent. You will still be in debt when you retire and the government will take your student loan debt payments out of your social security.

That is why Elizabeth Warren's plan to tax wealth is a good one. It's the only thing that will reduce the inequality gap which is growing exponentially. Most Americans have been led to believe that the American Dream is to have a good paying job requiring a college education. Wrong! Financially speaking, the American Dream should be to acquire wealth at least not to end up at the end of your life a debtor no matter how much money you've made. I'm not talking wealth like Jeff Bezos or Bill Gates has. I'm talking wealth as in a fully paid for house and maybe some rental property. It could include a stock portfolio as well, but stocks have a way of plummeting about the time you want to convert them into cash. This is not as likely to happen with real estate. Since pensions are a thing of the past, it's a good idea to own enough wealth to support a decent lifestyle for the rest of your life. That means rental property which is the gift that keeps on giving. It doesn't run out if properly managed whereas a fixed amount in savings will run out probably sooner than expected.

There are a lot of good paying jobs that one can qualify for which don't require a college education or that provide free training. One can also migrate to Europe and attend great universities there for little or no money. In 2014, Germany's 16 states abolished tuition fees for undergraduate students at all public German universities. This means that currently both domestic and international undergraduates at public universities in Germany can study for free, with just a small fee to cover administration and other costs per semester. Education is free in Italy and free education is available to children of all nationalities who are residents in Italy. People of Italian descent can also claim full dual citizenship in Italy and gain many other advantages like access to visa free travel throughout the European Union and access to universities in other countries. As an EU citizen, you are entitled to study at any EU university under the same conditions as nationals.

In short any American who goes to a 4 year college and accumulates student loan debt usually at the rate of $25,000 a year is a sucker. Also a 4 year degree doesn't buy you much in the labor market. You need at least a Masters Degree. And don't forget bankruptcy protection is not available to student loan debtors. More than sufficient reason to vote for Bernie Sanders or Elizabeth Warren. They will not only make public universities free, but will restore bankruptcy protection for those currently in student loan debt.

One Inexpensive and Easy Fix for the Student Loan Problem

by Alan Collinge

November 29, 2019 06:35 PM

A key Republican Education Department official and Trump Appointee, A. Wayne Johnson, recently resigned his position and made a radical call for student loan cancellation. Johnson noted that the lending system was “fundamentally broken” and called for loan cancellation for all loan holders up to $50,000. He also called for a tax credit of the same amount for those who have already repaid their loans. Interestingly, Johnson’s plan sounds very similar--and in some ways even more generous--than what presidential candidate Elizabeth Warren is proposing.

This is strong stuff coming from a Republican, particularly one who ran the federal lending program. Johnson’s comments could indicate that this problem is far worse than the Department of Education has said publicly. He noted that he came to this conclusion after having a “firsthand look” at defaults, which we already know are running at about 40% for 2004 borrowers. And those borrowers were only borrowing one-third of what students are borrowing currently. One can only wonder how bad the internal projections must be for more recent students.

Johnson is to be applauded for calling out this big-government lending monstrosity, and even for his call to get the government out of the lending business. In the absence of both bankruptcy protections and statutes of limitations, the Department of Education has become one of the largest lenders on earth, and a viciously predatory one at that. Johnson is also correct in pointing out that the various forgiveness programs run by the Department are failing badly. Additionally, at least a portion of the $50+ billion that the department makes in profits every year are being used to fund unrelated social programs (like Obamacare), despite President Lyndon B. Johnson's declaration in 1965 that these loans would be "free of interest."

However, there were problems with Warren’s plan, and these have not gone away under the current proposal.

For example, despite the rising default rate, many borrowers are doing fine. They enjoyed the benefits of their loans and now they are successful enough to make the payments. There is no particularly good reason to cancel their debt. Conversely, there are many borrowers who owe far more than $50,000, who have seen their debt explode with penalties, fees, and interest, such that writing them down by $50,000 really wouldn’t make much of a dent. In short, Warren's “one-size-fits-all” approach makes little sense. And at a price of $925 billion, it’s expensive.

Also, any cancellation program would be administered by the Department of Education, which has a well-documented history of bungling such programs. For example, of the roughly 40,000 people who thought they were getting cancellation this year through the Public Service Loan Forgiveness Program, fewer than 100 (less than 1%) actually will. Similarly, a whopping 57% of people in the Income Based Repayment Program (IBR) were disqualified for administrative reasons. This means that many borrowers have been cruelly left owing far more than they would if they had never entered it.

To be blunt: the Department of Education cannot be trusted to administer yet another loan cancellation program. As they have done before, they will surely find ways to disqualify the vast majority of borrowers so that the agency captures the wealth rather than those who it was intended for.

A far more efficient solution to this problem is simply returning standard bankruptcy protections to these loans. The founders called for uniform bankruptcy in the Constitution before even giving Congress the power to raise an army or declare war, and the student lending system is proving their wisdom. Borrowers must have bankruptcy protections on their side in order for the lending system to be fair. It is only with this threat that lenders will act with a modicum of good faith. It will help restrain lending and force college prices down to rational levels.

Bankruptcy is also a far less expensive solution than Warren's. At first, there would be an unavoidable spike in filings, but bankruptcy scholar Robert Lawless has estimated that in the “steady-state”, annual discharges would come to less than $3 Billion per year. Even if it turned out to be double or triple this rate, that is still far less than Warren's proposal -- not to mention that this would require no tax hikes. This could be achieved by simply repealing the one line in the federal code that exempts student loans from standard bankruptcy protections.

There is legislation in Congress that would achieve this: HR. 2648, a bipartisan bill, and its Senate companion, S. 1414. Alternatively, President Trump could simply direct the Department of Education to stop opposing student loan borrowers in bankruptcy court. Either way, we would get a much more efficient and well suited outcome.

Not to mention: The Founders would agree.

Alan Collinge is Founder of StudentLoanJustice.Org, and author of The Student Loan Scam (Beacon Press).

The Disaster of Negative of Interest Rates

by Ellen Brown, Web of Debt blog

Posted on September 29, 2019 by Ellen Brown

President Trump wants negative interest rates, but they would be disastrous for the U.S. economy, and his objectives can be better achieved by other means.

The dollar strengthened against the euro in August, merely in anticipation of the European Central Bank slashing its key interest rate further into negative territory. Investors were fleeing into the dollar, prompting President Trump to tweet on Aug. 30:

The Euro is dropping against the Dollar “like crazy,” giving them a big export and manufacturing advantage… And the Fed does NOTHING!

When the ECB cut its key rate as anticipated, from a negative 0.4% to a negative 0.5%, the president tweeted on Sept. 11:

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.

And on Sept. 12 he tweeted:

European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!

However, negative interest rates have not been shown to stimulate the economies that have tried them, and they would wreak havoc on the U.S. economy, for reasons unique to the U.S. dollar. The ECB has not gone to negative interest rates to gain an export advantage. It is to keep the European Union from falling apart, something that could happen if the United Kingdom does indeed pull out and Italy follows suit, as it has threatened to do. If what Trump wants is cheap borrowing rates for the U.S. federal government, there is a safer and easier way to get them.

The Real Reason the ECB Has Gone to Negative Interest Rates

Why the ECB has gone negative was nailed by Wolf Richter in a Sept. 18 article on WolfStreet.com. After noting that negative interest rates have not proved to be beneficial for any economy in which they are currently in operation and have had seriously destructive side effects for the people and the banks, he said:

However, negative interest rates as follow-up and addition to massive QE were effective in keeping the Eurozone glued together because they allowed countries to stay afloat that cannot, but would need to, print their own money to stay afloat. They did so by making funding plentiful and nearly free, or free, or more than free.

This includes Italian government debt, which has a negative yield through three-year maturities. … The ECB’s latest rate cut, minuscule and controversial as it was, was designed to help out Italy further so it wouldn’t have to abandon the euro and break out of the Eurozone.

The U.S. doesn’t need negative interest rates to stay glued together. It can print its own money.

EU member governments have lost the sovereign power to issue their own money or borrow money issued by their own central banks. The failed EU experiment was a monetarist attempt to maintain a fixed money supply, as if the euro were a commodity in limited supply like gold. The central banks of member countries do not have the power to bail out their governments or their failing local banks as the Fed did for U.S. banks with massive quantitative easing after the 2008 financial crisis. Before the Eurozone debt crisis of 2011-12, even the European Central Bank was forbidden to buy sovereign debt.

The rules changed after Greece and other southern European countries got into serious trouble, sending bond yields (nominal interest rates) through the roof.  But default or debt restructuring was not considered an option; and in 2016, new EU rules required a “bail in” before a government could bail out its failing banks. When a bank ran into trouble, existing stakeholders–including shareholders, junior creditors and sometimes even senior creditors and depositors with deposits in excess of the guaranteed amount of €100,000–were required to take a loss before public funds could be used. The Italian government got a taste of the potential backlash when it forced losses onto the bondholders of four small banks. One victim made headlines when he hung himself and left a note blaming his bank, which had taken his entire €100,000 savings.

Meanwhile, the bail-in scheme that was supposed to shift bank losses from governments to bank creditors and depositors served instead to scare off depositors and investors, making shaky banks even shakier. Worse, heightened capital requirements made it practically impossible for Italian banks to raise capital. Rather than flirt with another bail-in disaster, Italy was ready either to flaunt EU rules or leave the Union.

The ECB finally got on the quantitative easing bandwagon and started buying government debt along with other financial assets. By buying debt at negative interest, it is not only relieving EU governments of their interest burden, it is slowly extinguishing the debt itself.

That explains the ECB, but why are investors buying these bonds? According to John Ainger in Bloomberg:

Investors are willing to pay a premium–and ultimately take a loss–because they need the reliability and liquidity that the government and high-quality corporate bonds provide. Large investors such as pension funds, insurers, and financial institutions may have few other safe places to store their wealth.

In short, they are captive buyers. Banks are required to hold government securities or other “high-quality liquid assets” under capital rules imposed by the Financial Stability Board in Switzerland. Since EU banks now must pay the ECB to hold their bank reserves, they may as well hold negative-yielding sovereign debt, which they may be able to sell at a profit if rates drop even further.

Wolf Richter comments:

Investors who buy these bonds hope that central banks will take them off their hands at even lower yields (and higher prices). No one is buying a negative yielding long-term bond to hold it to maturity.

Well, I say that, but these are professional money managers who buy such instruments, or who have to buy them due to their asset allocation and fiduciary requirements, and they don’t really care. It’s other people’s money, and they’re going to change jobs or get promoted or start a restaurant or something, and they’re out of there in a couple of years. Après moi le déluge.

Why the U.S. Can’t Go Negative, and What It Can Do Instead

The U.S. doesn’t need negative interest rates, because it doesn’t have the EU’s problems but it does have other problems unique to the U.S. dollar that could spell disaster if negative rates were enforced.

First is the massive market for money market funds, which are more important to daily market functioning in the U.S. than in Europe and Japan. If interest rates go negative, the funds could see large-scale outflows, which could disrupt short-term funding for businesses, banks and perhaps even the Treasury. Consumers could also face new charges to make up for bank losses.

Second, the U.S. dollar is inextricably tied up with the market for interest rate derivatives, which is currently valued at over $500 trillion. As proprietary analyst Rob Kirby explains, the economy would crash if interest rates went negative, because the banks holding the fixed-rate side of the swaps would have to pay the floating-rate side as well. The derivatives market would go down like a stack of dominoes and take the U.S. economy with it.

Perhaps in tacit acknowledgment of those problems, Fed Chairman Jay Powell responded to a question about negative interest rates on Sept. 18:

Negative interest rates [are] something that we looked at during the financial crisis and chose not to do. After we got to the effective lower bound [near-zero effective federal funds rate], we chose to do a lot of aggressive forward guidance and also large-scale asset purchases. …

And if we were to find ourselves at some future date again at the effective lower bound–not something we are expecting–then I think we would look at using large-scale asset purchases and forward guidance.

I do not think we’d be looking at using negative rates.

Assuming the large-scale asset purchases made at some future date were of federal securities, the federal government would be financing its debt virtually interest-free, since the Fed returns its profits to the Treasury after deducting its costs. And if the bonds were rolled over when due and held by the Fed indefinitely, the money could be had not only interest-free but debt-free. That is not radical theory but is what is actually happening with the Fed’s bond purchases in its earlier QE. When it tried to unwind those purchases last fall, the result was a stock market crisis. The Fed is learning that QE is a one-way street.

The problem under existing law is that neither the president nor Congress has control over whether the “independent” Fed buys federal securities. But if Trump can’t get Powell to agree over lunch to these arrangements, Congress could amend the Federal Reserve Act to require the Fed to work with Congress to coordinate fiscal and monetary policy. This is what Japan’s banking law requires, and it has been very successful under Prime Minister Shinzō Abe and “Abenomics.” It is also what a team of former central bankers led by Philipp Hildebrand proposed in conjunction with last month’s Jackson Hole meeting of central bankers, after acknowledging the central bankers’ usual tools weren’t working. Under their proposal, central bank technocrats would be in charge of allocating the funds, but better would be the Japanese model, which leaves the federal government in control of allocating fiscal policy funds.

The Bank of Japan now holds nearly half of Japan’s federal debt, a radical move that has not triggered hyperinflation as monetarist economists direly predicted. In fact, the Bank of Japan can’t get the country’s inflation rate even to its modest 2 percent target. As of August, the rate was an extremely low 0.3%. If the Fed were to follow suit and buy 50% of the U.S. government’s debt, the Treasury could swell its coffers by $11 trillion in interest-free money. And if the Fed kept rolling over the debt, Congress and the president could get this $11 trillion not only interest-free but debt-free. President Trump can’t get a better deal than that.

______________________________

This article was first posted on Truthdig.com. Ellen Brown is an attorney, chair of the Public Banking Institute, and author of thirteen books including Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age.  She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com. 

Off the Top of My Head

Why is the Fed Giving Billions to the Big Banks Again?

by John Lawrence, November 14, 2019

After the Great Recession of 2008, the Federal Reserve gave $16.8 trillion to the big Wall Street banks. Now again there is not enough money in the repo market so the Fed has to step in and provide more money to keep the system going even though it said quantitative easing (QE) was over. Under normal circumstance banks would borrow from each other in the repo market to balance their books overnight. That's the purpose of the repo market - short term lending so that everything checks out on a daily basis. So why are banks so short of cash that the Fed has to provide liquidity now? The reason that the Treasury has to issue so much in bonds every month is to cover the Federal budget deficit. The Treasury Department plans to borrow $1.23 billion in 2019. The big banks act as the middle man or conduit to offload this debt onto investors. If they can't offload it, they are stuck with it and become cash short. That's when the Fed has to step in and supply liquidity by taking the Federal debt off the Big Banks' hands. In addition to the short term loans in the repo market, where the Fed purchases Treasury debt, the central bank recently said it would provide emergency liquidity by buying some $60 billion of Treasury bills a month, expanding its balance sheet. So essentially the Treasury debt caused by the Federal budget deficit caused mainly by Trump's tax breaks for the wealthy is being purchased to a high degree by the Fed which disappears it on its balance sheet after it passes through the hands of the middle men. The Fed by law can't buy Federal debt directly.

China is the largest holder of US Treasury debt at about $1.12 trillion. However, China has cut its purchase of US debt recently and its holdings are down about $20 billion. What does this portend? The US has weaponized the dollar applying sanctions liberally. It has put sanctions on Chinese tech giant Huawei and also ZTE. It is engaged in some kind of trade war with China, but as the largest holder of US debt, China has all the cards. It can weaponize right back by not continuing to purchase US deb among other thingst. This will have the effect of creating a glut of Treasuries in the hands of the middlemen, namely the big US banks and hence the liquidity crisis. If no one wants to purchase US Treasuries, the Fed has to do it and put them on its balance sheet essentially disappearing and eating US debt.

So it raises the question, if the Fed can disappear US budget deficits which are caused by tax cuts for the wealthy as well as a bloated trillion dollar defense budget, why couldn't the Fed eat the deficits caused by a Green New Deal and Medicare for All. It seems like more people want to expand the ACA (Obamacare) with a public option than want Medicare for All. This boils down to broad support for a Medicare for All Who Want It plan which is supported by the Democratic moderates like Joe Biden. At any rate Republicans will try to demand from the Democrats a balanced budget as a way to put the damper on bold Democratic initiatives while they effectively spend like drunken sailors and let the Federal Reserve buy the excess debt that China and other nations are increasingly reluctant to buy in light of the weaponized dollar.

Meanwhile, on November 1, 2019, The World Trade Organization ruled that China can impose sanctions on up to $3.6 billion worth of U.S. goods over the U.S. government’s failure to abide by anti-dumping rules with regard to Chinese products. Oh, so two can play that game. I'll sanction you, and you'll sanction me, not that the US ever cared a fig about the World Trade Organization or what it said.

The Democrats can and will play the same game as far as deficits are concerned. Let the Federal Reserve eat the Federal debt that other nations will increasingly not be buying. Both a Green New Deal and a national health care plan are crucially important. In the long run a lot more people will die if we don't get global warming under control than will die with our current patchwork medical system. Most of them will die in other parts of the world, but the US will be heavily impacted as well which is already starting to happen in the present day.

Trump's liberal use of sanctions has created a backlash from the rest of the world especially China which is US' largest creditor. It's as if you go to your rich uncle hat in hand asking for more money while at the same time telling your rich uncle how to live his life. Other nations are building alternative banking institutions in order to bypass the use of the US dollar and that portends bad news for the dollar as the world's reserve currency. When China and other nations start selling instead of buying US debt, teh Fed will have to step in as it's already doing and swallow that debt. In other words perpetual QE even though the Fed doesn't want to call it that.

The American Dream Is Alive and Well—in China

by Ellen Brown

Posted on June 14, 2019 from Web of Debt blog

Home ownership has been called “the quintessential American dream.” Yet today less than 65% of American homes are owner occupied, and more than 50% of the equity in those homes is owned by the banks. Compare China, where, despite facing one of the most expensive real estate markets in the world, a whopping 90% of families can afford to own their homes.

Over the last decade, American wages have stagnated and U.S. productivity has consistently been outpaced by China’s. The U.S. government has responded by engaging in a trade war and imposing stiff tariffs in order to penalize China for what the White House deems unfair trade practices. China’s industries are said to be propped up by the state and to have significantly lower labor costs, allowing them to dump cheap products on the U.S. market, causing prices to fall and forcing U.S. companies out of business. The message to middle America is that Chinese labor costs are low because their workers are being exploited in slave-like conditions at poverty-level wages.

But if that’s true, how is it that the great majority of Chinese families own homes? According to a March 2016 article in Forbes:

… 90% of families in the country own their home, giving China one of the highest home ownership rates in the world. What’s more is that 80% of these homes are owned outright, without mortgages or any other liens. On top of this, north of 20% of urban households own more than one home.

Due to their communist legacy, what Chinese buyers get for their money is not actually ownership in perpetuity but a long-term leasehold, and the quality of the construction may be poor. But the question posed here is, how can Chinese families afford the price tag for these homes, in a country where the average income is only one-seventh that in the United States?

The Misleading Disparity Between U.S. and Chinese Incomes

Some commentators explain the phenomenon by pointing to cultural differences. The Chinese are inveterate savers, with household savings rates that are more than double those in the U.S.; and they devote as much as 74% of their money to housing. Under China’s earlier one-child policy, many families had only one heir, who tended to be male; and home ownership was a requirement to score a wife. Families would therefore pool their resources to make sure their sole heir was equipped for the competition. Homes would be purchased either with large down payments or without financing at all. Financing through banks at compound interest rates doubles the cost of a typical mortgage, so sidestepping the banks cuts the cost of housing in half.

Those factors alone, however, cannot explain the difference in home ownership rates between the two countries. The average middle-class U.S. family could not afford to buy a home outright for their oldest heir even if they did pool their money. Americans would be savers if they could, but they have other bills to pay. And therein lies a major difference between Chinese and American family wealth: In China, the cost of living is significantly lower. The Chinese government subsidizes not only its industries but its families—with educational, medical and transportation subsidies.

According to a 2017 HSBC fact sheet, 70% of Chinese millennials (ages 19 to 36) already own their own homes. American young people cannot afford to buy homes because they are saddled with student debt, a millstone that now averages $37,000 per student and will be carried an average of 20 years before it is paid off. A recent survey found that 80% of American workers are living paycheck to paycheck. Another found that 60% of U.S. millennials could not come up with $500 to cover their tax bills.

In China, by contrast, student debt is virtually nonexistent. Heavy government subsidies have made higher education cheap enough that students can work their way through college with a part-time job. Health care is also subsidized by the government, with a state-run health insurance program similar to Canada’s. The program doesn’t cover everything, but medical costs are still substantially lower than in the U.S. Public transportation, too, is quite affordable in China, and it is fast, efficient and ubiquitous.

The disparity in incomes between American and Chinese workers is misleading for other reasons. The “average” income includes the very rich along with the poor; in the U.S., the gap between those two classes is greater than in China. The oversize incomes at the top pull the average up.

Even worse, however, is the disparity in debt levels, which pulls disposable income down. A survey after the 2008-09 credit crisis found that household debt in the U.S. was 136% of household income, compared with only 17% for the Chinese.

Another notable difference is that 70% of Chinese family wealth comes not from salaries but from home ownership itself. Under communism, all real property was owned by the state. When Deng Xiaoping opened the market to private ownership, families had an opportunity to get a home on reasonable terms; and as new homes were built they traded up, building the family asset base.

Deng’s market liberalization also gave families an income boost by allowing them to become entrepreneurs. New family-owned businesses sprang up, aided by affordable loans. Cheap credit from state-owned banks subsidized state-affiliated industries as well.

“Quantitative Easing With Chinese Characteristics”

All this was done with the help of China’s federal government, which in recent decades has pumped massive amounts of economic stimulus into the economy. Unlike the U.S. Federal Reserve’s quantitative easing, which went straight into big bank reserve accounts, the Chinese stimulus has generated new money for productive purposes, including local business development and infrastructure. Sometimes called “qualitative easing,” this “quantitative easing with Chinese characteristics” has meant more jobs, more GDP and more money available to spend, which in turn improves quality of life.

