rumitoid

There is nothing Left or Right about them, and seeing them in that way is at least an in encumbrance to clear thinking yet more likely a treasured blindness. Opinions and views are just that: opinions and views. Their efficacy or lack thereof is not dependent upon either a label of Left or Right nor a backing by either party. THINK! I know it may hurt but if you stay honest, we have a chance to get through our divisiveness.

rumitoid

A twenty year scientific inquiry just recently discovered the greatest, most long lasting and successful conspiracy ever. Since the first child of our species emerged from the womb, women have promulgated the legendary lie that labor hurts. In untold millennia of secrecy and collusion women have managed to keep secret not just the illusion labor is painful but hiding as well that it is actually highly pleasurable. A literal bomb shell and ammo for the Right. Rand Paul just named names: Wasserman, Pelosi, and whatshername (oh, my). Women, as the RNC suspected all along, are questionable at the least of basic integrity or a disposition toward it.

Floyd Brown Loc: Milwaukee WI

Well as the husband of a woman That has had 7 children & 1 still born. I opted to be out of the room when the delivery took place, so I can not attest to either issue on the pain or pleasure of birth. But I have always felt that there was some of both for my wife. She has never complained of the pain.
The children have always been a source of pleasure for both of us.

moose

Wasserman, Pelosi,Susan Rice and Hillary are all liars.

MarvinSussman

This is not an opinion or a view. It is a description and a prescription:

Think of the US economy as a wash bowl with water being the money. Imagine three sets of faucets and corresponding drains representing different ways that money enters and exits the economy. The analogy will show how control of the money flow can attain and maintain a prosperous economy while avoiding severe inequality.

“WATER” LEVELS

Because supply and demand determines value, a dollar becomes precious when the level of “water” is near the bottom. The economy freezes solid in a deflationary crisis. Who would spend a dollar today if it would buy more tomorrow? We have a severe depression with an unemployment rate over 25%, bank failures, and very low GDP.

When the level is higher but still below the half mark, the economy hovers between deflation and inflation. We have a serious recession with 10% unemployment and little GDP growth. The market is in turmoil.

When the level is not much above the half mark, the economy is precarious with a low inflation rate, a 7% unemployment rate, and a slowly rising GDP. It’s our US economy during January, 2014!

When the level is higher but not too close to the brim of the bowl, we have prosperity at last! We have a 2% inflation rate, a 4% unemployment rate, and a 3% GDP growth rate. Not too hot, not too cold. Goldilocks!

When the level is close to the brim, a lack of slack causes shortages and too much money is chasing too few goods. Harmful inflation rises above 3% and the unemployment rate drops below 4%. Quick, Fed! Raise the interest rates!

Closer to the brim, the economy becomes unstable due to an increased velocity of money (transactions per week at a given “water” level). Prices vainly pursue rising costs. Imagine how bad it gets when the bowl overflows!

Of course, we want the economy to attain and maintain the prosperity level. To attain that level, we have to manage the flows. To maintain that level, we have to micro-manage the flows.

“WATER”

The transfer of funds among owners does not affect the level of “water” in the bowl. However, severe inequality of wealth takes a large portion of the money supply out of economic service and lowers the effective “water” level. Also, excessive private debt is equivalent to creditors hoarding funds - with the same effect as severe inequality.

The US Treasury offers several types of term-deposit accounts called “treasuries”, similar to a “certificate of deposit” or “CD”. Thus, a US bond is equivalent to a savings account. Neither the amount of funds contained in these accounts nor the transfer of funds between these accounts and other accounts affects the “water” level.

The Fed may also buy treasuries in the market with cost-free keystrokes, relieving the Treasury of corresponding debt. The
Fed may also sell treasuries but must return 94% of its earnings to the Treasury. Neither the amount of funds in the Fed’s account nor the transfer of funds between the Fed’s account and other accounts affects the level of “water” in the bowl but could, by its influence, change the interest rates of the treasuries at auctions.

FAUCETS AND DRAINS

The Bank-Loan faucet creates money out of thin air. Of course, these loans create debt, not savings, but the economy cannot tell the difference. The corresponding drain is Loan-Repayment, where the money vanishes. Could we manage our economy by controlling lending? Effectively, the loans always add to the “water” level, with the amount added increasing as the “water” level rises. Near the brim of the bowl, bank lending is the main cause of inflation. Since the economy determines the bank flows, we cannot manage the economy by controlling lending.

The only other private source of money is the Export-Receipts faucet. Import-Payment is the corresponding drain. A trade surplus would increase the “water” level. Our current trade deficit is lowering the level.

Could we manage the economy by controlling trade?
Governments set trade policy but millions of individuals everywhere, acting in their own interest, do the trading. Again, it is the relative state of the various economies that determine the flows of trade rather than the reverse. So we cannot manage our economy by controlling trade.