The Chinese government has done this without amassing a crippling federal debt or triggering runaway inflation. In the last 20 years, its M2 money supply has grown from just over 10 trillion yuan to 180 trillion yuan ($11.6T), a nearly 1800% increase. Yet the inflation rate of its Consumer Price Index (CPI) has remained low. In February of this year, it was just 1.5%. In May it rose to 2.7% due to an outbreak of swine fever, which drove pork prices up; but this was a response to shortages, not to an increase in the money supply. Radically increasing the money supply has not driven consumer prices up because GDP has increased at an even faster rate. Supply and demand have risen together, keeping consumer prices low.

Real estate prices, on the other hand, have skyrocketed 325% in the last two decades, fueled by a Chinese shadow banking system that is largely beyond regulatory control. Pundits warn that China’s housing is in an unsustainable bubble that will pop, but the Chinese housing market is still more stable than the U.S. subprime market before 2008, with its “no-doc no-down” loans. Chinese buyers typically put 40 to 50% down on their homes, and the demand for houses remains high. The central bank is also taking steps to cool the market, by targeting credit so that it is steered away from real estate and other existing assets and toward newly-produced goods and services.

That central bank intervention illustrates another difference between Chinese-style qualitative easing and Western-style QE. The People’s Bank of China is not trying to improve banking sector liquidity so that banks can make more loans. Chinese economists say they don’t need that form of QE. China’s banks are already lending, and the central bank has plenty of room to manipulate interest rates and control the money supply. China’s central bank is directing credit into the local economy because it doesn’t trust the private financial market to allocate credit where local markets need it. True to its name, the People’s Bank of China seems actually to be a people’s bank, geared to serving the economy and the public rather than just the banks themselves.

Time for More QE?

 In early April, President Trump said in one of his many criticisms of the U.S.  central bank that he thought the Fed should be doing more quantitative easing (expanding the money supply) rather than quantitative tightening (shrinking the money supply). Commentators were left scratching their heads, because the official U.S. unemployment rate is considered to be low. But more QE could be a good idea if it were done as Chinese-style qualitative easing. A form of monetary expansion that would allow Congress to relieve medical and educational costs, grant cheap credit to states to upgrade their roads and mass transit, and support local businesses could go a long way toward making American workers competitive with Chinese workers.

Unlike the U.S. government, the Chinese government supports its workers and its industries. Rather than penalizing China for that “unfair” trade practice, perhaps the U.S. government should try doing the same. China’s legacy is socialist, and after opening to international trade it has continued to serve the collective good, particularly of its workers. Meanwhile, the U.S. model has been regressing into feudalism, with workers driven into slave-like conditions through debt. In the 21st century, it is time to upgrade our economic model from one of feudal exploitation to a cooperative democracy that recognizes the needs, contributions and inalienable rights of all participants.

___________________________

This article was first published on Truthdig.org. Ellen Brown is an attorney, founder of the Public Banking Institute, and author of thirteen books including Web of Debt and The Public Bank Solution. Her latest book is Banking on the People: Democratizing Money in the Digital Age, published by the Democracy Collaborative. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.

Off the Top of My Head

US Deficit Approaching $1 Trillion Per Year

by John Lawrence, September 1, 2019

The number crunchers at the Congressional Budget Office project that the deficit for the current fiscal year will come to $960 billion. In the next fiscal year, which begins Oct 1, it will exceed $1 trillion. So every year for the foreseeable future the US will go another trillion dollars, if not more, in debt. “The recent budget deal was a budget buster, and now we have further proof. Both parties took an already unsustainable situation and made it much worse,” said Maya MacGuineas, president of the private Committee for a Responsible Federal Budget. Meanwhile some of the US' most profitable corporations, namely Amazon, pay no taxes at all. Just paying interest on the debt is taking up more and more of the budget. In fiscal year 2023, the federal government will spend more on interest than defense.

However, there is still a large market for US Treasury bonds since most of the rest of the world's bonds have a negative interest rate. Currently, $17 trillion worth of global bonds have negative yields. A US 30 year Treasury still pays 2.75% interest which although low is a lot better than a negative yield. For every $1000 of face value the holder gets paid $13.75 semiannually. After 30 years you get the face value of the bond back or you can sell it in the market before then.

So the US has no problem taking on more debt since investors around the world would rather make something on their money than pay a bank just to store it. But someday the chickens will come home to roost, investors will sell off US debt and invest in something else. That day, however, won't be any time soon. As long as US Treasuries continue to pay more in interest than bonds from other countries, investors will flock to US bonds thus enabling the big spenders in Washington to spend even more. If there is a recession, the already high deficit will prevent the Fed to spend even more to get out of it. “We all know we are already on a troubling fiscal path, but today’s CBO report shows us that our leaders are making things considerably worse,” said Michael A. Peterson, chief executive of the Peter G. Peterson Foundation, which advocates for lower deficits.

President Trump is adamant about jawboning the Fed to cut interest rates in order to boost the economy. But there is already so much money sloshing around in the system that this kind of stimulation will likely have little effect. Corporations just want to park their money, not put it to some useful use. The economy is already overstimulated. If there is a recession coming up, the Fed's already low interest rates will not give it much ammunition to deal with it. “Both sides are out of bullets,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “I’ve never seen a situation where there’s a recession cloud on the horizon but Washington is totally unprepared to deal with a downturn in the economy.” But all Trump is interested in is stimulating the economy now so it doesn't fall into recession just as the 2020 campaign season gets underway.

Trump's trade war is turning off American farmers who voted for him in the last election. There are indications that they are now getting genuinely angry over Trump’s efforts to gaslight them so shamelessly over the impact of his trade war with China. The term "gaslighting" is used to describe abusive behavior, specifically when an abuser manipulates information in such a way as to make a victim question his or her sanity. Gaslighting intentionally makes someone doubt their memories or perception of reality. Trump is the arch gaslighter of all time. He constantly tries to piss down farmers' backs and call it rain, and they're getting tired of it. China’s retaliatory tariffs are closing off the biggest export market in the world — leading to a massive drop in exports of soybeans, pork, wheat and other agricultural products.

Elizabeth Warren to Restore Bankruptcy Protection for Student Loan Debtors

From Alan Collinge

Great News!

Elizabeth Warren announced her student loan cancellation plan in April.  We were interviewed by Vice News about this, and we were quite critical.  We lamented the fact that Warren taught bankruptcy for years, yet didn't mention bankruptcy at all in her press release.
Well...I received a note yesterday from one of her staffers to inform me (and I have confirmed) that Senator Warren has modified her plan to include the full return of bankruptcy rights- precisely as it does for S. 1414 and HR. 2648, and the bill that they recently introduced in the Senate which reflects this!
So...THEY ARE LISTENING TO US!
I hope you are all pleased.  This puts us in a position to push both Warren and ALL the candidates to go the FINAL STEP, and pledge to issue an executive order (if necessary) that calls for the Department of Education to cease challenging student loan filers in bankruptcy court.  This would give us the certainty we need to give them a full-throated endorsement.  I think we can do this. See the video above.
Folks, we REALLY need donations right now.  Will you please help?

http://www.studentloanjustice.org/Support

Our recent move into our new digs has depleted our reserves, as expected.  We REALLY have to shore up our funds as soon as possible.  It is getting quite critical.

I hope you are happy with all that we are getting done, and all that we are poised, now, to get done.  We really are kicking butt over here and moving the needle.  To not have to worry about fundraising, and be able to focus on the mission at hand would be hugely helpful for us.  I hope that you agree, and will help. 

Ok folks.  Pretty excited.  It really is "GO TIME"!!!

Best Regards,

Alan

ps.  THANKS TO EVERYONE WHO HAS BEEN STEPPING UP LATELY.  YOU KNOW WHO YOU ARE!!!

Off the Top of My Head

Negative Yielding Debt and the The Inverted Yield Curve

by John Lawrence, August 21, 2019

The world is awash in money so investors try to determine where to park it to get the maximum return. Right now $15 trillion is being parked at banks who are charging for the privilege. About a third of the tradeable bonds in the world have negative yields. J.P. Morgan strategists point out that four countries — Denmark, Germany, Netherlands and Finland — now have negative yields across their full spectrum of rates. The era of Quantitative Easing that was ushered in to prevent a collapse of the global banking system in 2008 has led to a world in which interest rates are very low and in some parts of the world they are negative. “We’re the only country that has an integer in front of our bond yields. We have 90% of the world’s investment-grade debt. We actually have rule of law and we have a decent economy. All the money is going to come here,” Bass, founder and chief investment officer of Hayman Capital Management, told CNBC’s David Faber on Tuesday. True.

Although the US bond market still has positive yields, investors are worried about the dreaded "inverted yield curve." This happens when the short term interest rate is higher than the long term rate. Normally, you would expect a higher rate of return the longer you tied up your money. So why would you buy a 10 year Treasury bond for a lower rate of return than you would get for a 2 year Treasury bond? It would only be true if you expected interest rates to go even lower, and then you could sell that bond in the bond market at a profit. And why would investors expect interest rates to go even lower? Because that's how you head off a recession - you make money easy to borrow. Supposedly that's how you get business people to make productive investments and hire more people. Voila! No recession. No wonder Trump wants the Fed to lower interest rates. Free money. Yea!

Although borrowing money is almost cost free for banks and large investors, the opposite is the case for you and me, Mr. ans Mrs. John Q Public. We are getting screwed with exorbitant interest rates on our credit cards and student loans. Credit card rates are the highest they've ever been. According to the Federal Reserve's data for the first quarter of 2019, the average APR across all credit card accounts was 15.09% — the highest rate recorded since 1994. So the average American pays through the nose for his or her debt while getting essentially zero interest on their savings account. What's wrong with this picture? Free money is available for banks and large investors,while Joe Six Pack pays through the nose. Well, Joe Six Pack is doing his civic duty  because he is keeping inflation low.

But then consider Trump's tariff war with China. All of a sudden American consumers are going to pay more for a whole range of products manufactured in China. What this means is - INFLATION. And what that means is RECESSION because the American consumer will start buying less. Since consumption is 70% of GDP, all of a sudden GDP starts going down and - voila - we're in recession. People will start wondering why everything is so expensive while banks are getting free money, and they are paying through the nose on credit cards while receiving no interest on savings accounts.

Central banks around the world are printing money and giving it to rich people. That's why the national debt is nothing to worry about. It will just be swallowed and digested by the Federal Reserve, the US' central bank, which has swallowed and digested $4.5 trillion in the past. It could swallow the whole US national debt if necessary just by printing money the way other central banks, notably, China do.

The take away of all this is that the world is awash in free money that rich people can easily access while the average person gets screwed. Interest rates are going to zero because rich people will pay banks to park their money while highly profitable banks charge an arm and a leg for credit card and student loan debt.

Off the Top of My Head

Pirate Equity Firms Destroy Good Paying Jobs While Making Wall Street Investors Rich

by John Lawrence, August 8, 2019

How it works: Fund managers with Wall Street connections can borrow unlimited sums of money to buy out all the shares of some company, usually a retail company like Toys R Us. They then strip the company of its assets and load it up with debt. They then take the company into bankruptcy firing all the employees. Result: millions of good paying middle class jobs are eliminated. Fund managers and their investors become rich.

From United for Respect:

Debbie Mizen lives in Youngstown, Ohio, and began working at Toys “R” Us in 1987. She was a single mother when she started working and was able to care for her three children on her modest salary. Debbie was an assistant manager for the last 12 years of her career, although she knew she was earning less than male supervisors in the same position. In June 2018, she lost a job she loved when Toys “R” Us liquidated and closed over 800 stores across the country. Debbie found out that her store was closing on same day as her mother’s funeral and was devastated. Since her store closed, she has faced unemployment. When her unemployment checks ran out, she had to take a job in a grocery store collecting grocery deliveries for customers while earning half of what she did at Toys “R” Us. She is turning 67 this year.

Pirate Equity is ruining millions of lives, making fund managers rich and driving (among other factors) the economic divide between the 1% and the 99%. In the last decade pirate equity has led to 1.3 million job losses - mainly in retail jobs. 10 out of the 14 largest retail chain bankruptcies since 2012 were at private equity-acquired chains. Then the Wall Street executives use the carried interest loophole and offshore bank accounts to escape from paying taxes. A wave of high-profile retail bankruptcies in the last few years — including household names like RadioShack, Toys “R” Us, Sports Authority, Payless ShoeSource, Sears, and Kmart — have impacted retailers owned by Wall Street.

Hostess Twinkies is another example of a company that was taken over by pirate equity which then fired thousands of workers. I delved into this in a 2012 article in the San Diego Free Press (Twinkies’ Twisted Tale: Junk Food Devoured By Junk Bonds):

All the late night talk shows laughed it up over the supposed demise of Twinkies, Ho Hos, Ding Dongs, Wonder Bread etc as the news came out that Hostess Brands was going bankrupt. But delve beneath the surface and you will find something more akin to a Shakespearean tragedy than talk show banter.

It’s a tale involving two unions, one private equity fund, two hedge funds and a whole cast of former CEOs. There is sacrifice, greed and betrayal. 18,000 workers will be losing their jobs while some vulture capitalists will be walking away with millions. Another vulture capitalist will itself have been devoured in the process.

The simple fact is that the financialization of the US has led to a total disrespect for workers and workers' rights. Workers have been turned into serfs, their jobs turned into playthings for the rich with unlimited capital at their disposal. And we're all supposed to accept this because this is the inevitable outcome of capitalism. Well, not so fast there. Other countries practice a variant of capitalism (jee whiz, you mean there's more than one?) that does not exploit workers, but instead creates meaningful jobs for workers. Well, let's see what could those countries be? Well certainly, some of the European countries look out for their workers, Germany, for example. Unions are strong and workers sit on corporate boards, have a say in the running of the company.

No, it is the American variant of capitalism, not capitalism itself, that has run amok. American capitalism is destroying jobs; it has already destroyed most of the unions which were the countervailing force to the narcissistic and solipsistic demands of the capital markets.

The New York Times wrote:

Deals like Hostess have helped make the men running the six largest publicly traded private equity firms collectively the highest-earning executives of any major American industry, according to a joint study that The Times conducted with Equilar, a board and executive data provider. The study covered thousands of publicly traded companies; privately held corporations do not report such data.

On average, the heads of private equity firms earn about 10 times as much as the heads of banks. Take Stephen Schwarzman of the Blackstone Group for example. Last year he earned $799,838,742. Then in second place was Leon Black of Apollo Global Management. He earned $799,838,742. Part of his earnings, no doubt, came from his sale of Hostess Twinkies.

And then there is Mitt Romney, a Presidential candidate no less, who exploited workers with his company Bain Capital. Rolling Stone reported (Greed and Debt: The True Story of Mitt Romney and Bain Capital): "How the GOP presidential candidate and his private equity firm staged an epic wealth grab, destroyed jobs – and stuck others with the bill"

And this is where we get to the hypocrisy at the heart of Mitt Romney. Everyone knows that he is fantastically rich, having scored great success, the legend goes, as a “turnaround specialist,” a shrewd financial operator who revived moribund companies as a high-priced consultant for a storied Wall Street private equity firm. But what most voters don’t know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. This is the plain, stark reality that has somehow eluded America’s top political journalists for two consecutive presidential campaigns: Mitt Romney is one of the greatest and most irresponsible debt creators of all time. In the past few decades, in fact, Romney has piled more debt onto more unsuspecting companies, written more gigantic checks that other people have to cover, than perhaps all but a handful of people on planet Earth.

By making debt the centerpiece of his campaign, Romney was making a calculated bluff of historic dimensions – placing a massive all-in bet on the rank incompetence of the American press corps. The result has been a brilliant comedy: A man makes a $250 million fortune loading up companies with debt and then extracting million-dollar fees from those same companies, in exchange for the generous service of telling them who needs to be fired in order to finance the debt payments he saddled them with in the first place. That same man then runs for president riding an image of children roasting on flames of debt, choosing as his running mate perhaps the only politician in America more pompous and self-righteous on the subject of the evils of borrowed money than the candidate himself. If Romney pulls off this whopper, you’ll have to tip your hat to him: No one in history has ever successfully run for president riding this big of a lie. It’s almost enough to make you think he really is qualified for the White House.

But the sheer incompetence of the press corps is nothing compared with the total ignorance of the American people when it comes to electing a President. Example #1: Donald Trump, a bloviating, pompous, bait-and-switch, snake oil salesman that the American people elected instead of a competent, experienced, somewhat boring diplomat. So maybe the American people deserve what they get. The Republicans certainly think so. If they can lie their way into positions of power and delude the American people as to their true motives, well, in their mind, that proves that they really do deserve all the riches they can accumulate by any means necessary. Elizabeth Warren to the rescue?

Canceling All College Debt Will Make Us Smarter and Richer

Published on

Friday, June 28, 2019

by

CNN

An erasure of all student loans currently on the books, would be a significant boon to GDP, boosting the economy by approximately $100 billion a year for at least 10 years, yielding lower unemployment rates, increased spending, and more

by

 Astra Taylor

 

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Every class winds up deeper in debt than the last, with racial minorities and women hardest hit. (Photo: Getty)

On Monday morning, I gathered with other members of the Debt Collective in Washington DC to endorse the College for All Act of 2019. Sponsored by Reps. Ilhan Omar, Pramila Jayapal, and Sen. Bernie Sanders, the act would cancel all student debt and make all two- and four-year public colleges and universities tuition free, subsidized by a tax on Wall Street.

The Debt Collective is a membership organization fighting for economic justice that has been advocating student debt cancellation and free college for years. Our demands were initially met with skepticism and incredulity. Now, we're standing at the Capitol, winning the battle of ideas.

 

A growing number of people agree that eliminating student debt will improve millions of lives, advance racial and gender justice, and be a boon for our democracy and our economy. But even though loan cancellation is now at the center of public debate, it's far from a done deal. We need to continue to fight so that visionary proposals can become actual policy.

 

"Our privatized debt-for-education system has got to go," my Debt Collective co-founder Thomas Gokey said at the press conference where Sanders, Omar and Jayapal introduced the bill. Gokey warned that the proposed legislation is unlikely to become law unless the public turns up the heat. "No big change like this ever happens without mass mobilization; without ordinary people getting organized to take direct action and engage in civil disobedience," he said.

 

It may sound extreme, but civil disobedience -- or what we call economic disobedience -- is what got us this far, and it's what will get us across the finish line.

 

In 2015 the Debt Collective launched the first student debt strike in history. Fifteen students who had been defrauded by the predatory, for-profit Corinthian Collegeschain publicly announced they would no longer pay their loans. Soon their numbers grew, and tens of thousands of people disputed their loans through an app the Debt Collective created with the help of legal experts. As a result of grassroots organizing, coupled with careful strategy, we eventually won changes to federal law and, through various channels, more than a billion dollars of debt relief -- more than $500 million in relief for borrower defense applicants so far and more than$500 million won through a Harvard Law School case against ITT Tech we assisted on.

 

But the Corinthian debt strike was never just about the problem of predatory for-profit colleges. Instead, the Corinthian case epitomizes the problems with treating education as a commodity, an individualized product we purchase, instead of a public good that should be freely available to all.

 

A functioning democracy demands an educated citizenry, but the trend has been toward privatization and cutting state subsidies. A couple generations ago, college was affordable or even free. By 2017 the average four-year college borrower graduated owing more than $28,000. Every class winds up deeper in debt than the last, with racial minorities and women hardest hit.

 

People's dreams of education have morphed into nightmares of compounding interest (don't forget, there are no statutes of limitations on student loans, which also can't be discharged in bankruptcy). Today, Americans owe approximately $1.5 trillion in debt. Fortunately, there's a potential silver lining to this enormous sum. That $1.5 trillion is also leverage. If borrowers get organized, our debts can be a source of strength. Thus the Debt Collective's slogan: "You Are Not A Loan."

 

The Corinthian debt strike demonstrated the effectiveness of this strategy. Recently, MarketWatch reported that the Debt Collective's strike campaign "helped open up the conversation around broader debt forgiveness" that Warren is now running on (her plan proposes a maximum of $50,000 of relief contingent on income). "This process of trying to leverage existing provisions started to both show the flaws of the existing system, and make people more comfortable with the argument that sometimes debt has to be just wiped away," a former adviser to Warren told the outlet.

 

At the press conference for the College for All Act, Debt Collective members made clear that debt isn't always bad. Rather, we need to ask which debts are moral and which are not. "When people get sick, we owe them healthcare; if they're homeless, they deserve shelter; if somebody wants to learn, they should be able to go to school without being weighed down by unpayable loans at usurious rates," Gokey, my colleague, said.

These are the moral debts we are currently defaulting on and that we should pay by expanding public services.

 

Indeed, we will be richer if we do so, at least where canceling student debt is concerned. Research from the Levy Institute shows that a full jubilee, an erasure of all student loans currently on the books, would be a significant boon to GDP, boosting the economy by approximately $100 billion a year for at least 10 years, yielding lower unemployment rates, increased spending, and more.

 

In the final accounting, we are talking about something that transcends money. Free education is essential to a truly free society, which means it's something we can't put a price tag on. As things stand, the cost of education is too steep for nearly everyone. If we want to change that, we have to organize, and say we won't pay.

© 2019 CNN

Financed by Tax on Wall Street Speculators, Sanders Plan Would Wipe Out All $1.6 Trillion in US Student Loan Debt

Published on Monday, June 24, 2019

by Common Dreams

"We bailed out Wall Street in 2008. It's time to tax Wall Street's greed to help the American people."

by Jake Johnson, staff writer

 

16 Comments

Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) speaks to the crowd during the 2019 South Carolina Democratic Party State Convention on June 22, 2019 in Columbia, South Carolina. (Photo: Sean Rayford/Getty Images)

As part of a bold legislative package that would make public colleges and universities tuition-free, Sen. Bernie Sanders on Monday will unveil a plan to wipe out the $1.6 trillion in student loan debt that is saddling an estimated 45 million Americans.

"In a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the 'crime' of getting a college education."
—Sen. Bernie Sanders

 

"This is truly a revolutionary proposal," Sanders told the Washington Post, which reported the details of the Vermont senator's bill late Sunday. "In a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the 'crime' of getting a college education."

Sanders, a 2020 Democratic presidential candidate, will introduce his proposal alongside Reps. Ilhan Omar (D-Minn.) and Pramila Jayapal (D-Wash.), who plan to unveil the Student Debt Cancellation Act and the College for All Act in the House.

"I am one of the 45 million people with student debt—45 million people who are held back from pursuing their dreams because of the student debt crisis," Omar tweeted Sunday. "It's why I'm proud to stand with Sen. Sanders and Rep. Jayapal to pass college for all and cancel student debt."

The three lawmakers introduced their proposals in a press conference Monday morning outside the U.S. Capitol building. Watch:

Vox's Tara Golshan called Sanders's legislative package the "most ambitious higher education plan in the Democratic 2020 presidential primary so far."

Unlike means-tested plans introduced by other 2020 contenders, Golshan observed, Sanders's legislation would cancel student debt for everyone "regardless of their income or assets."

"While this is a universal program—students from any financial background would benefit from the elimination of tuition—the proposal specifically targets lower-income students by increasing the federal Pell Grant program, tripling funding for the work-study program, and creating a dollar-for-dollar federal match to states to eliminate additional costs related to going to college," Golshan wrote.

According to the Post, Sanders would pay for his plan with "a tax on Wall Street his campaign says will raise more than $2 trillion over 10 years."

"Sanders is proposing to pay for the legislation with a new tax on financial transactions, including a 0.5 percent tax on stock transactions and a 0.1 percent tax on bonds," the Post reported. "Such a levy would curb Wall Street speculation while reducing income inequality, according to a report by the Century Foundation, a left-leaning think tank."

Warren Gunnels, Sanders's staff director, tweeted, "If we could give a multi-trillion bailout to Wall Street, yes we can make college for all a reality."

We'll pay for #CollegeforAll & our #CancelStudentDebt plan through a tax on Wall Street speculators that's estimated to raise $2.4 trillion over 10-years. The middle class bailed out Wall Street in 2008. Now, it's Wall Street's turn to return the favor. https://t.co/58YPvXQ9JK

— Warren Gunnels (@GunnelsWarren) June 24, 2019

Sanders echoed Gunnels in a tweet Sunday night, writing, "We bailed out Wall Street in 2008. It's time to tax Wall Street's greed to help the American people."

According to the Post, the Vermont senator's new plan will go beyond the tuition-free public college proposal that was a key plank of his 2016 presidential campaign platform.

"Sanders's bill includes $1.3 billion a year for low-income students at historically black colleges and universities," the Post reported, "and $48 billion per year for eliminating tuition and fees at public schools and universities."

The Vermont senator's debt cancellation proposal comes just weeks after he unveiled a sweeping K-12 education platform that includes a national ban on for-profit charter schools, free universal school meals, and a significant raise for teachers.

"More than one million people default on their student loans each year," Sanders tweeted Sunday. "We have got to make public colleges and universities tuition-free."

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Off the Top of My Head

Working Class: What Working Class?

by John Lawrence, June 7, 2019

Marx's analysis was based on historical determinism - that the working class would rise up against the capitalist class. "Workers of the world arise. You have nothing to lose but your chains." But today there is no working class to speak of. The union movement, which represented the working class, is dead. Everyone is a college graduate, and, therefore, a member of the "professional class." Even assembly line workers have to know hot to run computers, as the video doctor used to say. Republicans created a master stroke when they got everyone - not just capitalists - invested in the stock market through their 401(k)s. Even teachers who have by far and away the largest union are not "workers." They're college graduates and hence "professionals."

There used to be a distinction between "workers" and "professionals." When I worked at General Dynamics, I was sent on a mission that required traveling on Sunday to the east coast. Next to me on the plane was a technician. Since I was a salaried "professional," I was paid nothing extra for traveling on a Sunday. Paul, on the other hand, was a non-college educated "worker" who belonged to the union and was paid by the hour. On this particular occasion Paul was paid double time for "working" on a Sunday while I was paid nothing but my usual "professional" salary. There were other class distinctions also. One of the technicians had a fondness for wearing a coat and tie to work. This was a no-no. Only "professionals" were supposed to wear a coat and tie. Technicians or workers were supposed to come to work in their shirt sleeves. So Carl was looked down on and ridiculed for his impertinence in ignoring class distinctions. Today Apple and Google have changed all that. The CEO comes to work in a hoodie.

After World War II, which we can't get enough of celebrating about, a family could get by very nicely on a one income worker family. There was no student loan debt, a family could have a nice house in Levittown, a car, two weeks vacation a year, send their kids to college, adequate health care, and did I say NO DEBT. The wife could stay home with the kids and bake pies and cakes plus get her hair out of curlers before the man of the house came home from work. Today the average family consists of two earners, massive student loan debt, mortgage debt, car loan debt and credit card debt. Sure they have a 401(k) so technically they are of the capitalist class. They have college degrees so they are "professionals" and not "workers". However, Joe the plumber down the street has most of what they have but no student loan debt because he never went to college. I hired a handyman to hang a door the other day and his charge was $160 for the first hour and $114 for every hour thereafter. Pretty good wages for a nonprofessional. There are several millionaire plumbers in San Diego who advertise on TV. Never went to college. They are probably also landlords whom the "professionals" are paying rent to. Never had a 401(k) though.

Marx's analysis, sadly for dyed in the wool socialists, doesn't apply any more. It's totally out of date. European countries have proved that there is a magic line between socialism and capitalism that, when attained, can bring out the best in both worlds. America's hypercapitalism has only produced massive debt both individually and nationally - the national debt is some $20 trillion and rising daily. Student loan debt is $1.5 trillion. When free money is available, there is a huge appetite for the stuff you can buy with it. When the chickens come home to roost, you're left with a massive debt to repay and the stuff has long been forgotten.

America has led the world to a capitalist utopia where everything except the military is privatized, infrastructure is crumbling (except for the rich who have been able to provide their own infrastructure), massive amounts of debt have been acquired by "professionals" and the nonindebted capitalist class extracts rents and interest from the indebted capitalist class. Everyone is a capitalist, but some capitalists are better off than others. Some are asset rich and some own negative assets. My Grandfather used to say, "Pay what you owe; then you will know what you own." Today nobody pays what they owe in full and, therefore,nobody ever ends up owning anything except debt. Student loan debt can't be discharged in bankruptcy so it follows you around your entire life. It can be discharged by death, however. For those who can't keep up with their payments, the street looms. In this classless society of capitalists, there is still one class - the homeless class. But I don't think even Marx would expect them to rise up and cast off their chains. They are hardly a threat to us capitalists.

Off the Top of My Head

Billionaire Wipes Out Student Loan Debt at Morehouse College

by John Lawrence, May 24, 2019

Robert Smith, a black billionaire, paid off all the student loan debt for the graduating class at historically black Morehouse College - some $40 million of it. One guy alone had $200,000 in student loan debt. Now it's up to some of the white billionaires to pay off student loan debt at their alma maters. Ha. Ha. Won't happen. Alternatively, if you are of Italian or Irish descent you can get a free college education anywhere in the EU and get dual citizenship to boot. Or you can go to Germany and get a free college education regardless of your heritage. Germany needs skilled workers, and this reality creates a win-win situation for American students. All students enrolled in any of the country’s public universities can attend for free. What’s more, German universities offer a wide range of programs entirely in English, and an American student can earn a university degree in Germany without speaking a word of German.

Why aren't American students taking advantage of these options? It's a no brainer. The opportunities today are at the global level. Someone who doesn't learn a foreign language and just graduates from some podunk American college with $50 or $100 thousand in student loan debt is choosing a life of debt peonage. People who qualify for Italian citizenship can also get free health care in that country. You can pass the citizenship on to your children. You can remain an American citizen so you have all the advantages of American citizenship as well as all the advantages of European citizenship. If you get citizenship in one EU country, you can travel or go to school in any EU country so it's like being a citizen of Europe not just Austria or Italy.

Europe remains a well-known, highly sought-after destination for students seeking refuge from high-priced U.S. colleges and universities, but public universities in countries such as Mexico and Brazil also have virtually free tuition; students pay registration fees, which amount to very little when considering the exchange rates. Some universities offer top-quality programs of study in English. Earning a degree south of the border also makes it possible for students to learn highly sought-after languages of commerce, such as Spanish and Portuguese.

It's a no brainer especially for the 17 million Americans of Italian descent. Citizenship in Italy means that you are a citizen of the EU and can live, work and travel visa free anywhere in the EU. Free medical care is nothing to take for granted. There is no free long term health care for seniors in the US even if you have Medicare. Medicare does not cover nursing homes which are very expensive. Jus sanguinis, or the right to citizenship because your ancestor was born in a particular country, applies to a number of other countries besides Italy: Ireland, Austria and the Czech Republic, for example. Some countries only recognize jus sanguinis for one generation. In other words you would have to be born to a father or mother who is a citizen of that country. But Italy recognizes your right to acquire Italian citizenship if your ancestor going back many generations was born in Italy. Italy only became a country in 1861 so you can't go back farther than that.

This is a wonderful opportunity especially for those of Italian descent. Being an Italian citizen is the same as being a citizen of the EU. With that and dual American citizenship you are practically a citizen of the world and can choose to live wherever it is most advantageous or propitious.

'A Burning Indictment of Our Higher Ed System': Commencement Speaker Pays Off $40 Million in Student Debt

Published on Sunday, May 19, 2019

by Common Dreams

Billionaire's gift to nearly 400 graduating seniors of Morehouse College earned him praise—but also sparked criticism of the cost of education

by Jessica Corbett, staff writer

 

9 Comments

Morehouse College commencement speaker and billionaire Robert F. Smith announced Sunday he is wiping out an estimated $40 million in student debt for nearly 400 graduates. (Photo: Morehouse College/Twitter)

Commencement speaker Robert F. Smith garnered widespread praise Sunday when the billionaire investor announced he will wipe out an estimated $40 million in student debt for Morehouse College's nearly 400 graduating seniors—but the move also sparked intense criticism of the cost of higher education in the United States.

"People shouldn't be in a situation where they depend on a stranger's enormous act of charity for this kind of liberation to begin with."
—Rep. Alexandria Ocasio-Cortez<

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"Two things are simultaneously true about this story: 1. This is a very cool thing to do," tweeted Current Affairs editor Sparky Abraham. "2. That this is so cool and necessary and has such a huge impact on the students' lives is a burning indictment of our higher ed system."

"The Morehouse graduating class has $40 million in student debt," he continued. "That is an enormous tragedy."

Smith's announcement Sunday at the all-male, historically black college in Atlanta, Georgia provoked impassioned calls for both making higher education free across the country and canceling student debt.

Abraham, in a piece for Current Affairs last month, argued: "Free college is the efficient, non-stigmatizing way to open up college access for everyone without the burdens of means-testing. It doesn't have to be regressive and, with any luck, it will follow the path of free high school: In short order it will be nearly universally accepted as a public good and a huge boon to everyone, especially those from poorer and working class backgrounds."

Responding to Smith's donation on Sunday, Waleed Shahid of Justice Democrats tweeted, "Taxing billionaires and Wall Street would allow every American to go to college for free while also canceling almost all student debt."

Rep. Alexandria Ocasio-Cortez (D-N.Y.) suggested in a series of tweets that this could serve as a "natural experiment" to demonstrate how lack of student debt impacts graduates' lives.

"It's important to note that people shouldn't be in a situation where they depend on a stranger's enormous act of charity for this kind of liberation to begin with (aka college should be affordable)," the congresswoman added.

Every Morehouse Class of 2019 student is getting their student debt load paid off by their commencement speaker.

This could be the start of what’s known in Econ as a ‘natural experiment.’ Follow these students & compare their life choices w their peers over the next 10-15 years. https://t.co/UM1qTJOxHf

— Alexandria Ocasio-Cortez (@AOC) May 19, 2019

"I've been teaching [at] Morehouse for 3 years now and I see firsthand the burden of costs for an education has on black folks," David Dennis Jr., a writer and adjunct professor of journalism at the college, said in a series of tweets. "Getting rid of their student loan debt is going to literally change the lives of every single graduate. Incredible."

Dennis also called attention to the banks and predatory lenders that will receive the estimated $40 million:

Also, think about the fact that just 400 students represented $40 million...with a large portion of that money going to banks and predatory lenders. Because that's $40 million without the added 10+% interest they were going to have to pay annually. From ONE small graduating class

— David Dennis Jr. (@DavidDTSS) May 19, 2019

One graduating Morehouse student interviewed by The Associated Press, 22-year-old finance major Aaron Mitchom, racked up $200,000 in loans, which eight of his family members co-signed so he could make it through four years of schooling.

Mitchom said that prior to Smith's announcement, he used a spreadsheet to figure how long it would take to pay off his debt—per his calculations, it worked out to 25 years at half his monthly salary.

Describing his reaction at the ceremony on Sunday, Mitchom told the AP: "I don't have to live off of peanut butter and jelly sandwiches. I was shocked. My heart dropped. We all cried. In the moment it was like a burden had been taken off."

Linking to the AP report that features Mitchom, New York Times writer Astead Herndon tweeted, "Yes, the Morehouse story is a beautiful moment provided by an unequal system."

Yes, the Morehouse story is a beautiful moment provided by an unequal system https://t.co/WfFOxFwHhV

— Steadman™ (@AsteadWesley) May 19, 2019

a-tweet-id="1130182212089987073" title="Twitter Tweet" frameborder="0">

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Off the Top of My Head

Lowest Unemployment Rate Since 1969, But Why Can't 40% of Americans Cover a $400 Emergency?

by John Lawrence, May 4, 2019

This is a complete disconnect. On the one hand the economy has never been better. On the other, people are struggling living paycheck to paycheck. And then there's the bottom rung of the population that can't even afford to pay rent. Sure the economy is creating jobs, mostly on the low end of the pay scale, however. Three-quarters of U.S. jobs created since the 2008-'09 financial crash pay less than a middle-class income, according to an Axios analysis of U.S. Labor Department data. And the cost of housing  and medical care is out of sight. That's why Bernie Sanders should press on with his campaign of Medicare For All and a Green New Deal.

The fact that 40% of Americans can't cover a $400. emergency tells me that 40% of Americans have no assets or wealth whatsoever. They are renters living one paycheck from the streets or home owners deeply in debt. The economic divide between the rich and the poor is growing although most of the poor are at least working. That's a good thing, I guess. The working poor probably are in a lot of debt. Student loan debt is $1.5 trillion and rising. Auto loan debt and mortgage debt contribute to the fact that a lot of the paychecks are going to pay off debt or at least to pay on debt that may never be paid off. So it's no wonder that 40% of Americans can't come up with $400. unless they borrow the money and go into even more debt. They would probably put that $400. on their credit card adding to credit card debt. According to the Federal Reserve, Americans owe a record $1.04 trillion in credit card debt – up from less than $854 billion five years ago.

Market Watch reports:

The Federal Reserve’s Economic Well-Being of U.S. Households report released [May 22, 2018] notes that while 74% of adults said they were doing “at least OK” financially in 2017, 40% of them still don’t have enough money to cover an unexpected $400 expense. And less than two-fifths believe that they are on track with their retirement savings.

“The finding that 4 in 10 adults couldn’t cover an unexpected $400 expense without selling something or borrowing money is troubling,” Bankrate.com’s chief financial analyst Greg McBride told Moneyish. “Nothing is more fundamental to achieving financial stability than having savings that can be drawn upon when the unexpected occurs.”

One question I have is why this data which is a year old is being covered now as "news?"The second question is what's the use of having a savings account when 1) banks are paying zero interest and 2) you can always put $400 if needed on a credit card. The whole report is worrisome in that it depicts the American population merely as workers and savers rather than as people who accumulate wealth or go into debt. The emphasis should be on how much wealth Americans have accumulated. If that number is zero, then of course they will have problems with a $400 emergency. It will go right on the credit card adding to their indebtedness. If an American's assets - namely, equity in a house or the stock market - exceeds the sum of the their debts by $400, then they have the $400. If not they will have to borrow the money.

The article continued:

But good luck growing your emergency fund on the West Coast. People living in the metropolitan areas around San Jose, Los Angeles, San Francisco and San Diego have the hardest time saving for emergencies, largely due to the high cost of housing, according to a recent Bankrate report.

The study analyzed the local average cost of living in the 50 largest metro areas in the country, as well as the median after-tax household income, before calculating how much of an emergency fund a family of four would need to cover six months of expenses. And the average San Jose family didn’t even come close to breaking even (income versus bills), let alone squirreling away the $67,342 they’d need to cover six months of bills in case of an emergency.

Again it's not simply a story of income versus bills. And it's not just about "retirement savings." It's about the accumulation of wealth versus the accumulation of debt. For most middle class people, even with two incomes, the combined drain on their finances due to housing costs, auto loans, student loan debt, credit card debt and medical and pharmaceutical expenses is just too much to allow them to accumulate any wealth unless they are entrepreneurial and have started a successful business. A two earner household where both earners have middle class type jobs will for the most part never accumulate wealth of any significance in this day and age. They will be perennial debtors and form the serfs of the new financialized economy.

Promising Signs That America Is Waking Up to the Student Debt Crisis

Published on

Wednesday, April 24, 2019

by

Common Dreams

New data reveals the issue of crushing student debt has the potential to help Democrats to make inroads with a broad array of voters

 

by 

Sean McElwee

 

 5 Comments

 Protestors gather in Parliament Square during a march against student university fees on November 19, 2014 in London, England. (Photo: Rob Stothard/Getty Images)

The revolution to end the burden of student debt continues, with a recent proposal from presidential contender Elizabeth Warren to cancel $50,000 in loans for households making less than $100,000 a year, with lower amounts for those making up to $250,000. Following the Democratic wave, which was driven in part by a surge of youth turnout, it’s more important than ever for Democrats to embrace an ambitious progressive agenda aimed at benefiting the rising American electorate. An ideal policy would be total student debt cancellation.

Earlier this year, Freedom to Prosper and Data for Progress fielded a nationally representative survey analyzing support for repealing Trump’s tax cuts and using the proceeds to cancel outstanding student debt. Across the full sample, 47 percent of respondents supported and 36 percent of respondents opposed the proposal. Contrary to Republicans’ hopes, not only are Trump’s corporate tax handouts unpopular generally, but they are especially so when voters are given the chance to cancel them in favor of a major national debt cancellation program.

According to our analysis of the Cooperative Congressional Election Study (CCES) 2018 survey, a gold standard political science resource, Democrats won 65 percent of the two-party vote (excluding third-party candidates) among student debt holders, compared with only 50 percent of the vote among non-student debt holders.

The policy is particularly popular among Democrats who support it by a 68-13 margin.

Going into the 2020 election, the key question for Democrats is how to maintain the youthquake that delivered them the House. A war on student debt could do so.

Overall, Millennials support the policy by a 53-24 margin. Generation X respondents back it by a 43-33 margin. Baby Boomers are narrowly split, supporting the policy by a 45-42 margin. Only Silent Generation respondents opposed the policy, by a 39-47 margin. Respondents who are closer in age to the college experience are more likely to support assistance with student debt, as one might expect.

Previously, Freedom to Prosper and Data for Progress had fielded a survey containing the same item. Support increased more than five points since then, from 41 percent in 2018 to 46 percent in 2019.

First, the change in overall opinion is likely driven by Millennials, who are growing as a share of the electorate and are the voters most directly affected by the burden of student loans. Their mean level of support for student debt relief rose by six points from July 2018 to January 2019.

In addition to age, self-reported household income predicted support for supporting student debt relief, when controlling for other factors. As the Democratic Party struggles to appeal to the voters who turned out in 2012 but stayed home in 2016, student debt relief stands out as an issue. Indeed, one in four Americans who voted in 2018 but did not vote in 2016 are student debt holders (the analysis only includes individuals old enough to vote in both elections). Sixty-four percent of these voters supported Democrats.

Student debt has the potential to help Democrats to make inroads with a broad array of voters. As previous Freedom to Prosper research showed, one in five people responsible for paying off a student loan is over the age of 50. Perhaps surprisingly, more than half of individuals over the age of 26 who were responsible for paying off a student loan do not have a college degree, according to the CCES 2016 survey.

We should expect growing support for this item for a few reasons: Younger voters of all political stripes are being exposed to the status quo student loan system. Younger voters are also less likely to accept the toxic brand of “conservatism.” Because party ID and ideology are good predictors of support for student loan relief, and because party ID and ideology are clearly favorable to Democrats among the next generation of voters, we should be prepared to push the issue of student loan forgiveness.

This article was produced by Economy for All, a project of the Independent Media Institute.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

Off the Top of My Head

Joe Biden Not the Man for the Job

by John Lawrence, April 6, 2019

And it doesn't have anything to do with his "touchy-feelyness." To think President Pussygrabber has the noive to accuse Joe Biden of invading someone's personal space! I guess now that's a mortal sin. Forgive me Father for I have sinned. I invaded somebody's personal space. Anyway that's not the reason Joe Biden shouldn't run. It has to do with the fact that Biden was instrumental in getting the law changed so that student loan debt is not dischargable in bankruptcy. His state of Delaware is loaded with financial corporations chartered there because conditions are so favorable for them. Joe is just too cozy with all these behemoths just as Hillary was too cozy with Wall Street. As a result of Biden's efforts for the financial industry, Americans now have about $1.56 trillion in student loan debt. Not to mention credit card debt.

Joe Biden needs to apologize. He's worthless as a Democratic candidate for President. His state, Delaware, is home to the credit card divisions of the major banks because of laws passed that favor them. In February 1981, he supported the Financial Center Development Act, legislation that dropped restrictions on interest rates and gave tax breaks and other accommodations to the burgeoning credit card sector. It’s that bill which is now credited with supporting ballooning credit card debt, and those are the roots of why most of the national banking companies with offices in Wilmington have their credit card divisions there.

So good old union supporting Joe has his hands dirty on both credit card debt and student loan debt. Elizabeth Warren is right. He should just step out of the national political scene. His time is past. Forget about his invading personal space. He has invaded most Americans financial space while supporting big banks and giving rich people advantages in the state of Delaware. Salon reported:

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed in April, 2005 by the U.S. Senate in a 74-25 vote, including the "yea" vote of Joe Biden, and was quickly signed by President Bush.