The Federal-Spending faucet increases the “water” level. IRS-Revenue is the corresponding drain. To prevent inflation, taxation drains away most of the spending. To keep the excess money out of circulation, the IRS destroys its receipts, shredding bills and melting coins for scrap. Thus the drain outflow is not connected to the faucet. Since tax revenue is not available, Congress never spends “other peoples’ money” to help the poverty-stricken.

Congress creates fiat money out of thin air, exactly the way banks create loans. The federal dollars spent and not repossessed by the IRS are saved by the private sector, increasing the “water” level. Under the previous gold standard, the Treasury matched the savings with bond auctions, a practice still continued but no longer necessary with our fiat currency.

Instead, unrelated to federal spending, the Treasury could now offer a rational amount of bonds for trade collateral, pensions, insurance, bank reserves, etc., just as banks offer CDs. Such a practice would end concern about the national debt (total accumulated private savings) and the annual debt interest expense.

Could we manage the economy by controlling the IRS-Revenue drain? Tax legislation can be brutal. At most, we could set a stable flow rate at a reasonable level. So we cannot manage the economy by controlling tax rates.

So, by elimination, we have found that the only way to control the economy is by Congressional spending. We have also found that the only rational restraint on Congressional spending is the threat of HARMFUL inflation.

To ATTAIN prosperity, Congress must spend enough money (but not more!) on much-needed infrastructure.

To MAINTAIN prosperity, Congress must spend enough money on infrastructure while the Fed controls interest rates and the administration micro-manages the economy by careful scheduling of infrastructure projects.

To the extent that Congress spends more than that amount of money, Congress would cause harmful inflation.

To the extent that Congress spends less than that amount of money, Congress would cause unemployment.

To the extent that Congress allows the occurrence of unemployment rates that weaken the bargaining strength of labor and promote inequality, Congress would be wilfully malevolent and should be rejected by American voters.

Loki Loc: Georgia

When the Fed creates money out of thin air, they take real property as collateral.

Unclet Loc: Amarillo, Tx

:thumbup: :thumbup: :thumbup: :thumbup: :thumbup:

rickdri

Our true unemployment rate is not 6.6%, rather it's closer to the 10% level when you factor in those that have stop trying. Why do you fall for the false numbers the government states? If we measured the unemployment rate and the inflation rate as it was prior to 1980, our unemployment rate is around 12%. Inflation is around 9%.
Sorry I wasn't finished and hit the wrong key.
Next a command and control economy is a myth. The Federal Reserve doesn't lead the economy. The economy leads the Fed. This will be proven soon as the tricks the fed continues to do to juice the economy will fail. QE has not been as successful as we are being lead to believe.
Next, remember when Obama brought out the stimulus stating it was for shovel ready jobs? How big of a farce was that? That money went to shore up state budgets and to pay back Obama's friends for the election. Then he has the nerve to sit there with Jeff Immelt and laugh about the jobs no being so shovel ready. What makes you think that another stimulus would actually go to infrastructure as we were lied to before?

Unclet Loc: Amarillo, Tx

Another stimulus would be insane. Remember, the definition of insanity is to - Do the same thing, over and over, expecting a different result.

rickdri

I agree!!!

MarvinSussman

When your corner bank gives you a mortgage loan out of thin air, your home becomes their collateral. So what?

MarvinSussman

The key to my essay is the last sentence. Everything leading up to it was figurative. You took the numbers for arguments. They were meant as approximations. You saw the trees but couldn't find the forest. You missed the entire point.

My fault. My essay was not clear enough.

Far from being a command and control economy, you can only give it a direction: up or down. I was arguing for up. You missed the point.

Unclet Loc: Amarillo, Tx

Corner bank does not make a loan out of thin air - they have the money on hand, and uses the home to cover the loss if you default.

The Fed prints money that there is no backing for, read this as no gold in reserve, to cover what they print. You in turn use the money to pay for the house that bank loaned the money to purchase. Funded vs Unfunded. Inflation increases, you loose your job and default, the bank forecloses on your loan. You are forced to give up your collateral, the bank now has spent funded money for your loan and recouped unfunded money. Now who do you suppose will lose in this instance. The answer is obvious, all of us if we pay taxes. Certainly will not be the Fed. They will just print more money to fund that which they cannot afford. Very simplistic explanation to a complex problem. Like I said - Insanity.

moose

Every time this president prints money without no gold backing it, it devaluates the dollar more and more. This is what he is doing.I dont know why the House dont stop him.They have the control of the purse strings. I wonder what a dollar is actually worth. 25 cents maybe?

rickdri

Yes I did miss the point. I do understand now. It is a good essay. I should have read it more closely. That was my mistake. Thanks for setting me straight and for writing a good post!