In light of what occurred in its wake, this law is easily one of the most disgraceful aspects of the Bush and Biden legacies. The harm it did to middle-class Americans, especially during the crushing events of the recession four years later, is immeasurable. The bill made it nearly impossible for average families to file Chapter 7 bankruptcy protection, also known as "clean slate" bankruptcies intended to discharge nearly all debts, a matter of a few years before they'd need it the most. The bill instituted an all new means test to determine whether debtors with insurmountable financial hardships earned enough income to pay back all or part of their unsecured debts, specifically credit debt. If they earned too much, a clean slate bankruptcy became impossible, and they'd be forced to file Chapter 13, which would force debtors to pay back their debt over a five-year timeline, thus legalizing neo-indentured-servitude to creditors.

Among other things, the bill also forced debtors to enroll in an "instructional course concerning personal financial management." The requirement still exists even though there's little evidence of its efficacy. Additionally, the bill made it more difficult to force creditors to stop harassing debtors for repayment after bankruptcy protection had been filed. As if all of this wasn't bad enough, the Biden-supported legislation prioritized credit card debt repayment over child support repayment, forcing women who are owed back support to negotiate with credit card companies over the debts owed by their exes. Furthermore, the term "debtor" was changed by the BAPCPA to "household" so that the new means test would take into account the total earnings of an entire household, rather than one debtor -- including, for example, a teen daughter's babysitting money.

Worse yet, the bill contained nothing to crack down on abusive practices by predatory lenders, including punitive interest rates and penalties.

Unforgivably, Joe Biden was one of the leading cheerleaders of the bill.

Joe Biden has his handprints all over the indebtedness of the middle class and the increasing split between the wealthy and everyone else. While the banks were bailed out and given free fiat money in the 2008 crisis, Americans were screwed and couldn't even file for bankruptcy thanks to Joe Biden with all his folksy charm. Don't be fooled by this guy. His time has gone. He is not the man for the job. Let him go back to hair sniffing and "pressing the flesh." Biden's son also had ties to the financial industry as reported by the NY Times:

Mr. Biden’s role in the bankruptcy debate and his ties to MNBA were immediately an issue for him after he was selected as Mr. Obama’s running mate in August 2008. A day after Mr. Biden was introduced as Mr. Obama’s choice, campaign aides acknowledged that Hunter Biden, his son, had a consulting arrangement with MBNA and that vetting the Bidens’ connections with the card issuer had been especially delicate in picking him for the ticket. Mr. Biden played down the relationship at the time, telling NBC’s Tom Brokaw that there was nothing inappropriate about his ties to MBNA.

One hand washes the other. Good 'ol Joe now can't pretend that he didn't play a leading role in the impoverization of millions of Americans and the creation of a neo-feudal society. Besides all the other advantages of doing business in Delaware, it is also a tax shelter.

There is no sales tax in Delaware. It doesn't matter if a company's physical location is in the state or not; as a Delaware corporation, no in-state purchases are subject to tax. Additionally, there is no state corporate income tax on goods and services provided by Delaware corporations operating outside of Delaware.The state does not have a corporate tax on interest or other investment income that a Delaware holding company earns. If a holding corporation owns fixed-income investments or equity investments, it isn't taxed on its gains on the state level.Delaware also does not have any personal property tax. There is sometimes a county-level real estate property tax, but that tax is very low compared to other states. Corporations can own their own office spaces and reduce the amount of property tax compared to other states.The state has no value-added taxes (VATs), it does not tax business transactions, and it does not have use, inventory or unitary tax. There is no inheritance tax in Delaware, and there are no capital shares or stock transfer taxes.

We need a true progressive like Elizabeth Warren or Bernie Sanders in the White House, not a pseudo, phony like the Clintons, Obamas and Joe Biden. Remember it was Bill Clinton who supported the overturning of Glass-Steagall which separated commercial from investment banking and precipitated the 2008 financial crisis.

 

A TALE OF TWO TICKETS

by Robert Reich

Tuesday, March 26, 2019

RR:  Hi, I’m Robert Reich.  

WKB: And I’m W. Kamau Bell.  

RR: We’re teaming up to highlight an issue that matters a lot to both of us. It starts with what you might call a “tale of two tickets.” Say you happen to be going for a drive in Oakland and your car has a broken tail light.  You see the flashing blue lights, and your heart drops. Oh no, you think, I’m going to get a ticket.

WKB: Oh c’mon, Robert. You aren’t going to get a ticket.  You’re a white, former secretary of labor. I’m 6’4’’ black guy! I’m going to get a ticket.  

RR: 6’4”?

WKB: Gentle Giant.

RR: You’re too tall.

WKB: That’s why this is “a tale of two tickets!”  You can have radically different experiences with getting pulled over depending on your skin color.

Number one: You’re more likely to get pulled over if you’re black. No surprise. In 2017 in Oakland, California, out of the almost 97,000 black people who live here, more than 19,000 got pulled over. But of the more than 116,000 white people who live here, more and more moving in every day, only a few over 2,800 were pulled over. That means you are 10 times more likely to be pulled over driving while black.  

Number two: When you get pulled over, if you are black, the officer is more likely to speak to you disrespectfully. You are much more likely to be searched, handcuffed, arrested, poked, prodded, and prosecuted. And almost all of what are called “use of force” incidents are against black people.  

RR: You know, it’s not just the likelihood of being pulled over. It’s also the consequences.

Start with the ticket itself. A broken taillight in California is usually a “fix it” ticket. If you can fix it, it costs about $35. But if you don’t or can’t pay, with penalties and assessments, it quickly goes up to $235. And in a year it can be as high as $835.

WKB: And for those who have a brush with the criminal justice system as a result of getting pulled over, who are almost all black, the costs can balloon quickly.

A so-called free public defender costs, on average, $500.

If you are convicted and put on probation, you will get a bill for $6,000 just to cover those costs.

RR: These fines and fees can easily put a family into debt – especially if you are black.  For example, the average black family as $5 in savings for every $100 of a typical white family.  

WKB: What the f***? (bleeped)

RR: Exactly.

With debt comes the risk of being hounded by predatory debt collectors.

Also, the arrest and conviction can result in the loss of a job and make it harder to get another one.

If you are on probation for a prior offense, failing to pay the debt can put you back in prison. In a tragic irony, it can also put pressure on an individual to commit a crime just to pay the debt.

This is what people politely call a cascade of consequences.  

WKB: And what I impolitely call a cascade of s*** (bleeped) on poor communities generally, and communities of color in particular.  

RR: It’s known academically as  “The Criminalization of Poverty.” And it has to be stopped.

WKB: Ok, you say, that sucks if you are poor and black. But I’m rich and white. Hey, I’ve got some news: it’s bad for you, too.

RR: In addition to being a massive drain on the economy, these fees don’t even help cash-strapped cities. Uncollected court debt for traffic and criminal offenses totaled $12.3 billion in 2016 in California alone. A lot of the fee revenue that does come in goes to collection services, that are private and for profit. Which means very little of the money that is collected winds up going to roads, bridges, schools, and other good things we all need.

WKB: That’s why we need to stop the criminalization of poverty. Have you heard of win-win? Well, this is lose-lose, non-win. It sucks. It’s bad for EVERYBODY.  

RR: Bad for poor people, bad for the social fabric, and doesn’t even help the bottom line for government.

WKB: Our home state of California is helping to lead the charge to stop the criminalization of poverty.  Go to CAdebtjustice.org for more information. Go. Don’t just watch the video. Go.

'We Are Crushing the Next Generation': Young Millenials Saddled With $1,005,000,000,000 in Student Debt

Published on Monday, February 25, 2019

by Common Dreams

New data fuels call for progressive solutions

by Andrea Germanos, staff writer

 

0 Comments

"Student debt is at a crisis level in this country," said Sen. Kirsten Gillibrand (D.N.Y.). (Photo: thisisbossi/Flickr/cc)

Underscoring the need for progressive proposals like tuition-free college and debt relief, new data shows young Americans are being crushed by debt.

In the last quarter of 2018, outstanding student loan debt went up $15 billion to $1.46 trillion. Credit card balances shot up as well, raising $26 billion to $870 billion, according to (pdf) the most recent quarterly housefold debt report from the Federal Reserve Bank of New York's Center for Microeconomic Data.

The youngest age bracket in the report, those aged 19-29, had over $1 trillion in debt in 2018. "That's the highest debt exposure for the youngest adult group since late 2007," Bloomberg reported. Moreover, "Student loans make up the majority of the $1,005,000,000,000 owed by this cohort, followed by mortgage debt," the reporting adds.

"We are crushing the next generation with debt," tweeted Democratic presidential hopeful and Universal Basic Income proponent Andrew Yang in response to the findings.

 

In a tweet last week, another Democratic 2020 contender, Sen. Kirsten Gillibrand (D.N.Y.), said, "Student debt is at a crisis level in this country, and it holds our whole economy down."

Among the roughly one in four Americans facing that crisis—a problem a bipartisan majority of Americans want Congress to do something about—is Melissa Haggerty, a Loyola University Chicago alumna.

Being "strapped with student loan debt," she recently wrote that she's "barely getting by, and looking for solutions from lawmakers." She added:

In cities across Illinois, borrowers are putting 10 percent or more of their paychecks towards paying down student loan debt. The consequences of this means financial stability will continue to be out of reach for young people like me unless bold policies are implemented that make college more affordable for future students, and provide meaningful relief to borrowers like me. In Illinois, borrowers now have a Student Loan Bill of Rights, which provides basic consumer protections to defend them against bad practices by student loan companies. But we need to go further. Incoming policymakers should hold greedy student loan lenders accountable for their deceptive practices, and consider debt forgiveness programs for current borrowers. Borrowers should also be allowed to file for bankruptcy. Saddled with tens of thousands of student loans, filing for bankruptcy would be a welcome relief.

"It's time our policymakers take these challenges seriously, and offer meaningful solutions to help borrowers get ahead," she concluded.

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This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

The Fed's Dramatic About-Face

by Ellen Brown, from truthdig, February 20, 2019

LeoLondon / CC BY-NC-ND 2.0

LeoLondon / CC BY-NC-ND 2.0

“Quantitative easing” was supposed to be an emergency measure, but the Federal Reserve is now taking a surprising new approach toward the policy. The Fed “eased” shrinkage in the money supply due to the 2008-09 credit crisis by pumping out trillions of dollars in new bank reserves. After the crisis, the presumption was the Fed would “normalize” conditions by sopping up the excess reserves through “quantitative tightening” (QT)—raising interest rates and selling the securities it had bought with new reserves back into the market.

The Fed relentlessly pushed on with quantitative tightening through 2018, despite a severe market correction in the fall. In December, Fed Chairman Jerome Powell said QT would be on “autopilot,” meaning the Fed would continue to raise interest rates and sell $50 billion monthly in securities until it hit its target. But the market protested loudly to this move, with the Nasdaq composite index dropping 22 percentfrom its late-summer high.

Worse, defaults on consumer loans were rising. December 2018 was the first time in two years that all loan types and all major metropolitan statistical areas showed a higher default rate month over month. Consumer debt—including auto, student and credit card debt—is typically bundled and sold as asset-backed securities similar to the risky mortgage-backed securities that brought down the market in 2008 after the Fed had progressively raised interest rates.

Powell evidently got the memo. In January, he abruptly changed course and announced QT would be halted if needed. On Feb. 4, Mary Daly, president of the Federal Reserve Bank of San Francisco, said it was considering going much further. “You could imagine executing policy with your interest rate as your primary tool and the balance sheet as a secondary tool, one that you would use more readily,” she said. QE and QT would no longer be emergency measures but would be routine tools for managing the money supply. In an article on Seeking Alpha titled “Quantitative Easing on Demand,” Mark Grant writes:

If the Fed does decide to pursue this strategy it will be a wholesale change in the way the financial system in the United States operates and I think that very few institutions or people appreciate what is taking place or what it will mean to the markets, all of the markets.

The Problem of Debt Deflation

The Fed is realizing that it cannot bring its balance sheet back to “normal.” It must keep pumping new money into the banking system to avoid a recession. This naturally alarms Fed watchers worried about hyperinflation. But QE need not create unwanted inflation if directed properly. The money spigots just need to be aimed at the debtors rather than the creditor banks. In fact, regular injections of new money directly into the economy may be just what the economy needs to escape the boom and bust cycle that has characterized it for two centuries. Grant concludes his article by quoting Abraham Lincoln:

The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.

The quote is apparently apocryphal, but the principle still holds: new money needs to be regularly added to the money supply to avoid an overwhelming debt burden and allow the economy to reach its true productive potential. Regular injections of new money are necessary to avoid something economists fear even more than inflation—the sort of “debt deflation” that took down the economy in the 1930s.

Most money today is created by banks when they make loans. When overextended borrowers pay down old loans without taking out new ones, the money supply “deflates” or shrinks. Demand shrinks with it, and businesses lacking customers close their doors, in the sort of self-feeding death spiral seen in the Great Depression.

As Australian economist Steve Keen observes, today the level of private debt is way too high, and that is why so little lending is occurring. But mainstream economists consider the rate of growth of debt to be irrelevant to macroeconomic policy, because lending is thought to simply redistribute spending power from savers to investors. Conventional economic theory says that banks are merely intermediaries, recirculating existing money rather than creating spending power in their own right. But this is not true, Keen said. Banks actually create new money when they make loans. He cites the Bank of England, which said in its 2014 quarterly report:

[B]anks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits …

In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

Loans create deposits, and deposits make up the bulk of the money supply. Money today is created by banks as a debt on their balance sheets, and more is always owed back than was created, since the interest claimed by the banks is not created in the original loan. Debt thus grows faster than the money supply. When overextended borrowers quit taking out the new loans needed to repay old loans, the gap widens even further. The result is debt deflation—a debt-induced reduction in the new money needed to stimulate economic activity and growth. Thus comes the need for injections of new money to fill the gap between debt and the money available to repay it.

However, the money created through QE to date has not gone to the consuming public, where it must go to fill this gap. Rather, it has gone to the banks, which have funneled it into the speculative financialized markets. Nomi Prins calls this “dark money”—the trillions of dollars flowing yearly in and around global stock, bond and derivatives markets generated by central banks when they electronically fabricate money by buying bonds and stocks. She writes, “These dark money flows stretch around the world according to a pattern of power, influence and, of course, wealth for select groups.” In a piece for Daily Reckoning, she shows graphically that the rise in dark money is directly correlated with the rise in financial markets.

QE has worked to reverse the debts of the banks and prop up the stock market, but it has not relieved the debts of consumers, businesses or governments; and it is these debts that will trigger the sort of debt deflation that can take the economy down. Keen concludes that “no amount of exhorting banks to ‘Intermediate’ will end the drought in credit growth that is the real cause of The Great Malaise.” The only way to reduce the private debt burden without causing a depression, he says, is a Modern Debt Jubilee or People’s Quantitative Easing.

QE-Funded Debt Relief

In antiquity, as professor Michael Hudson observes, debts were routinely forgiven when a new ruler took the throne. The rulers and their advisers knew that debt at interest grew faster than the money supply, and that debt relief was necessary to avoid economic collapse from an overwhelming debt overhang. Economic growth is arithmetic and can’t keep up with the exponential growth of debt growing at compound interest.

Consumers need that sort of debt relief today, but simply voiding out their debts as was done in antiquity will not work, because the debts are not owed to the government. They are owed to banks and private investors who would have to bear the loss. The alternative suggested by Keen and others is to fill the debt gap with a form of QE dropped not into bank reserve accounts but digitally into the bank accounts of the general public. Debtors could then use the money to pay down their debts and non-debtors would receive a cash injection.

Properly managed, these injections need not create inflation. (See my earlier article here.) Money is created as loans and extinguished when they are paid off, so the money used to pay down debt would be extinguished along with the debt. Cash injections not used to pay down debt would just help fill the gap between real and potential productivity, allowing demand and supply to rise together, keeping prices stable.

A regular injection of money into personal bank accounts has been called a “universal basic income,” but it would be better to call it a “national dividend”—something all citizens are entitled to equally, without regard to economic status or ability to work. It would serve as a safety net for people living paycheck to paycheck, but the larger purpose would be as economic policy to stimulate demand and productivity to keep the wheels of industry turning.

Money might then indeed become a servant of humanity, transformed from a tool of oppression into a means of securing common prosperity. But first the central bank needs to be made a public utility, responsive to the needs of the people and the economy.  In other words, it needs to become a public servant once and for all.

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Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of twelve books including "Web of Debt" and "The Public Bank Solution." A thirteenth book titled "The Coming Revolution in Banking" is due out soon. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.

Off the Top of My Head

US Pays Half Trillion Annually Just for Interest on National Debt

by John Lawrence, October 26, 2018

Even with record low interest rates, the US pays about a half a trillion dollars each year in interest on the national debt. This is money that could be spent on infrastructure, but it's not. It could be spent in many ways to give Americans a better quality of life, but it's not. Why is the government so short of funds? It's because rich people and corporations pay hardly any taxes. The projection is that for FY 19, government revenues from corporations or in other words corporate taxes will account for only 7% of the US government's total revenues. Taxes from individuals (mostly poor and middle class individuals) account for 49%, and another third, $1.238 trillion, comes from your payroll taxes. This includes $905 billion for Social Security, $275 billion for Medicare, and $47 billion for unemployment insurance. Trump's tax plan cut taxes for corporations much more than it did for individuals. In 2017, corporations paid 9 percent and income taxpayers paid 48 percent.

Long story short. Middle class and poor individuals and families pay the bulk of US government taxes while the rich and corporations do not pay their fair share. The shortfall in tax revenues creates an almost trillion dollar deficit each year. The debt itself is 21 trillion, and that has been going up by about a trillion dollars a year. The NY Times reported:

The federal government could soon pay more in interest on its debt than it spends on the military, Medicaid or children’s programs.

The run-up in borrowing costs is a one-two punch brought on by the need to finance a fast-growing budget deficit, worsened by tax cuts and steadily rising interest rates that will make the debt more expensive.

With less money coming in and more going toward interest, political leaders will find it harder to address pressing needs like fixing crumbling roads and bridges or to make emergency moves like pulling the economy out of future recessions.

Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.

It is becoming clear that the Federal Reserve is printing money to buy up US debt and that as time goes on and there are fewer buyers for that debt, it will have to print more and more. Also it must keep interest rates near zero to keep the interest on the debt as low as possible. Printing money by the Federal Reserve will become the main way of funding the US government.

Off the Top of My Head

What Will Happen to the US Dollar When Its Not the World's Reserve Currency Any More?

by John Lawrence, September 13, 2018

The dollar is the world's reserve currency by virtue of the fact that Saudi Arabia agreed to sell its oil only for dollars in return for US military protection, a deal struck by President Nixon in 1971 when he took the dollar off the gold standard. Other nations had to buy and sell goods in dollars to get enough dollars to buy oil. But the world is changing. For one thing the world is converting to renewable energy so the price of oil will eventually plummet just as the US with its shale oil is becoming the world's leading oil exporter.

However, other nations are losing faith in the US as the world's moral arbiter. US imposed sanctions, brought about because the US controls international financial institutions like SWIFT, have caused the nations that are usually the target of US sanctions to form their own alliances, form their own financial, institutions and trade among themselves using other currencies. Eventually the dollar will only be one of many instead of being the only reserve currency. Eventually, other nations may even impose sanctions on the US, something unheard of at the present time.

So the US dollar may well lose value with respect to other currencies making imports to the US more expensive. However, exports would be cheaper for other countries to buy and that would boost exports which would help manufacturing in the US. If the US dollar loses value with respect to other currencies, other nations will not be as willing to park their savings in US Treasury bonds which means that the Federal Reserve will have to raise interest rates to attract buyers of US debt. Or the Fed could just print dollars and give the money to US banks to buy up US debt which is just what it has been doing with its quantitative easing policy.

The US will be stuck with its enormous national debt with creditors not willing to fund any more of it. Paying it off with "conjured money" will cheapen the US dollar and even perhaps result in the same sort of austerity that has been imposed on Greece and other countries that get behind in their payments to investors. We'll see. In any event it won't happen any time soon. But by mid century as hurricanes, floods and wildfires take their tolls, the paucity of dollars in the US Treasury and the reluctance of investors to fund more US debt may not augur well.

Ending the Secrecy of the Student Debt Crisis

From Yes Magazine:

Activists are building meaningful connections among borrowers to counter the taboo of admitting they can't pay their bills.

 

 

by Daniela Senderowicz, posted Sep 05, 2018

 

Gamblers and reality TV stars can claim bankruptcy protections when in financial trouble, but 44 million student loan borrowers can’t. Unemployed, underpaid, destitute, sick, or struggling borrowers simply aren’t able to start anew.

With a default rate approaching 40 percent, one would expect armies of distressed borrowers marching in the streets demanding relief from a system that has singled out their financial anguish. Distressed student debtors, however, seem to be terror-struck about coming forward to a society that, they say, ostracizes them for their inability to keep up with their finances.

When we spoke to several student borrowers, almost none were willing to share their names. “I can’t tell anyone how much I’m struggling,” says a 39-year-old Oregon physician who went into student loan default after his wife’s illness drained their finances. He is terrified of losing his patients and reputation if he speaks out about his financial problems.

Debtors blame themselves and self-loathe when they can’t make their payments.

“If I shared this with anyone they will look down upon me as some kind of fool,” explains a North Carolina psychologist who is now beyond retirement age. He explains that his student debt balance soared after losing a well-paying position during the financial crisis, and that he is struggling to pay it back.

Financial shame alienates struggling borrowers. Debtors blame themselves and self-loathe when they can’t make their payments, explains Colette Simone, a Michigan psychologist. “There is so much fear of sharing the reality of their financial situation and the devastation it is causing in every facet of their lives,” she says. “The consequences of coming forward can result in social pushback and possible job–related complications, which only deepen their suffering.”

Debtors are isolated, anxious, and in the worst cases have taken their own lives. Simone confirms that she has “worked with debtors who were suicidal or had psychological breakdowns requiring psychiatric hospitalization.”

With an average debt of just over $37,000 per borrower for the class of 2016, and given that incomes have been flat since the 1970s, it’s not surprising that borrowers are struggling to pay. Student loans have a squeaky-clean reputation, and society tends to view them as a noble symbol of the taxpayers’ generosity to the working poor. Fear of facing society’s ostracism for failure to pay them back has left borrowers alienated and trapped in a lending system that is engulfing them in debt bondage.

“Alienation impacts mental health issues,” says New York mental health counselor Harriet Fraad. “As long as they blame themselves within the system, they’re lost.”

“Connection is the antidote to alienation."

Student debtors can counter despair by fighting back through activism and political engagement, she says. “Connection is the antidote to alienation, and engaging in activism, along with therapy, is a way to recovery.”

Despite the fear of coming forward, some activists are building a social movement in which meaningful connections among borrowers can counter the taboo of openly admitting financial ruin.

Student Loan Justice, a national grassroots lobby group, is attempting to build this movement by pushing for robust legislation to return bankruptcy protections to borrowers. The group has active chapters in almost every state, with members directly lobbying their local representatives to sign on as co-sponsors to HR 2366. Activists are building a supportive community for struggling borrowers through political agitation, local engagement, storytelling, and by spreading a courageous message of hope that may embolden traumatized borrowers to come forward and unite.

Julie Margetaa Morgan, a fellow at The Roosevelt Institute, recently noted that student debt servicers like Navient have a powerful influence on lawmakers. “Student loan borrowers may not have millions to spend on lobbying, but they have something equally, if not more, powerful: millions of voices,” she says.

A recent manifesto by activist and recent graduate Eli Campbell calls for radical unity among borrowers. “Young people live in constant fear that they’ll never be able to pay off their debt. We’re not buying houses or able to afford the hallmarks of the American dream,” he explains.

Ending the secrecy of the crisis through massive national attention may destigmatize the shame of financial defeat.

In his call for a unified national boycott of student loan payments, inevitably leading to a mass default on this debt, Campbell hopes to expose this crisis and instigate radical change. In a recent interview he explained that the conditions for borrowers are so bad already that debtors may not join the boycott willingly. Instead, participation may simply happen by default given the lack of proper work opportunities that lead to borrowers’ inability to pay.

While a large-scale default may not happen through willful and supportive collective action, ending the secrecy of the crisis through massive national attention may destigmatize the shame of financial defeat and finally bring debtors out of the isolation that causes them so much despair.

Activists are calling for a significant conversation about the commodification of educating our youth, shifting our focus toward investing into the promise of the young and able, rather than the guarantee of their perpetual debt bondage. In calling for collective action they soothe the hurt of so many alienated debtors, breaking the taboos that allow them to say, “Me, too” and admit openly that in this financial climate we all need each other to move forward.

Off the Top of My Head

How Is Money Created?

by John Lawrence, March 30, 2018

The money supply is added to whenever a bank creates a loan. They do this with a few keystrokes on a computer. It is a fallacy that this money is money that they already have that they loan to you. No, this is new money that is created by a private bank. That money is deposited in your account supposedly to be used for a good purpose. Else the money would not have been loaned to you. That money must be paid back with interest so it ends up finally as the property of the bank which loaned you the money. The borrowed money is used to expand a business, make home improvements and other worthwhile activities that will supposedly generate the money to pay back the loan. So, theoretically at least the loan is a win-win situation. The bank makes money both from principal and interest and the person borrowing the money makes money from an expanded business or is better off and more productive in other ways. As a consequence, the money supply is increased. It is thought that this situation is not inflationary as long as the money is used for a constructive purpose which leads to an expansion of the economy.

The government, supposedly, does not get involved in creating money or adding to the money supply. That is thought to be inflationary. However, in recent years the Federal Reserve, with its quantitative easing policy, has done just that. It has added to the money supply by creating money and shoveling it out to the Big Banks in order to keep them afloat. They have contended that this policy has not been inflationary because wages and the cost of living have not gone up. But they are fooling themselves. While wages have not gone up, the cost of living surely has if you include rent and real estate prices. Real estate and also stocks are considered to be assets. Asset prices have gone up tremendously. The stock market is in a bubble because the Fed has kept interest rates at zero in order to supply money to corporations, hedge funds, banks and the wealthy class in general. This has not filtered down to Joe Six Pack, so it isn't considered inflationary. But it is inflationary if you consider asset classes.

So money given to the wealthy is not considered inflationary but quantitative easing for the people where money would just be given to average citizens - so-called helicopter money - would be considered inflationary. Another reason the Fed won't raise interest rates is that that would increase the national debt. The Federal government, which is $21 trillion in debt, borrows more every month just to make interest payments on that debt. The market for US Treasuries used to be big enough that other countries and sovereign wealth funds would buy it all up. As of December 2017, $6.3 trillion or approximately 45% of the debt held by the public was owned by foreign investors, the largest of which were Japan (about $1.06 trillion) and China (about $1.18 trillion). The US Federal appetite for debt has increased so much that foreign investors are no longer willing to buy it all up. Therefore, US entities must buy it with free money supplied by the Fed. In other words the Fed is just printing money.

This is not a good situation. Giving free money to the wealthy only drives up the economic divide. Asset bubbles inevitably will burst causing chaos and losses to pension funds. The US Federal government could become a subservient debtor to the Chinese among others with US taxpayers holding the bag. Wealthy speculators and investors will already have taken an immense amount of money out of the system and into their private coffers in the Cayman Islands and other tax shelters so Joe Six Pack will end up with the bill.

Trump's recent tax cuts for the rich enacted by Congress will make the situation immeasurably worse as the discrepancy between government tax revenues and outlays grows.

Fortune reported:

In the absence of decisive, quick action to tackle this slow-motion crisis, the best-case scenario for the next few years is that America becomes a much riskier place to do business. A high debt load will limit our flexibility to keep the economy on an even course. “Countries with high debt don’t respond aggressively to downturns,” says Harvard economist Kenneth Rogoff. If the U.S. slips into recession, we’ll lack the option of lowering taxes or increasing spending on infrastructure, for example, as tools to revive growth. And as the debt load grows, efforts by the Federal Reserve to stimulate the economy with lower rates would be more likely to feed runaway inflation. “Then, investors will dump Treasuries,” says John Cochrane, an economist at the Hoover Institution. “That will drive rates far higher, and make the budget picture even worse.”

According to wolfstreet .com:

The US gross national debt jumped by $72.8 billion in one day, on Thursday, the Treasury Department reported Friday afternoon. This March 16 is a historic date of gloomy proportions, because on this date, the US gross national debt punched through the $21 trillion mark and reached $21.03 trillion.

The US national debt spiked $1.2 trillion in six months. This is totally unsustainable. They are acting as if US debt can be unlimited without any consequences just as they acted like climate change doesn't matter. Until it does.

US Consumers Head Over Heels in Credit Card Debt

From Wallethub:

Credit Card Debt Study, based on Federal Reserve data released yesterday afternoon.

Given this ominous data, WalletHub also released the results of its 2018 Credit Card Debt Survey, which provides a nationally representative look at consumer sentiment. You can find highlights from both reports below.

• The average household owes a record $8,600 – $138 more than at the height of the Great Recession.
   
• The $67.6 billion in credit card debt that we added in Q4 2017 is the highest quarterly accumulation in 30 years – 68% higher than the post-Great Recession average.
   
• Despite Federal Reserve data painting a dark picture, consumers are optimistic about their credit card debt, with 92% thinking they’ll have less debt at the end of the year.
   
• 35% of people think travel is worth getting into debt for, and more than 1 in 10 people with credit card debt don’t remember why they got into it.
   
• 7 in 10 people think we’re 2+ years from another recession.
   
• 88% of Americans say their personal finances are run better than the federal government.

Off the Top of My Head

Student Loan Debt: The Old Are Eating the Young

by John Lawrence

It doesn't pay to be young any more or to be a student, at least a non-independent student stuck in a classroom where you run the risk of being murdered. That's not to say that you can't study independently which is an option these days. Most of the people that made great intellectual contributions were independent scholars. That being said, if you survive being shot at school, you can look forward to piling on an insane amount of student loan debt in college just to obtain an increasingly worthless piece of paper that amounts to a Good Housekeeping Seal of Approval.

We have gone from being a nation of employees to a nation of entrepreneurs. To be an entrepreneur you don't need a college diploma. Those steel mill employee jobs are not coming back. All the rust belt manufacturing jobs are not coming back. However, there are still many jobs out there for skilled trades people. But for these jobs you have to be an entrepreneur; you have to be self-employed. As long as there are houses and cars, there are skilled jobs taking care of such. Handymen can claim quite a bit of wages these days. They're just not employed by a big corporation any more.  Employee benefits are not worth it. 401(k)s amount to just gambling in the stock market not a guaranteed pension.

Until the US becomes a nation where education is guaranteed as a right and paid for by the government, it's becoming increasingly obvious that a paid college education is a humungously bad deal. Better to acquire skills and study on your own and start your own business. The is what America is all about and is becoming more so. There are certain jobs that will require certification, but let the rich kids whose parents can actually pay for college take those jobs. There are a lot of millionaire plumbers our there. There are some billionaire pizza makers out there too.

For profit and even non-profit colleges prey on young people these days. They sell them a bill of goods and lead them down the garden path that a college degree is going to make them happy and prosperous. Instead the probability is that it will leave them under a ton of debt and depressed just as they start out in life. There are better paths to take, roads to go down that don't involve acquiring a huge load of debt.

Or you could go to Germany and get a free college education. Having to learn German would be a small price to pay. Broaden your horizons!

Off the Top of My Head

College Ends Up in Debt and Servitude for Many Black Students

by John Lawrence

A new in depth study by the Brookings Institution shows that the student loan debt crisis is worse than previously thought. As many as 40% of students default on their loans. The crisis is particularly disastrous for black students. The study found "Debt and default among black college students is at crisis levels, and even a bachelor’s degree is no guarantee of security: black BA graduates default at five times the rate of white BA graduates (21 versus 4 percent), and are more likely to default than white dropouts."

For profit colleges are literally sucking the blood out of black students, and determining that they will have a future mired in debt. White students aren't that much better off. Although most debts can be discharged in bankruptcy, student loan debt cannot. They are stuck with a noose around their neck for life in some cases. Free money for college is just too much of a false incentive for poor people who are sold a bill of goods which envisions for them a life in which they have pulled themselves out of poverty. Instead they get a life in which escalating payments on their debt guarantees a life of debt servitude, a high class form of slavery.

The Incredible Rise of Student Loan Debt in America

It doesn't have to be this way. Many countries guarantee free education from preschool to graduate school. The key for higher education is does the student's past history merit the state investing in further higher education. If so, they can get the education debt free. If not, they will have to settle for the education they've already received. Not everyone is PhD material. For for profit colleges in the US everyone is PhD material as long as they borrow the money for the education they are about to receive. This does not make sense.

Guidance counselors should guide students to the level and type of education that best suits them and prepares them for a job that they will be happy and successful in. Instead guidance and admission officers at for profit colleges are basically salesmen telling prospective students how much better their lives will be if they only attend their college. They even qualify for financial assistance, a euphemism for taking out a loan and going into debt. The admission officers never tell them about the history of student loan debt, nor do they tell them about their shortcomings as a student which might make it inadvisable to attend college at all. Maybe they would be better off as a tradesman or woman.

Trades people make very good money and their skills are in constant demand. Anything dealing with houses or cars will never go out of style. Mechanics, electricians, plumbers, solar installers, carpenters ... these are the jobs of the future. One can become a skilled tradesman for very little money. In many cases companies will even pay for the necessary training and education. One can be independent and self-employed as an option. A person can work for an employer and do jobs on the side. There are many possibilities. You don't need a piece of paper signifying that you have a college degree. If that piece of paper comes from a for profit college, it's probably worthless anyway. Even if it comes from a prestigious institution, it's no guarantee of employment.

As a tradesman, you have practical skills which can be used to build wealth as well as make a living. There are no guarantees with a corporate job which is mainly what the college degree is useful in getting. Self-employed people don't need a degree. Tradespeople only need a set of skills which are quickly apparent to any employer.The US should emulate European countries which attempt to place people in appropriate careers whether they be trades or college educated depending on their aptitudes and preferences. Either way their education is free.

Student Debt Slavery: Bankrolling Financiers on the Backs of the Young

Posted on December 26, 2017 by Ellen Brown

Higher education has been financialized, transformed from a public service into a lucrative cash cow for private investors.

The advantages of slavery by debt over “chattel” slavery – ownership of humans as a property right – were set out in an infamous document called the Hazard Circular, reportedly circulated by British banking interests among their American banking counterparts during the American Civil War. It read in part:

Slavery is likely to be abolished by the war power and chattel slavery destroyed. This, I and my European friends are glad of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led by England, is that capital shall control labor by controlling wages.

Slaves had to be housed, fed and cared for. “Free” men housed and fed themselves. For the more dangerous jobs, such as mining, Irish immigrants were used rather than black slaves, because the Irish were expendable. Free men could be kept enslaved by debt, by paying them wages that were insufficient to meet their costs of living. On how to control wages, the Hazard Circular went on:

This can be done by controlling the money. The great debt that capitalists will see to it is made out of the war, must be used as a means to control the volume of money. . . . It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that.

The government, too, had to be enslaved by debt. It could not be allowed to simply issue the money it needed to meet its budget, as Lincoln’s government did with its greenbacks (government-issued US Notes). The greenback program was terminated after the war, forcing the government to borrow from banks – banks that created the money themselves, just as the government had been doing. Only about 10% of the “banknotes” then issued by banks were actually backed by gold. The rest were effectively counterfeit. The difference between government-created and bank-created money was that the government issued it and spent it on the federal budget, creating demand and stimulating the economy. Banks issued money and lent it, at interest. More had to be paid back than was lent, keeping the supply of money tight and keeping both workers and the government in debt.

 

Latest Student Loan Debacle Is Ultimate Example of Trump's Campaign Con

The president ran against debt predators, drug makers and big banks – once elected, he immediately got in bed with all of them

by Matt Taibbi, Rolling Stone

President Trump with Education Secretary Betsy DeVos, in February. AP Photo/Evan Vucci

Last October, just about a week after the release of the infamous Access Hollywood "pussy" tape, Donald Trump gave a surprising speech in Columbus, Ohio.

RELATED

Taibbi: The Great College Loan Swindle

How universities, banks and the government turned student debt into America's next financial black hole

While the entire Republican Party was running sideways away from his cratering campaign, Trump was scrambling to find a way back in the race. One of his strategies – and I remember watching this on the trail – was to tack back to the populist themes he'd used to great effect in the Republican primaries.

In Columbus, with Hillary Clinton running away with the election, Trump unveiled what even The Washington Postdescribed as a "pretty radical student debt plan." The basic idea was income-based repayment capped at 12.5 percent, then total loan forgiveness after 15 years of payments.

"Students should not be asked to pay more on the debt than they can afford," Trump said. "And the debt should not be an albatross around their necks for the rest of their lives."

Trump hasn't gone back on that proposal, not exactly, anyway. The 12.5 percent-times-15-years concept was indeed part of a plan he submitted this past summer, at least for undergraduates.

But that same plan proposed a wipeout of five other existing income-based repayment plans, and grad students would be pushed into a harsher program requiring payments for 30 years.

Moving forward, Trump and the Republican Party have all but buried the campaign-trail "fairly radical" plan under a series of other student-bashing decisions.

On Monday, Fortune reported that Department of Education head Betsy DeVos is seeking to end a program to cancel the debt of students defrauded by ripoff diploma-mill universities.

This came just as the inspector general of the Department of Education issued a blistering report showing that DeVos had already essentially stopped processing such claims under the existing program.

Trump, pictured in October 2016, floated on the campaign trail what was described at the time as a "pretty radical student debt plan." AP Photo/ Evan Vucci

The IG report shows that the Trump administration has received 25,991 such claims since Inauguration Day, and approved exactly none of them.

None of this is a surprise. After all, Donald Trump himself ran one of the more notorious higher-education scams, settling a lawsuit for $25 million last year. And DeVos has spent much of her tenure walking back Obama-era initiatives to rein in diploma-mill scams.

The latest DeVos move comes in sync with a nasty piece of legislation introduced by House Republicans this month. Billed as a measure to "simplify" the student loan system, HR 4508, a.k.a. the PROSPER Act, would repeal and prevent the re-adoption of the "Borrower Defense" program that DeVos has already stalled.

continue reading Latest Student Loan Debacle Is Ultimate Example of Trump's Campaign Con

Off the Top of My Head

The National Debt: Why Worry?

by John Lawrence

The US national debt is about $20 trillion. That's money American tax payers owe to investors including foreign investors and governments. It is also money owed to other governmental agencies like the Social Security Trust Fund. About 30% of the national debt falls into this category. Of the remaining debt which is owned by the public, about half is owned by foreign investors and governments. Some people worry that the government will not be able to keep on borrowing money to roll over its debt which is added to each year by the deficit. People worry that foreigners will own the US.

Well, foreigners already do own much of the US. According to Robert Reich, about 35 percent of stock in U.S. corporations is now held by foreign investors. So if foreign governments and investors refused to buy any more Treasury bonds and wanted to cash out on the bonds they now own, the Federal Reserve would just print the money to pay them. So what would they do with the money then? They could either buy more US goods and services (unlikely) or they could buy more US assets as they already have been doing. So instead of owning just 35% of American corporations they might own practically all US corporations. However, the total value of the stock market is $25 trillion. Since foreigners own about $6 trillion of US debt, they could convert that to another approximately 30% ownership of the stock market. That would still leave about one third of US corporations owned by Americans.

So what? Who cares who owns American corporations? As Reich points out, corporations are global and have no particular allegiance to American taxpayers. In fact their whole aim is to avoid paying American taxes. Trump is about to give them their ultimate wet dream.

So what if the foreign owners of US debt, like China and Japan which each own about a trillion dollars of US Treasuries, took their money out of US debt and bought US real estate? They are already doing that of course. The solution would still be the same. The shortfall in selling new Treasury bonds to roll over old ones and pay interest would be made up by the Federal Reserve simply printing more money. Since the total value of US real estate is about $30 trillion, there is little to fear that foreign governments will soon be landlords to most American renters.

So what about that portion of the $5.6 trillion the US government owes to the Social Security Trust Fund and other governmental agencies? Again, if worse came to worse and investors, sovereign wealth funds and other domestic and foreign entities refused to loan us the money, the solution is the same: the Federal Reserve could just print it. Of course the Federal Reserve has already used this tactic of printing money when it bailed out the big Wall Street banks with its policy of quantitative easing. Quantitative easing has the secondary effect of keeping interest rates, and therefore US government deficits, low.

So if the Federal Reserve can print money, the question is why couldn't they spread some around to the American people in the form of a Universal Basic Income (UBI). American jobs are being displaced by robots so that the economic divide between rich and poor is growing. One way to redress the balance is to tax the rich and by means of various programs use the money to benefit the poor. Another way is for the Fed to just print the money ("helicopter money" some call it) and give it to the poor. This might cause some inflation, but again nothing serious.The money given to the big banks caused inflation in the asset markets (stock and real estate) but nobody worries about that. That's a far bigger threat to the US economy than the price of milk going up.

The real reason why the Fed won't use quantitative easing for the people is that the Fed is privately owned by the big Wall Street banks so they are not in the business of helping the people with their monthly bills. Secondly, if the American people could pay their bills, there would be much less debt. But debt is the main product of Wall Street banks. If there were no debt, Wall Street would not have a product to sell, and, therefore, would go broke. The less debt the American people are in, the less profits Wall Street makes.

A truly public central bank, one owned by the people not private corporations, could ease the indebtedness of the American people while, at the same time, easing the indebtedness of the US government. The judicious printing and the wise distribution of dollars could end the Web of Debt as Ellen Brown calls it.

 

How to Wipe Out Puerto Rico’s Debt Without Hurting Bondholders

From Counterpunch, OCTOBER 13, 2017

by ELLEN BROWN

 

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Photo by The National Guard | CC BY 2.0

During his visit to hurricane-stricken Puerto Rico, President Donald Trump shocked the bond market when he told Geraldo Rivera of Fox News that he was going to wipe out the island’s bond debt. He said on October 3rd:

You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out. That’s gonna have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave good-bye to that.

How did the president plan to pull this off? Pam Martens and Russ Martens, writing in Wall Street on Parade, note that the U.S. municipal bond market holds $3.8 trillion in debt, and it is not just owned by Wall Street banks. Mom and pop retail investors are exposed to billions of dollars of potential losses through their holdings of Puerto Rican municipal bonds, either directly or in mutual funds. Wiping out Puerto Rico’s debt, they warned, could undermine confidence in the municipal bond market, causing bond interest rates to rise, imposing an additional burden on already-struggling states and municipalities across the country.

True, but the president was just pointing out the obvious. As economist Michael Hudson says, “Debts that can’t be paid won’t be paid.” Puerto Rico is bankrupt, its economy destroyed. In fact it is currently in bankruptcy proceedings with its creditors. Which suggests its time for some more out-of-the-box thinking . . . .

Off the Top of My Head

Puerto Ricans Will Be Fleeing the Island in Droves

by John Lawrence

It's not just the fact that Puerto Rico has been devastated by Hurricane Maria. Even before the hurricane made any semblance of human civilization a thing of the past, Puerto Rico was mired in a debt crisis. Now the hurricane has left the people of Puerto Rico facing a double whammy.

The LA Times reported: "Two weeks after the storm devastated Puerto Rico, tens of thousands of hurricane evacuees are packing scheduled flights and charter jets in what officials there and in states across the U.S. fear is the beginning of a mass exodus of historic proportions. The mainland had already been absorbing record numbers of Puerto Ricans fleeing economic decline and a mounting debt crisis, with more than 700,000 migrating between 2006 and 2015."

Any Puerto Rican with half a brain in their head will take any means of transportation possible and head for the mainland. After all they are American citizens, and they need no visa or passport. They are essentially refugees with a ticket to the Promised Land unlike refugees from the Middle East, Africa and Asia.

Puerto Rico's government is more than $70 billion in debt plus $50 billion in pension obligations. People staying on the island would be stuck with it just like the Greeks were. Problem for the Greeks was that they were not American citizens so could not get out of paying the debt by leaving Greece. They were subjected to austerity.

Puerto Rico partied hearty, but now the party's over. It's time to call it a day. Or is it? Puerto Ricans can get out of paying the debt simply by moving to Orlando. The poor suckers left behind will have to deal with it.

Hedge funds own a lot of the debt, and they will probably be hung out to dry because they aren't going to get paid back by the few Puerto Ricans left on the island.They are on the hook for billions in Puerto Rican debt. Ha. Ha.

For instance, Autonomy Capital, a New York hedge fund run by former Lehman Brothers banker Robert Gibbins, owns nearly $1 billion of Puerto Rican general obligation bonds. FCO Advisors, a hedge fund run by former Goldman Sachs municipal banker Hector Negroni, is sitting on more than $400 million of Puerto Rican bonds as well. Another key player is Aurelius Capital Management, a New York hedge fund that lists nearly $500 million in Puerto Rican bonds. Aurelius, run by Mark Brodsky, won big by playing hardball with Argentina for years following that country's default.

The typical scenario where the hedge funds will subject their debtors to the harsh conditions of austerity will force Puerto Ricans to say, "Naa, who needs it?", and the hedge funds will be left holding the bag.

As Wall Street Vultures Circle, Demands for Immediate Puerto Rico Debt Relief

Published on Friday, September 29, 2017 by Common Dreams

"Washington must abandon its austerity agenda and support the removal of all manmade obstacles to Puerto Rico's recovery and reconstruction."

by Jessica Corbett, staff writer

 

32 Comments

A resident surveys her neighborhood as people deal with the aftermath of Hurricane Maria on September 27, 2017 in Corozal, Puerto Rico. (Photo: Joe Raedle/Getty Images)

While Wall Street vultures circle amid an ongoing humanitarian crisis and try to entice Puerto Rico with "relief" offers in the form of more debt, advocates for economic justice are demanding immediate debt relief and federal stimulus spending to rebuild the island's devastated infrastructure.

"For the president to bring up Puerto Rico's economic crisis and its debt to corporate America during a time of tremendous suffering is shocking, even for Trump. The fact that he accompanied this statement with very little action to actually help Puerto Ricans intensified the cruelty of his words." - Sonali Kolhatkar, Truthdig

"Puerto Rico needs immediate humanitarian assistance before many more lives are lost thanks to America's latest climate catastrophe, and reconstruction aid to help them rebuild their infrastructure," Wenonah Hauter, executive director of Food & Water Watch, wrote for Common Dreams on Friday. She continued:

The hurricane only made a bad situation much, much worse: Puerto Rico has been reeling from austerity measures for years that were put in place by Wall Street, which has been calling to recoup the debt. One of Donald Trump's first responses to the mounting humanitarian crisis was to remind people of the "billions of dollars" the territory owes to the bank, "which must be dealt with"—signaling what the priorities will be.

"Instead, we should consider forgiving Puerto Rico's debt and federally fund its reconstruction," Hauter added. "It's important to demand federal funding for our precious water infrastructure before disasters happen as well; indeed, this funding was cut off to Puerto Rico because of its debt, making a bad situation much worse when the hurricane hit."

Since Hurricane Maria struck the island last week, nearly half of the commonwealth's 3.4 million residents remain without access to potable water and 97 percent remain without electricity—which its governer has warned may not be fully restored for up to six months.

Meanwhile, President Donald Trump, as Common Dreams reported Tuesday, has continuously offered assurance that the recovery efforts are "doing well" while also suggesting the government can offer only limited assistance because of Puerto Rico's debts.

A Wake-Up Call for Students

From Angry Bear Blog | September 18, 2017 8:00 pm

Guest Author: Alan Collinge, StudentLoanJustice.Org,

Both Alan and I have written various posts on the student loan crisis. Alan has been featured on Angry Bear Blog from time to time.

If you are in college and looking for something worthy to fight for today; as a student, you should consider the student loan issue. Student loans and how they are administered are the national injustice of our time reaching threatening proportions and impacting the livelihood of young adults going forward. While at first glance, the problem appears complicated, confusing, and overwhelming; it is actually quite simple and its debt genesis hearkens back to the creation of this country. This problem transcends partisan and cultural divides and could serve to bring together those on the left and right on campus.

George Washington, Thomas Jefferson, and others were in debt up to their eyeballs to British banks and merchants. They came to understand how a lending system could be used against the citizens. Of course it was not just the Founders who were being exploited, many early settlers were indebted to English banks as well. John Adams famously remarked;

“There are two ways to enslave and conquer a country. One is by the sword. The other is by debt”

.When the Founders created the Constitution, they made it a point to reflect on bankruptcy rights prominently. Few people realize that a uniform bankruptcy system is called for before the power to raise an army or a navy, ahead of the power to coin currency, and even ahead of the power to declare war in Article I, Section 8 of the Constitution.
Obviously, bankruptcy rights were very important to these men.

Free men are not forced into any type of behavior by the government that We The People established and ordained. The government is to serve the people – not to force them into servitude and obedience. The people are sovereign, as the people came before the government and the Constitution that gave rise to the government.

Adam Smith, the founder of free market economics provided the basis for western economic theory, was compelled to advocate for bankruptcy protection as a means to encourage entrepreneurship, risk taking, and also a means to compel good faith in a lending relationship.

When an individual or firm goes bankrupt, a legal process is instigated to discharge debts that cannot be repaid. In former times such debtors might have been put into a debtors’ prison and languished there for years. The process weighs assets against liabilities and allows the debts to be discharged at some fraction of their nominal value, leaving the debtor free of the burden, albeit subject to rules of financial behaviour and with a blemish on their credit record which can last for years.

WHY WE SHOULD ABOLISH THE DEBT CEILING

 

Thursday, September 7, 2017

Congressional Democrats have pulled a fast one on Republicans by striking a deal with Trump to raise the federal debt ceiling only until the end of the year. This will give them bargaining leverage in December to strike a bigger bargain with Republicans: Democrats will agree to raise the debt ceiling then in return for Republican cooperation on legalizing Dreamers (unauthorized immigrants brought into the U.S. as children), making small but necessary fixes in the Affordable Care act, and other things Democrats seek.  

Raising the debt ceiling is always a political football, used by whichever party is in the minority to extract concessions from the majority party or from the majority party’s president.

The debt ceiling is how much the government is allowed to borrow. It shouldn’t be a political football. It should be abolished. It serves absolutely no purpose.

When the debt ceiling was first adopted in 1917, it might have been a useful way to prevent a president from spending however much he wanted. But since 1974, Congress has had a formal budget process to control spending and the taxes needed to finance it.

There’s no reason for Congress to authorize borrowing for spending that Congress has already approved, especially when a failure to lift the debt ceiling would be so horrific.

Having a debt ceiling doesn’t discipline government, anyway. The national debt is obligations government has already made to those who lent it money. Discipline has to do with setting spending limits and legislating tax increases, not penalizing the lenders.

Which is why most modern democracies don’t have debt ceilings. Britain, France, Germany, Canada, Australia – they do just fine without explicit borrowing limits.

Even more basically, the nation’s debt is a meaningless figure without reference to the size of the overall economy and the pace of economic growth.

After World War II, America’s debt was larger than our entire Gross Domestic Product, but we grew so much so fast in the 1950s and 1960s that the debt kept shrinking in proportion. 

Today’s debt is about 77 percent of our total national product. The reason it’s a problem is it’s growing faster than the economy is growing, so it’s on the way to becoming larger and larger in proportion.

This is what we ought to be focusing on. Fighting over whether or not to raise the debt ceiling is a meaningless and dangerous distraction. So abolish it.

Sovereign Debt Jubilee, Japanese-Style

Posted on June 27, 2017 by Ellen Brown

Japan has found a way to write off nearly half its national debt without creating inflation. We could do that too.

Let’s face it. There is no way the US government is ever going to pay back a $20 trillion federal debt. The taxpayers will just continue to pay interest on it, year after year.

A lot of interest.

If the Federal Reserve raises the fed funds rate to 3.5% and sells its federal securities into the market, as it is proposing to do, by 2026 the projected tab will be $830 billion annually. That’s nearly $1 trillion owed by the taxpayers every year, just for interest.

Personal income taxes are at record highs, ringing in at $550 billion in the first four months of fiscal year 2017, or $1.6 trillion annually. But even at those high levels, handing over $830 billion to bondholders will wipe out over half the annual personal income tax take. Yet what is the alternative?

Japan seems to have found one. While the US government is busy driving up its “sovereign” debt and the interest owed on it, Japan has been canceling its debt at the rate of $720 billion (¥80tn) per year. How? By selling the debt to its own central bank, which returns the interest to the government. While most central banks have ended their quantitative easing programs and are planning to sell their federal securities, the Bank of Japan continues to aggressively buy its government’s debt. An interest-free debt owed to oneself that is rolled over from year to year is effectively void – a debt “jubilee.” As noted by fund manager Eric Lonergan in a February 2017 article:

The Bank of Japan is in the process of owning most of the outstanding government debt of Japan (it currently owns around 40%). BoJ holdings are part of the consolidated government balance sheet. So its holdings are in fact the accounting equivalent of a debt cancellation. If I buy back my own mortgage, I don’t have a mortgage.

If the Federal Reserve followed the same policy and bought 40% of the US national debt, the Fed would be holding $8 trillion in federal securities, three times its current holdings from its quantitative easing programs.

America is not Broke!

Why Banks Love Public Debt

China's 'Belt and Road' Plan for Economic Development

by John Lawrence

Under the “One Belt, One Road” plan, China is remaking global trade and nurturing geopolitical ties.

One Belt One Road initiative to connect China to Europe (credit:YouTube)

The plan promises more than $1 trillion in infrastructure investments that span 60-plus countries across Europe, Asia and Africa.

While Trump touts "America First" as his watchword, China is undertaking a massive development program that will expedite trade and benefit China and its partners economically as it gains influence throughout much of the world. The US Trans Pacific Partnership which is now defunct was supposed to counter growing Chinese influence, but now China will become the dominant player in the world economy gaining friends and alliances along the way.

An Up-To-Date Silk Road

The Silk Road was an ancient network of trade routes that were for centuries central to cultural interaction originally through regions of Eurasia connecting the East and West. The Silk Road derives its name from the lucrative trade in silk carried out along its length, beginning during the Han dynasty (207 BCE – 220 CE). Trade along this corridor did much to promote political and economic ties among China, Asia, Africa and Europe. China now seeks to build a modern version of the Silk Road.

Unlike the US which seems to impose its western, capitalist democratic values on the rest of the world, China is out to prove that its model is more viable because it is stimulative of commerce without demanding fealty or allegiance to western values in return. Major countries participating include Russia, India, the Philippines, Iran and Iraq. These countries working together will form a relationship that will counterbalance US influence which will be relegated to its allies in Europe, which is having second thoughts about the US thanks to Trump, and South America much of which is a basket case. Trump's insistence on renegotiating NAFTA is sure to distance both Mexico and Canada. His building a wall between the US and Mexico will further anger south and central American countries.

Trump's withdrawal from the Paris climate change accords signals the moment when the US lost its hegemony over the rest of the world. Now China is positioned to fill the void. The US seems incapable of coming up with the $4.6 trillion needed to repair its own infrastructure according to the American Society of Civil Engineers, much less build infrastructure in the rest of the world like China is doing. It's clear that the contingent landmass of Asia, Russia and Africa will fall under Chinese geopolitical influence.

Credit: Dave Simmonds

The American model of loaning money to other nations via Wall Street banks and then demanding austerity measures and privatization of governmental assets when their payments fall short will soon be a thing of the past in terms of appealing to developing nations. Even Europe, notably Germany, is distancing itself from the US. Angela Merkel said recently, "And that is why I can only say that we Europeans must really take our fate into our own hands - of course in friendship with the United States of America, in friendship with Great Britain and as good neighbors wherever that is possible also with other countries, even with Russia." Germany gets a large percentage - about 40% - of its natural gas from Russia. They might decide to participate in China's Belt and Road program now that they seem to be detaching themselves from Great Britain and the US or rather it's the other way around. Britain and the US have detached themselves from Germany thanks to Brexit and Trump.

Bill to Protect California Consumers From Predatory Lending is Held by Assembly Appropriations

Published May 26, 2017 19:32 by California Reinvestment Commission

Earlier today, Assembly Bill 784 was “held” in the suspense file by the Assembly Appropriations Committee, effectively killing the bill.

Liana Molina, director of community engagement at the California Reinvestment Coalition, released this statement:

“It was deeply disappointing to see AB 784 (Dababneh) held in suspense today by the Assembly Appropriations Committee. AB 784 called for reasonable interest rate caps to protect California’s working families from predatory lenders who are currently allowed to charge unlimited interest rates for loans greater than $2,500.

There is a groundswell of support for ending predatory lending, including over 100 community, faith, and civil rights organizations who support an interest rate cap. We will continue building that support, and educating the public about the financial heartaches created by these loans.

It's worth noting the industry spent a great deal of money to oppose this bill, suggesting their profits are far more important than treating their customers fairly. Reforming predatory lending practices, which disproportionately harm Californians in communities of color, would be a concrete way for the California legislature to demonstrate its commitment to building a refuge of justice here in our state."

Additional Background on Harm of High-Cost Lending

There are no limits the APRs that high-cost lenders can charge Californians for loans that are greater than $2,500.

In 2015, more than half the loans to Californians for loans of $2,500 to $4,999 came with interest rates of more than 100% APR, according to the California Department of Business Oversight.

According to research by the CFPB, one out of five car title borrowers will have their cars repossessed.

Over 30 states already have interest rate caps, according to research by the National Consumer Law Center.

The New, New Economic Model

by John Lawrence

From Peoria

Quantitative Easing Becomes the Status Quo

After the Great Recession of 2008, the privately owned central bank of the US, the Federal Reserve, found a new way to get the economy moving again. They would simply create money and give it to the large Wall Street banks and even to some foreign banks like Deutsche bank. This newly created money would allow the big banks to cover all their collateralized debt obligations, interest rate swaps and other risky derivatives that had gone sour. They paid cash and then took the banks' risky trash onto their own, namely the Feds', balance sheet in the expectation that some day they would get rid of the stuff by selling it back into the market and then extinguish the cash which had been created with a few computer keystrokes. Here we are nine years after the massive bail-out of the big banks, and the Fed's once radical policy to save the world's financial system has become the status quo. The initial fear was that printing all that money and then effectively giving it to the Big Banks would create all kinds of inflation which money printing had done in the past most notably during the hyperinflation in Germany after the First World War.

US Fed Money Printing Didn't Cause Inflation Why?

So the fear of inflation turned out to be groundless because the Fed didn't spend that money into the everyday economy. They didn't help out Joe Six Pak. They didn't help out those with underwater mortgages. Essentially they gave all the money to rich people, and by this device averted inflation. Hmmm, said the Fed. We found out that, as long as you print money and give it to the Big Banks ^i.e. rich people, the money printing won't be inflationary. Instead, the Fed was successful in reinflating the economy as we had known it before the Great Recession. They created an asset bubble in the stock market since all this cash that had been given to rich people (also know as investors) found its way back into the stock market. The Big Banks had been bailed out. The world economic system was no longer in danger of collapse so things could hum along nicely with business as usual. The Fed was confident in the knowledge that it could print money at will as long as it gave that money to people who were already rich, and, therefore, wouldn't spend it in the real economy. These people would only invest it.

Economic Reality for the Little Guy

So the Fed in their basic function to prop up the Big Banks, and to hell with the little guy, adopted the policy of ongoing cash infusions to the Big Banks known as Quantitative Easing. They continued to buy on a monthly basis the bad debts of the banks thus continually infusing them with new cash. In addition they kept interest rates near zero. This allowed the banks to borrow money at extremely low rates and loan it out at much higher rates thus adding additionally to their bottom lines. The debt based economy was again in full swing. GDP continued to go up. The Fed knew that, if there were another recession, it could bail out the Big Banks again by just printing more money and inflation would not be a problem as long as the money went to rich people and was not spent into the real economy like job creation by a government program would do. The little guy would just have to be satisfied with being a permanent debtor. This was his role: to keep the economy going by borrowing money to consume more since consumption is 2/3 of GDP.

Student Loan Debt Hits $1.4 Trillion

The little guys, convinced they needed a college education, continued to borrow money and go into debt just to pay for the promise of a college degree and a good job one day. The poorer the person was, the more student loan debt they would have to go into, and the more motivated they were to pull themselves out of poverty. Car loans and credit card debt continued apace building up the debt based economy. Even car title loans based on equity in a car came into play.

Wall Street continued to play derivative games with all that debt turning it into asset backed securities and offloading it onto investors. Keeping interest rates low meant that savers were essentially screwed. Older Americans with savings accounts but no stocks got what amounted to no interest on their savings. So they were forced to go into the stock market thereby adding to Wall Street profits. Pension funds could not increase the value of their funds with conventional safe investments so they had to deal in riskier financial instruments as well.

Fed Policy Drives Economic Inequality

Fed policy is exacerbating income and wealth inequality since it basically gives money to rich people - to Wall Street and not to Main Street. And why should they give money to the little guy? They are a wholly owned subsidiary of Wall Street. They are a private entity not a publicly owned asset. They look out for the people who own them and nobody else. They are convinced that the USA and the world will keep running along very smoothly as long as there is no inflation which would occur if they gave money not to the rich but to the poor or middle class. That would drive up wages and create what economists fear most: wage inflation! The prevailing wisdom has replaced the conventional Keynesian wisdom which was to prime the pump by putting money into the little guy's hands. They know that now they can print as much money as they like as long as they give it to the already rich and no inflation will occur. As far as their supposed mandate to keep unemployment low, there is enough demand for low paying service jobs to do that even though the higher paying manufacturing jobs have by and large disappeared. So unemployment of the masses is not a problem. So what if a good paying job is replaced by a low paying job. That still counts as one unit of employment as far as the unemployment statistics are concerned.

Zerohedge reports the following:

The Fed has not even announced the framework of what its balance sheet "normalization" would look like, and already Boston Fed president Rosengren is talking about the next Fed QE program.

In a speech titled “The Federal Reserve Balance Sheet and Monetary Policy” delivered to Bard College on Wednesday afternoon, Rosengren said that structural changes in the macroeconomy "may necessitate more frequent use of large-scale asset purchases during recessions" and he said it is "quite likely" that the use of central bank balance sheets will be necessary in future economic downturns.

The reason?  A combination of low inflation, low rates of productivity growth, and slow population growth may imply an economy "where equilibrium short-term interest rates remain relatively low" by historical standards. In other words, the natural rate, or r-star, is so low, the Fed will only be able to hike rates a handful of times before it tips the economy over into contraction, requiring a new easing regime.

As a result, reductions in short-term rates to combat recessions will encounter the zero boundary and "will not be sufficient," Rosengren said – so "it is likely to be more common for central banks to engage in asset purchases to stimulate the economy by reducing longer-term rates."

Long story short: the Fed can only raise interest rates a small amount before they have to lower them again due to a looming recession. There is not enough interest rate leverage to keep the economy going so quantitative easing will continue to be the main tool in their toolbox.

As Long as People Keep Borrowing Money to Consume, Wall Street Will Be Happy

It's just Wall Street's job to keep the money spigot open. They need to keep money in the form of loans flowing. Then people will have every consumer item they desire, and they will continue to be in debt to Wall Street. The prevailing debt based model will continue to work until it doesn't. At that point there will be another financial crisis, but the Fed will just print money, give it to the banks and - voila! - the crisis will be over. The net result is that debtors will lose whatever items secured their debt including houses, cars and other assets. So the investor class will take over ownership and former middle class owners will in turn become renters. Eventually, all debtors will lose what they thought they owned because they are in over their heads and cannot make the payments.

The National Debt - No Problem

Conservatives used to be all upset over the $20 trillion national debt, but no more! They know the Fed can print any amount of money to make payments on the debt. There is nothing to fear about money running out. It has nothing to do with GDP or taxes. In fact the Fed could go from $4.5 trillion on its balance sheet to $20 trillion, the size of the national debt, without any problems as long as they keep feathering the nests of the rich. That would mean more billionaires and a greater wealth and income gap with the middle class. Current Fed policy will only fuel economic inequality, but they don't care about economic inequality. Their mandate only mentions inflation and unemployment. As long as they keep those two things in check, they are only too happy to create more billionaires and support financial manipulation as a source of wealth. After all they are owned by the very rich Wall Street billionaires who benefit from their policies.

Central Banks' Balance Sheets

 A Problem Emerges: Central Banks Injected A Record $1 Trillion In 2017... It's Not Enough

 The experts are now predicting that the Fed can't raise interest rates much or the whole stock market asset bubble will explode. If that were to happen, we'd be right back in another Great Recession or worse. So now the world's central banks are at the behest of Wall Street and other world financial centers such as the City of London.

Former Republican Tax Hawks Now in Favor of Cutting Taxes on the Rich and To Hell With the National Debt

In their perennial bait and switch on budget deficits, Republicans who criticized the Obama administration for overspending, now are content to run up the deficit even more as long as they get their tax cuts for the rich and increased military spending. Oh and the border wall, a completely superfluous and gratuitous expenditure.

According to a report in the New York Times:

From an office high above Manhattan, the billionaire Peter G. Peterson has warned for years that the federal government is borrowing too much money. So have other Republican grandees, like former Senator Alan K. Simpson, who made dire predictions about the federal debt in a 2010 report. Republicans in Congress have been eager to sing from the same hymnal so long as a Democrat was in the White House.

But when Republicans take charge, their fiscal rectitude sometimes starts to waver. The broad Republican support this week for President Trump’s plan to sharply reduce taxes suggests that those who hang on to austere concerns about debt will now be facing former allies who want to chase economic growth.

Some Republicans are rallying around the idea that less taxation is more important than less debt, just as they did during the Republican presidencies of Ronald Reagan and George W. Bush. That shift is a break with the die-hard hawks of the anti-deficit industrial complex, who have long warned of calamitous consequences to the American economy.

“This is about math, not mystery and magic,” said Mr. Simpson, who was a chairman of President Barack Obama’s bipartisan commission on the federal debt in 2010. “It’s madness to think that you can have a tax cut without some reduction in spending or some increase in revenue.”

Mr. Trump’s proposal, while short on details, calls for cutting taxes on corporations and individuals, including reducing the corporate tax rate from 35 percent to 15 percent and doubling the size of the standard deduction for individuals. Analysts estimated that it could add as much as $7 trillion over a decade to the federal debt, depending on what Congress eventually packs into a tax bill.

So Republicans care more about their tax cuts than they do about the National Debt. Who knew? But they do care about it if there is a Democratic administration in charge. They love tax cuts, but they hate Democratic government programs to help the poor and middle class. They hate anything public and that includes public schools, public parks, public roads, public libraries etc etc. You get the picture. They want to shrink government down to the size where "you can drown it in a bathtub." Overspending on tax cuts suits their agenda entirely because in a few years they'll be saying, "There's not enough money for social security or Medicare (two programs they really want to get rid of) or anything else except the military." By then the Trump administration will have gotten rid of all regulations thus creating a veritable "Buyer Beware" economy whether it comes to food, water, medical care, toys, air bags or anything else.

The Brave New World of American Capitalism

So the American consumer will be bought off with cheaper goods produced by low paid workers in other countries or robots, whichever is cheaper. No inflation here either in the price of stuff or in wages. The rich will continue their function of keeping the economy going by investing in asset bubbles. From time to time the Big Banks will totter on the brink of failure but will be bailed out by the Fed. Debts will be exinguished by foreclosure and bankruptcy which will only add to the largesse of the investor class which will be able to pick up assets like houses at bargain basement prices. The middle class will become renters and the poor will become homeless. That's the new reality.

Steve Fraser in his book, "The Age of Acquiescence," talks about how the former proletariat has become a precariat, working in the gig economy without unions, without worker protections, totally free in their labor, not having a boss standing over them. Labor just like capital has been freed from restraints and constraints, from regulations, from obligations. In this economy one might have to work 2 or 3 gig like jobs, but that's OK as long as one's role as a consumer promises that new and exciting purchases can be had relatively cheaply. Consumers have been bought off so that there's no need to struggle for social justice. What more could a person possibly want?

05/15/2017   5:07:31 PM

Free College Tuition in New York State?

by John Lawrence from the San Diego Free Press

Even in the Age of Trump There is Good News (at the State Level)

Taking a page out of the Bernie Sanders playbook, Governor Andrew Cuomo, with Bernie Sanders standing by his side, proposed free university tuition in New York state for residents making less than $125,000 a year. New York on the east coast and California on the west are taking the lead in preserving and advancing progressive values in the Trump era which will probably see conservative values extolled at the Federal level. But Democrats like Chuck Schumer, Elizabeth Warren and others will do all they can to block Republican efforts to shred the safety net for poor and middle Americans. Meanwhile, state and local governments in progressive states will do all they can to advance the cause of values that benefit average Americans.

Cuomo's proposal would cover state colleges, universities and two year colleges. Cuomo, who is thought to have Presidential ambitions, is tacking left on a number of issues including raising the minimum wage and paid family leave. Bernie Sanders made an issue of free college tuition during his Presidential campaign in light of the exploding student loan debt of over $1 trillion. Indeed, Sanders praised the announcement by saying, “That is a message that is going to provide hope and optimism for working-class families all across the state.”

 Regarding student loan debt, Cuomo said “It’s like starting a race with an anchor tied to your leg,” adding that many students in New York and elsewhere left college $30,000 or more in debt. “This society should say, ‘We’re going to pay for college because you need college to be successful,’” he added. “And New York State is going to do something about it.”

Tennessee and Oregon Lead Nation in Free Community College

Tennessee and Oregon already have programs to cover the costs of community college. Governor Cuomo's plan would include four-year schools as well as the city’s university system — a once-free network whose tuition has risen and reputation has fallen over the last decade.

The New York Times reported:

Mr. Cuomo hopes for a quick start for his idea, with a three-year rollout beginning in the fall, with a $100,000 income limit, rising to $125,000 by 2019, a timetable the administration billed as more speedy than the one embraced by Mrs. Clinton during her presidential campaign. (On Twitter, Mrs. Clinton said she was “delighted” by the governor’s proposal, calling it a plan that she and Mr. Sanders had “worked hard on.”)

It's unclear how much this program will cost. New York already offers in-state students one of the lowest tuition rates in the nation. Current full-time tuition at four-year State University of New York schools for residents is $6,470; at two-year community colleges, the cost is $4,350. Full-time costs for City University of New York schools are about the same. Cost estimates put the price of the new program at $163 million.

There are an estimated 940,000 New York households with college age children who would be eligible for this program. New York state has the nation's largest public university system with 440,000 students and 64 campuses. As student loan debt is greater than a trillion dollars and rising rapidly, something must be done or a whole generation is doomed to debt peonage. A college degree is no guarantee of a job, however. Students need to carefully consider their talents, abilities and interests before committing themselves to years of study in an area in which they might be ill suited. Therefore, high school guidance and career counseling is most important.

Bernie Sanders Suggested It First

Bernie Sanders was effusive in his praise of Mr. Cuomo’s idea, calling it “a revolutionary idea for higher education” that he envisioned would be emulated elsewhere. “Here’s my prediction,” the senator said. “If New York State does it this year, mark my words, state after state will follow.” Well, the blue states perhaps. But not in the south or the midwest. This proposal might appeal to a lot of Trump voters who have some college education but found the financial hurdles involved in getting a college degree just too insurmountable.

College students would still have to pay for room and board as well fees and books. So it is not a total panacea. Living at home would make getting a college education doable. Undoubtedly, many would move to New York just in order to be able to participate in such a program. Students would have to graduate in either two or four years or else lose their eligibility. They would also have to be qualified academically in order to gain admission to the colleges and universities in the first place. That means they would have to do pretty well in high school or they wouldn't even be accepted. But not everybody is college material, something that for profit colleges seem to ignore. They take everybody and sign them up for a student loan. Many do not even graduate, but still are stuck with a lot of debt.

Private For Profit Colleges Drive Student Debt

If this idea catches on, it could put the for profit private colleges out of business. They are the ones mainly responsible for driving up student loan debt. Good riddance to them, I say. Just this week SAGE college in San Diego abruptly closed shop leaving hundreds of students, some close to graduation, in the lurch. Students said Sage College withheld information and in some cases continued to collect federal student loan funds and tuition payments as recently as a few days before closing. That's money students will have to pay back despite the fact they never got their degree or credential.

The San Diego Union reported:

“They told us in October that we had 18 months and that they would take care of us,” said Marissa Maginnis, a single mother from Spring Valley working toward her court-reporting certification. “We were supposed to have finals next week. A lot of us feel like we’ve just been scammed.”

Maginnis said she owes $23,000 in student loans — money she thought was a good investment because court reporters can earn $80,000 a year or more in San Diego. She hopes to get all or part of her loan forgiven.

While Trump appoints an Education Secretary devoted to privatizing the public schools, Betsy DeVos, Governor Cuomo of New York is taking the opposite tack by expanding the public school system. We'll see how this plays out over the next four years as political rivals seek to influence the American people towards either free public education or private charter schools run with public money.

Is the Green Party a Good Alternative?

by John Lawrence from the San Diego Free Press

Noam Chomsky advocates voting for Dr Jill Stein of the Green Party in states which are securely Democratic and voting for Hillary in swing states where every vote counts. This makes a lot of sense to me as it's one way, maybe the only way, to build a third party in this country. Due to our antiquated voting system, a third party can never be successful. However, it could conceivably replace one of the two present day mainstream parties at some point.

Jill Stein stands for a lot of the things that Bernie and other Progressives stand for. But even if, by some stretch of the imagination, she were to be elected in November, she would still face a Republican Congress. Hillary is right when she seeks to tone down Bernie's rhetoric and make more modest claims because, if elected President, she will face an intransigent Congress which will thwart her at every turn. Even though the Dems might be able to take back the Senate, it will not be filibuster-proof, and they probably will not be able to take back the House. So the Repubs will block all the good stuff in the Democratic party platform, and Hillary will be blamed for not delivering what she had promised.

If Hillary is not able to implement any bit of the Democratic platform, a platform shaped by Bernie Sanders, the high expectations of those who will vote for her will be smashed with the result that people will turn on her, and Donald Trump could come back to haunt us in four years.

Dr Jill Stein doesn't have that dilemma. She can state her positions clearly and unequivocally knowing that she will never have to try to get them implemented because she probably will never gain the Presidency. But still it's worthwhile to get those viewpoints out there before the public and let the public ruminate on them the same way Bernie Sanders did. If he had gained the Democratic nomination, he would have been in even worse shape than Hillary who at least had the perspicacity to tone down claims of what she would do as President to be somewhat more in tune with reality.

What does Jill Stein Stand For?

So what does Dr Jill Stein stand for? Here is a sampling:

1) Guarantee economic human rights, including access to food, water, housing, and utilities, with effective anti-poverty programs to ensure every American a life of dignity.

This is none other than the implementation of Article 25 of the UN Declaration of human rights which states

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

Economic human rights are something Republicans are dead set against. They say it's not in the Constitution and it's unAmerican; only political rights are mentioned in the Constitution. Jill Stein's plan to implement economic human rights would end poverty and guarantee everyone a basically decent existence. The crux of the matter is that those of us who have been fortunate enough to accumulate great wealth should use some of that wealth to support those of us who are less fortunate, not by means of philanthropy or charity, but through the intermediary of government and the tax code. So far human greed has made this outcome impossible. Will human nature change and in particular the American psyche become less selfish? We'll see, but I wouldn't count on it. It would entail rewriting the Constitution to reflect those values.

2) Create living-wage jobs for every American who needs work, replacing unemployment offices with employment offices. Advance workers' rights to form unions, achieve workplace democracy, and keep a fair share of the wealth they create.

In Sweden unemployment offices have been replaced by employment offices. These offices can be found in Stockholm and other cities and towns and are state run. In order to get a job all one must do is go in to this office, input one's qualifications and credentials, and they will help you search a database of every available job in the whole country. If a suitable job comes up, the applicant has a right not to accept it, and a new search is undertaken. However, after three rejections, his or her welfare is cut off. In other words you have to accept one out of three proposed jobs or else. This extensive job search should be implemented in this country in order to facilitate everyone's working to the greatest extent possible. If no suitable private sector job can be found, then public sector jobs at minimum wage can be created. There's no end of trash that needs to be picked up along the streets and freeways. I'm sure productive jobs can be created ala FDR's Civilian Conservation Corps and Works Progress Administration.

3) Create millions of jobs by transitioning to 100% clean renewable energy by 2030, and investing in public transit, sustainable agriculture, and conservation.

Global warming is serious and needs to be addressed in a serious manner. Dr Stein's platform would do this although the date needs to be moved up to 2025.

4) Establish a foreign policy based on diplomacy, international law, and human rights. End the wars and drone attacks, cut military spending by at least 50% and close the 700+ foreign military bases that are turning our republic into a bankrupt empire. Stop U.S. support and arms sales to human rights abusers, and lead on global nuclear disarmament.

The US has to be weaned away from being the world's foremost militarist nation if there is ever to be peace on the planet. Peace making activities such as the Peace Corps need to be stepped up. The money saved by slashing the military budget and closing bases can be used to transition to renewable energy and provide other social benefits.

The US military bases in almost every country of the world give credence to the fact that the US is an occupying power that occupies the whole world. It's world domination pure and simple, something we fought against in WWII when the Axis powers tried to do it. A lot of these countries, for example the Phillipines, don't want our bases on their territory. Converting US military occupation to Peace Corps related activities would go a long way to creating world peace. We create enemies and then beef up the military budget to defend against them. Even Russia has been recreated as a new old enemy when friendship would have been and still is possible. Those in power miss the good old days of the Cold War; they want it back so bad.

5) Establish an improved “Medicare For All” single-payer public health insurance program to provide everyone with quality health care, at huge savings.

With Aetna pulling out of Obamacare, Obamacare's days are numbered. The big insurance companies are not interested in playing that game leaving the whole program in jeopardy. It was a jury rigged, Rube Goldberg jumble of incompatible compromises in the first place. Medicare-for-all is the only sane solution. Let's get on with it.

6) Abolish student debt to free a generation of Americans from debt servitude. Guarantee tuition-free, world-class public education from pre-school through university. End high stakes testing and public school privatization. 

5) and 6) agree with Bernie Sanders' proposals.

7) Set a $15/hour federal minimum wage. Break up “too-big-to-fail” banks and democratize the Federal Reserve. Reject gentrification as a model of economic development. Support development of worker and community cooperatives and small businesses. Make Wall Street, big corporations, and the rich pay their fair share of taxes. Create democratically run public banks and utilities. Replace corporate trade agreements with fair trade agreements.

The Federal Reserve created $17 trillion out of thin air via a few keystrokes on a computer in order to bail out the big banks, domestic and foreign, in the 2008 financial crisis. It's obvious they don't know what they're doing. They're in uncharted waters, and the only thing they know is to preserve the system as it already exists until the next financial crisis. That's the only time when things might change. Until then they are holding on to the current system such that it is for dear life.

The Rich Need to Pay Taxes Sufficient to Reduce Inequality

The rich need to pay their fair share which I define as sufficient to diminish income and wealth inequality. If the US is to remain a democratic country and not become a plutocracy, this needs to happen.

Reagan's and Alan Greenspan's tax breaks for the rich had a lot to do with the increasing economic divide between rich and poor. The balance needs to be regained by taxing the rich to support the poor until wealth and income is more evenly distributed.

There are other parts to Dr Jill Stein's plan, but the above are the main "planks" in my opinion. She mentions public banking which I have written about extensively in the San Diego Free Press. The champion of public banking is Ellen Brown who has run on the Green Party ticket previously for State Treasurer of California. Public banking is an important concept that would make it possible for the US and its citizens to get away from the debt based economy they now suffer under. It also is a non-violent way to diminish the power Wall Street has over the economy.

In Ellen's latest blog: Can Jill Carry Bernie’s Baton? A Look at the Green Candidate’s Radical Funding Solution she says:

Bernie Sanders supporters are flocking to Jill Stein, the presumptive Green Party presidential candidate, with donations to her campaign exploding nearly 1000% after he endorsed Hillary Clinton. Stein salutes Sanders for the progressive populist movement he began and says it is up to her to carry the baton. Can she do it? Critics say her radical policies will not hold up to scrutiny. But supporters say they are just the medicine the economy needs.

...

As with Sanders’ economic proposals, her plan has been challenged as unrealistic. Where will Congress find the money?

But Stein argues that the funds can be found. Going beyond Bernie, she calls for large cuts to the bloated military budget, which makes up 55% of federal discretionary spending; and progressive taxation, ensuring that the wealthy pay their fair share. Most controversial, however, is her plan to tap up the Federal Reserve. Pointing to the massive sums the Fed produced out of the blue to bail out Wall Street, she says the same resources used to save the perpetrators of the crisis could be made available to its Main Street victims, beginning with the students robbed of their futures by massive student debt.

If the Fed Can Create Money for Wall Street, They Can Create It for Main Street

The Fed came up with trillions of dollars to bail out Wall Street and they did it with a couple keystrokes on a computer. So why can't the same thing be done for Main Street? Dr Jill Stein and Ellen Brown say it can. Bernie Sanders demanded that the Government Accounting Office conduct an audit of the Fed which revealed that it had provided a whopping $17 trillion to bail out American and foreign banks during the economic crisis. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else,” said Sanders in a press release.

If the Fed can create money that it doesn't really have just by a few keystrokes on a computer and give it to the rich, it begs the question why can't the Treasury Department issue the money directly to the people? Right now they are forbidden by law from doing so, but there is a way around this since the Treasury can issue coins. It has been proposed that the Treasury could mint a trillion dollar coin and then go from there. Better yet change the law so that the Treasury Department, not the Wall Street controlled Fed, has control over the money supply. If it did this, it wouldn't have to borrow money and pay interest on its bonds which goes mainly to Wall Street. Taxpayers would save billions of dollars in interest charges. Ellen continues:

The alternative is to do what governments arguably should have been doing all along: issue the money directly to fund their budgets.

Central bankers have largely exhausted their tool kits, prompting some economists to  recommend some form of “helicopter money” – newly-issued money dropped directly into the real economy. Funds acquired from the central bank in exchange for government securities could be used to build infrastructure, issue a national dividend, or purchase and nullify federal debt. Nearly interest-free loans could also be made by the central bank to state and local governments, in the same way they were issued to rescue an insolvent banking system.

Just as the Fed bought federal and mortgage-backed securities with money created on its books, so it could buy student or other consumer debt bundled as “asset-backed securities.” But in order to stimulate economic activity, the central bank would have to announce that the debt would never be collected on. This is similar to the form of “helicopter money” recently suggested by former Fed Chairman Ben Bernanke to the Japanese, using debt instruments called “non-marketable perpetual bonds with no maturity date” – bonds that can’t be sold or cashed out by the central bank and that bear no interest.

The Bernanke proposal (which he says could also be used by the US Fed in an emergency) involves the government issuing bonds, which it sells to the central bank for dollars generated digitally by the bank. The government then spends the funds directly into the economy, bypassing the banks.

The US government need not borrow money for its expenditures thus driving up the national debt. It could issue the money directly essentially the way the Fed did. The Fed then bailed out the banks, but won't bail out Main Street. The Federal government could do just that: provide money interest free for rebuilding infrastructure, buying up student loan debt and other worthwhile activities. The result would be increased economic stimulus and full employment. This coupled with a financial transactions tax on Wall Street, eliminating the "carried interest" loophole for hedge funds, would decrease the economic divide between the 1% and the 99%.

Bernie Sanders had the right ideas; Jill Stein has the right ideas. But none of these ideas can be implemented with a corporate controlled Congress which likes things just the way they are. After all it serves their interests very well. They are getting rich off it, and they could care less about the middle class or the poverty stricken. The Repubs have their southern "tribe" locked up and fully imbued with the idea of voting against their own interests. They are busy ginning up anger against the less rugged. This seems to be sufficient for getting people to vote against their own interests. Corporate Democrats like their perks too like going to work as lobbyists after they quit their "public service."

Financial Parasites Have Become Neo-Feudal Landlords

by John Lawrence

Classical economics divided income into two types: earned and unearned. Earned income came from productive labor combined with capital investment. Unearned income was considered parasitical and consisted of rent, interest and dividends. It was not considered as adding to GDP but as subtracting from it. It was money made by manipulating money much as feudal landlords made their money in what has been called a rentier economy.

Today most of the money earned by the 1% which is driving the income inequality gap is made in the financialized, rentier economy but is now considered earned income. New methods have been devised to make money not by productive labor and investment but by manipulating financial instruments. One such manipulation consists of stock buybacks.

Why would a company buy back its own stock, stock that was issued in the first place supposedly to give the company money it needed for productive investment to produce goods and services. The answer is very simple. When a corporation buys its own stock (often with borrowed money), the stock usually goes up at least temporarily. That gives the executives of the company and activist hedge funds time to cash in their stock grants, options and garden variety stocks and make a killing. The boost in stock value also impresses Wall Street which cares solely about the short term financial indicators for a company and not at all about what the company did to achieve those indicators.

When a company uses its profits or even borrowed money to buy back its own stock, that's money that is not being used for research and development or to expand production or to make a better product. The money that the executives and hedge funds make is strictly because of financial manipulation, but in a financialized economy it's considered to be additive to GDP. The measurement of GDP is no longer linked wholly or even mainly to production, but now consists to a large extent of income that is made in the rentier economy.

Carl Icahn, a big investor in Apple, is always trying to get them to buy back their stock so he can cash in. The billionaire activist investor lobbied Apple to buy back billions worth of its shares to boost value to shareholders. In April 2014 Apple boosted its buyback plans by $30 billion and even split its stock for the first time in nine years. Satisfied? Never. Icahn's taking another swing at getting Apple to buy back even more stock, saying the shares could double to more than $200 apiece.

Another way the parasites make money which makes the GDP figures look good is to not pay taxes. The tax code has been completely captured by the large corporations and their lobbyists which has shifted the burden away from corporations and onto the average working person - the 99%. Both Democrats and Republicans are complicit in this arrangement, one example of which is the tax giveaway they are getting ready to implement.

William Greider in an article entitled Democrats and Republicans Are Quietly Planning a Corporate Giveaway—to the Tune of $400 Billion writes the following:

The bad news is that key leaders of the Democratic Party—including the president—are getting on board with Republicans, despite some talk about confronting income inequality. Influential Democrats intend to negotiate with Republican counterparts on the size and terms of post-facto tax “forgiveness” for America’s globalized companies. This is real money they’re talking about—a giveaway of hundreds of billions

Why haven’t voters heard about this from candidates? Because Republicans and Democrats both know it would make angry voters even angrier.

The major multinationals complain about a tax problem that most citizens would love to have for themselves: Thanks to a loophole in the tax code, the companies do not have to pay US taxes on profits they have earned in foreign countries until they bring the money home to American shores. Altogether, the globalized US companies have accumulated $2.1 trillion in untaxed profits, most of it parked in overseas tax havens.

The multinationals are waiting for Congress to forgive them their debts.

Oh, but forgive the debts of the little guy? Never!! While corporations expect to have their debts forgiven, there is no such help for for the average American or average debtor nation like Argentina or Greece.  For the rest of us the commandment is "Thou shalt PAY UP." Wall Street has adamantly stuck to this first Principal of Finance which is sancrosanct, so sancrosanct in fact that bankruptcy rules for the average American are being tightened while at the same time they are being loosened for corporations. You think student loan debtors can go bankrupt? Guess again.

After all part of the vulture capitalist's playbook is to buy a company with borrowed money, load it down with debt, strip its assets, raid its pension fund, then take it into bankruptcy in order to destroy its union. Having accomplished all that and by the way added to GDP while so doing, the company can then be taken out of bankruptcy, taken private and then taken public again in order to get another infusion of cash from an Initial Public Offering (IPO) which is immediately gobbled up by the hedge fund (another name for vulture capitalist) itself. All of these shenanigans make money off of money, do nothing for productive investment but do add to GDP.

Congress let these corporations have a "tax holiday" in 2004 on the hope and promise that these corporations would spend their largesse doing research, investing in America and creating jobs. What happened? The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending. One of the beneficiaries was Qualcomm, a major whiner for another tax holiday. On his way out the door Paul Jacobs exhorted his employees and shareholders to “Send your Congress people your opinion that you’d like American companies to be able to bring offshore money back to the United States to either reinvest or return to shareholders.” Qualcomm had $21.6 billion in overseas profits in 2014. And those poor shareholders - most of them in the 1% - are having to make do without their money. Oh, Boo Hoo.

As a result GDP is no longer a measure of the health of an economy. If a tornado wipes out a town, the money spent to rebuild that town adds to GDP, but does not constitute a contribution to the economy that adds anything except to restore what was already there. In the same way hedge funds add nothing productive to the American economy, but they do increase GDP. So GDP as a measure of anything productive is passe. It is merely a measure of the cash that changes hands regardless if it changed hands as a result of winning a bet in a casino or in the casino of Wall Street or it changed hands because someone bought something that was actually useful.

And don't forget the second Principle of Finance - "If Wall Street fucks up, thou shalt bail us out" in which case taxpayers will restore their financial rectitude and well-being like we did in 2008. Or maybe this time it will be a bail-in in which case citizens will make Wall St whole again with money from their savings accounts which by the way are the property of the banks. The bank has merely issued you what amounts to an IOU, and, what's more, you're treated to practically zero interest rates on your savings. How's that you thrifty senior savers?

If GDP doesn't measure the exchange of productive goods and services or productive investment, why does every politician and pundit insist on "growing the economy" meaning increasing GDP? We would be better off in some ways if GDP were diminished and the emphasis was on a sustainable economy, an economy which valued the health and welfare of the average person instead of the 1%. All the money that is made from the oil and gas industries needs to diminish if we are to make any progress with global warming. All the money made by Wall Street on fees, interest and derivatives needs to diminish if the economy is to be placed on a more solid financial footing.

Consumers contribute 70% of GDP. If we start growing our own food and fixing our own cars and buying less junk, this will diminish GDP, but the average American will be better off. They would have less debt. If we stop going into debt, GDP would go down. But so would the inequality gap as corporations earned less profit and Americans took on less debt. How to make America great again? Pay down your debt, do more for yourself instead of buying goods and services in the cash economy, buy and work local and stop patronizing large corporations and Wall Street banks.

The only way that the central bank of the US, the Fed, knows to grow the economy is to lower interest rates and force more debt on American citizens. This is what monetary policy amounts to. Fiscal policy, in which the government would create jobs directly by providing money for infrastructure revitalization, is non-existant thanks to Republicans who won't approve expenditures by government that would actually create jobs and the military-industrial complex which gobbles up every available dollar.

If American citizens don't take on more debt, the economy goes to hell in a handbag. The only way around this is to start a public bank. Then the local economy can be served directly including creation of good jobs without reliance on Wall Street. By the way sports fans, the plan for the new San Diego "Convadium" would involve the City of San Diego issuing a billion dollars in bonds, a plan they are touting as requiring no taxpayer funding, but which will involve huge payments to Wall Street for fees and interest. These bonds will be backed by nothing except hotel taxes. Who's liable here if the plan goes south?

Michael Hudson writes in his book, Killing the Host - How Financial Parasites and Debt Destroy the Global Economy:

"Trying to rise into the middle class these days is a road to debt peonage. It involves taking on mortgage debt to buy a home of one's own, student loans to get the education needed to get a good job, an automobile loan to drive to work, and credit card debt just to maintain one's living standards as the debtor falls deeper and deeper into the hole. Many recent graduates find that they have to pay so much on their student loans that they must live at home with their parents and cannot afford to get married and start a family, much less qualify for a mortgage. That is why consumer spending has not risen since 2008. Even when income rises, many families find their paychecks eaten up by debt service."

Bernie Sanders is addressing the problem of debt peonage, which is gradually enslaving the American middle class, directly by calling for free public education and Medicare For All. He is also addressing the US tax code which has been rigged in favor of the wealthy and the corporations starting with Ronald Reagan's and Alan Greenspan's meddling. Republican Presidential candidates would only hasten the descent of the American middle class into debt peonage by giving further tax breaks to the rich while transferring even more of the tax burden onto the middle class and the poor.

The American dystopia that is becoming more likely is one in which a small percentage owns the means of production and rent producing assets while the vast majority eke out a living doing menial labor that can't be done by robots and automatons. Andrew F. Puzder, CEO of the parent company of Carl’s Jr., has announced he’s investing in machines because he doesn't want to pay employees $15 an hour or to pay for their health care. Puzder makes more in one day ($17,192) than one of his minimum-wage employees working full time makes in a year ($15,080), The Nation reported last year.

Work for nothing or be replaced by a robot - that's the choice for the 99%. But robots are taking middle class jobs now and will take more in the future, minimum wage or no minimum wage. So what's the solution? Start your own business, become self-employed, stay away from student loan debt or start or become a member of a cooperative enterprise. You have no future as a minimum wage employee regardless of the minimum wage. Take the bull by the horns instead of trying to convince the cow not to shit on you.

The American dystopian vision of the future is even more appalling than the feudal era in which human labor was actually needed to make the economy work. Sure the 1% controlled the wealth; it was a rentier economy but human labor was necessary. Now humans as well as their labor are expendable. The future could hold a life of abundance and leisure for everyone but that is not likely unless wealth is more evenly distributed. It won't be more evenly distributed unless consumers stop consuming, take matters into their own hands and start producing for themselves. The sad truth is you can make more money as a self-employed laborer than you can working a 40 hour week for MacDonald's even if you just do a couple of jobs per week! Why work for $10. an hour for someone else when you can make five times that much as a self-employed doing exactly the same work?

It's Time for Quantitative Easing for People Instead of Banks

by John Lawrence from the San Diego Free Press

Income Inequality is Getting Worse

Income and wealth inequality is only getting worse. It's not hard to understand why. Certain corporations have a lock on economic activity throughout the world. Mom and Pop operations have been forced out of business or have merged with the Big Guys. Artificial intelligence, automation, robots and computers have taken over many menial but used-to-be-better-than-minimum-wage jobs like check-out clerks, bank tellers and customer service operators. Other jobs have been off shored to cheaper labor jurisdictions.

The rest of us, college graduates included, have been reduced to being expendable appendages of the large corporate machines to be sucked in and spit out at their pleasure. When our skill sets are outmoded, we will be laid off and fresh talent will be acquired. The job pool is shrinking because the number of necessary jobs is shrinking. Today, there are approximately 1.2 million fewer jobs in mid-and higher-wage industries than there were prior to the 2008 recession, while there are 2.3 million more jobs in lower-wage industries. According to the Bureau of Labor Statistics most jobs in the next decade won't even require a college education. They are jobs that can't be done by robots: care givers, nurses, house cleaners, gardeners, retail.

Another reason for income and wealth inequality is that the US Federal Reserve's quantitative easing policy screws savers who get zero interest on their life savings while injecting money into the largest Wall Street banks. This money is siphoned off by wealthy investors and hedge funds. It never enters the real economy. It only encourages the average Joes and Janes to take on more debt. Ninty percent of the money supply is created by private banks who loan money into the economy through their policy of fractional reserve banking. As the money supply increases, so does debt.

Wall Street Banking Giants Create Most of the US Money Supply

Fractional reserve banking is a simple concept that has become more complicated and convoluted as it has evolved over the years. In its simplest terms, if a bank takes in a deposit of $100 from 10 people or $1000 total, it loans out $900 of that keeping $100 back as a reserve in case someone wants their deposit back before the principal and interest on the loans start flowing in. Their premise is that not everyone will demand their deposit back at the same time. If, however, everyone does want their money back at the same time, there could be a run on the bank unless the bank can borrow the money from some other entity like another bank or the Federal Reserve

Thus money is created by the bank with a few keystrokes on a computer and is fed into the economy as debt. The banks are at the top of the food chain since they create the money and loan it out on interest. Thus the US economy is a debt based economy. Bad things happen when people all demand their money back at the same time or collective debt becomes so big and untenable that it can't be paid back. This is what happened in the 2008 financial crisis when mortgages were given to people who couldn't pay them back and hence defaulted. Eventually this whole financial structure, which was a house built upon sand instead of a rock, to use a Biblical metaphor, collapsed.

It is to be noted that when a bank creates money, it is not backed by gold. Nixon took us off the gold standard in 1971. Money not based on anything but the government's say so is called fiat money. Thus all money created by private banks is fiat money, and, although the government says it is all good, it is the private banks that actually create it, not the supposedly democratically elected government.

The Federal Reserve has also been involved in money creation recently with a process called quantitative easing (QE). When the government needs money beyond the revenues it takes in by means of taxes, it goes into debt by issuing bonds. Sometimes those bonds are bought by Joe and Jane Average Investor or sometimes by other countries like Japan. However, much of the time they are bought by Wall Street banks. Then the Federal Reserve turns around and pays cash for those bonds taking them off the hands of the big banks. The result is that the banks end up with more money and the loans disappear on the Federal Reserve's balance sheet which is sort of like a black hole. Effectively, the government never has to pay those loans back.

Quantitative Easing for the People

There is another way that money could be created and injected into the economy. It might be called quantitative easing for the people (PQE) as Britain's Leader of the Labor Party, Jeremy Corbyn has termed it. He proposes to give the Bank of England a new mandate to upgrade the economy to invest in new large scale housing, energy, transport and digital projects. The investments would be made through a National Investment Bank set up to invest in new infrastructure and in the hi-tech innovative industries of the future.

The money creation (or printing if you like) would entail the government issuing a bond that a National Investment Bank would buy. Then the central bank would take that loan on its balance sheet in return for cash that the bank would then use to pay for infrastructure. The end result is that the government would owe the central bank the amount of the loan, but because the central bank is a financial black hole, it would never have to pay.

In Addition to Pocketing the QE, Wall Street Bankrupts Cities

The City of Los Angeles is paying a Wall Street bank $200. million annually in fees just to manage its money. The Huffington Post revealed:

LOS ANGELES, CA- At a lively downtown rally in front of the Bank of NY Mellon in Los Angeles, the Fix LA Coalition unveiled a groundbreaking research report, entitled "No Small Fees: LA Spends More on Wall Street than Our Streets," revealing that Wall Street charges the City of Los Angeles more than $200  million in fees. Coalition members called for action to reduce the high fees and put that money back into neighborhood services. After the rally, Fix LA Coalition members delivered the report to elected officials in City Hall.

In addition LA like a lot of cities that have gone bankrupt (Birmingham, Alabama for instance) has been snookered into interest rate swaps that end up costing much more money than  if they had kept the original loan at the original rate. Then to get out of these toxic deals, they have to pay a substantial "termination fee."

Lisa Cody, SEIU 721 Research Analyst and report co-author stated: "Based on what we know, there are some concrete steps we can take to save LA millions. For example, we can start with Mellon Bank to renegotiate a 'swap' deal that was supposed to save the city money, but is instead costing LA almost $5 million a year. To fix this toxic deal, the bank wants $24 million more in fees. In 2012, NY Mellon charged the city $26 million in termination fees for another swap they had sold us that turned out to be a terrible deal for LA." 

LA is not the first and probably won't be the last to be tricked into engaging in a fancy derivative deal that was way over the heads of the city employees that were talked into it by Wall Street hit men. If they had formed their own Public Bank of Los Angeles, they could not only have avoided being ripped off, but they could have actually made money and then be in a position to fix all those potholes they've been screaming about. And they could have created their own money supply the way Wall Street does it: fractional reserve banking.

In August 2014 the Fix LA coalition released the following statement:

Los Angeles Becomes Largest U.S. City to Take Action on Toxic Bank Deals; Unanimous Vote Requires City to Renegotiate or Terminate Multi-Million Dollar Interest Rate Rip-Off on Behalf of Taxpayers

Unanimous City Council vote sends strong message to Bank of NY Mellon, Wall Street: LA is not your ATM

The Los Angeles City Council voted 14-0 Wednesday to renegotiate or terminate without penalty a toxic swap deal the City entered into with two Wall Street banks, Bank of New York Mellon and Dexia. The measure, advanced by Fix LA, a coalition of clergy, unions and community groups aligned to restore city services and expand middle class jobs in the public sector, could save the City as much as $138 million. The International Business Times, noting the significance, reported that Los Angeles is now the largest city in the nation "to challenge ballooning Wall Street levies that accompany similar interest rate swap deals throughout the nation."

The motion further calls on the banks to return unfair profits and fees paid since 2008, estimated at more than $65 million to date. The deal costs taxpayers $4.9 million annually.

Los Angeles is now spending $290 million a year in financial fees or more than the entire city budget for maintaining its vast array of streets and highways. LA isn't the only sucker to enter into an interest rate swap in 2007 which was essentially a bet that interest rates would not fall below 2%. Then when the Federal Reserve, with its policy of QE, lowered interest rates to zero, LA and many other jurisdictions found themselves on the wrong end of a bet and were forced to shell out much more than they would have if they had kept the interest rate on the original loan.

The next sucker: Puerto Rico.  Puerto Rico ran itself into debt and then tried to make up for it with interest rate swaps. Recent credit downgrades allowed Wall Street to demand hundreds of millions more in short-term lending fees, credit-default-swap termination fees, and higher interest rates. Between 2012 and 2014, Puerto Rico paid nearly $640 billion to terminate swaps in addition to $12 million annual swap payments. As a result Puerto Rico is in the same situation as Greece - borrowing money in order to make debt payments which is the same as borrowing money on one credit card to make the payments on another.

The Chicago Public School Teachers' Pension and Retirement Fund has brought suit against 10 of Wall Street's biggest banks including Goldman Sachs, JPMorgan Chase, Citigroup and Bank of America for colluding to prevent the trading of interest rate swaps with the result that it cost the Fund more money.

I could go on ... about Birmingham, San Bernadino, Stockton and others ... but I won't.

If these jurisdictions - whether they be cities, counties or states - formed public banks as the state of North Dakota did, there would be no outflow of cash to Wall Street. Money would stay at the local level and could be used to support local businesses and create jobs repairing and building infrastructure.

An Infrastructure Bank Would Mean Good Jobs in a Much Needed Enterprise

If the government creates money and puts it in an infrastructure bank, that money would be spent into the economy by creating jobs to build and repair infrastructure. Thus good jobs would be created at the low and middle parts of the economic spectrum. This money would have a multiplier effect as the job holders would spend their paychecks on the necessities and luxuries of life. American GDP is based on 70% consumer spending so that would go up. Thus the democratically elected government - not private banks - would be in charge of creating the money supply and it would be to the advantage of average workers not high end financiers. Since the big banks are the current recipients of the QE largesse, that money goes into the pockets of billionaires in various ways and drives wealth and income inequality.

Or the government, instead of the private Wall Street banks, could create money itself directly and inject it into the economy in a variety of ways as Abraham Lincoln did when he had the American government create and spend greenbacks into the economy. This money, therefore, does not create debt as money created by private banks and loaned into the economy does. It's a bottom up rather than a trickle down method. Problem is that most money created today does not trickle down into the real economy.

Ellen Brown says in Time for the Nuclear Option: Raining Money on Main Street:

Australian blogger Prof. Bill Mitchell agrees that PQE is economically sound. But he says it should not be called “quantitative easing.” QE is just an asset swap – cash for federal securities or mortgage-backed securities on bank balance sheets. What Corbyn is proposing is actually Overt Money Financing (OMF) – injecting money directly into the economy.

Mitchell acknowledges that OMF is a taboo concept in mainstream economics. Allegedly, this is because it would lead to hyperinflation. But the real reasons, he says, are that:

It cuts out the private sector bond traders from their dose of corporate welfare which unlike other forms of welfare like sickness and unemployment benefits etc. has made the recipients rich in the extreme. . . .

It takes away the ‘debt monkey’ that is used to clobber governments that seek to run larger fiscal deficits.

So the government could just create money and inject it into the economy in one of two ways: directly to the people in the form of a basic guaranteed income or through an infrastructure bank that creates jobs. In the first instance money would be transferred directly to people to bolster consumption. In the second case jobs would be created that would get needed work done. Or a combination of both could be used.

A third way of reducing income inequality would be to redistribute money from the 1% to the 99% through the tax code. This is the method that Bernie Sanders advocates. Taxes on wealth and financial transactions would provide additional monies which could be  transferred to the 99% through social programs such as Medicare-For-All, or it could be given directly in terms of a deposit to checking accounts as was done in the Economic Stimulus Act of 2008. Money was deducted from tax liabilities or deposited directly to American citizens.

 

The Concept of a Basic Guaranteed Annual Income

The concept of a Basic Income in the U.S. goes back to Thomas Paine, one of the driving forces for independence and reducing inequality during the American Revolution. More recently, it’s been supported by very non-liberal individuals like Fredrick Hayek, Milton Friedman, and Richard Nixon. This would eliminate poverty in one fell swoop. All the anti-poverty programs could be rolled into one with much fewer administrative costs. Just as Medicare-For-All would simplify and reduce medical costs, a basic guaranteed income would amount to Social-Security-For-All. The state of Alaska already has such a program called the Alaska Permanent Fund which hands out money to each resident on an annual basis. In 2015 each man, woman and child received $2,072.00. For a family of four that was a nice basic income of approximately $8000. Sweet!

In the Netherlands a number of cities are experimenting with a basic income after the city of Utrecht announced that it would give no-strings-attached money to some of its residents. Tilburg, a city of 200,000 inhabitants close to the border with Belgium, will follow Utrecht’s initiative, and the cities of Groningen, Maastricht, Gouda, Enschede, Nijmegen and Wageningen are also considering it. A recent study conducted in 18 European countries concluded that generous welfare benefits make people likely to want to work more, not less.

In Switzerland, the necessary 100,000 signatures have been obtained for holding a referendum on whether Swiss citizens should receive an unconditional basic income of €2,500 per month, independently of whether they are employed or not. Other countries such as Finland and Catalonia are also moving in the direction of a no-strings-attached guaranteed income. This would do more to reduce inequality and poverty than perhaps any other measure.

According to The Dutch “basic income” experiment is expanding across multiple cities:

If Tilburg’s basic income project gets the green light from Netherland’s state secretary of social affairs, the town will provide an extra paycheck to a pilot group of 250 people starting in January 2016, Tillburg officials said. The city has not confirmed the amount of the stipend, but in Utrecht checks will range from around €900 ($1,000) for one adult to €1,300 ($1,450).

Although the classic basic income theory proposes universal payments across the population, the two Dutch experiments will only focus on residents who are already recipients of social assistance. Those in the program will be exempt from the severe job-seeking requirements and penalties in Dutch law.

Authorities aim to test how citizens react without that sword of Damocles over their heads. Will the money encourage them to find a job or will they sit on their couches comfortably?

A guaranteed income could be means tested. Why not? Rich people don't need an extra $1000. a month. It would reduce poverty, increase consumption and bolster GDP. Rich corporations would probably increase the price of staples as people had more money to buy them causing inflation. That's why the behemoth world wide franchise operations need to be broken up so they don't collude to raise prices on staples thus defeating the purpose of the basic income. With fiat money entering the real economy instead of the billionaire economy, inflation could become a concern.

Hyperinflation is always a concern when fiat money is created. When that money is spent by consumers, it will still wind up in the hands of a few major corporations, and that would be a problem. They could just keep raising prices. That's why breaking up those large behemoths by using the Sherman Anti-Trust Act is important. Money can also be pulled back by the government by taxation if inflation threatens to get out of hand.

As Ellen Brown says: "Thus there are many ways to recycle an issue of new money back to the government. The same money could be spent and collected back year after year, without creating price inflation or hyperinflating the money supply."

However, when fiat money ends up in the pockets of billionaires as has been the case with QE, inflation is not a concern because it doesn't enter the real economy and prices don't rise. Income inequality though becomes a major concern as does the influence of big money on the political system. Billionaire money has bought and paid for the political system through lobbying and campaign donations with the result that the US is effectively no longer a democracy but a plutocracy.

Trickle Down Economics Trickles Up Instead

As the article The Case for Universal Basic Income states:

What’s really scary is the general acceptance of a status quo in which most people are getting poorer and poorer, even while recent studies demonstrate that so-called “trickle-down” economics actually means an upwards flow of income until it stagnates as hoarded wealth. This stymies wealth creation in the economy, as the Institute for Policy Studies concluded after using standard economic multiplier models to show that every extra dollar paid to low-wage workers adds about $1.21 to the US economy. If this dollar went to a high-wage worker it would add only 39 cents to GDP. In other words, if the $26.7 billion paid in bonuses to Wall Street punters in 2013 had gone to poor workers, GDP would have risen by some $32.3 billion. ...

One of the main advantages of a universal basic income is that it would free people from the tyranny of the job market in which they are mere commodities by guaranteeing the most basic human right of all, that of material existence.

With inequality increasing some way or ways must be found to redress the balance. The alternative is to wake up and find ourselves in a neo-feudal society controlled by a few behemoth corporations employing only a few high level people at good wages. The rest of the population would be employed in low level service type jobs and live in relative poverty. What money they had would be spent in the troughs of the giant corporations and end up in the pockets of the 1%. Even if the 99% were given money to spend, it would still end up there - in the pockets of a few. An infrastructure bank funded by government created fiat money would provide people with decent jobs in which workers could maintain a sense of dignity and improve the quality of the nation's infrastructure at the same time.

In addition recipients of a basic income should have to give something back in terms of creating a better life for poor people around the world. Instead of armies with guns and weapons which have cost trillions and produced mainly negative results, a Peace Army could help poor people around the globe attain at least a minimally acceptable lifestyle in terms of clean water and sanitation, adequate nutrition, energy and education.

Installing solar around the world will not only provide energy for people who don't have anything but the most primitive kind while cleaning up the environment at the same time. The commitment of rich nations to help poorer nations convert to renewable energy could be manifested by funding unemployed and underemployed Americans to help build such infrastructure around the world.

It's not good for people to be idle. If they have no other job, they should at least be required to perform community service. If they have another job so that the basic income is just a supplement, this would be the ideal situation.

Income inequality will only increase as long as Wall Street banks control the money creation process, and the rest of US citizens keep going into debt whether it be with mortgages, student loans, car loans or credit cards. Local jurisdictions should take back the money creation process from Wall Street by creating their own public banks. Then the people will have the say in who gets the QE.