Sunday, January 12, 2020

How Money Works: Why we can pay for nice things!

     This past Friday, the Dow topped 29,000 for the first time in history. The tone in which the story was reported was breathless and triumphal. It was clear that NBC News writer Lucy Bayly was very impressed by the record.
    "The Dow hit 28,000 on Nov. 15 and needed just 48 points Friday to breach the 29,000 mark, having flirted with the number all day Thursday after a de-escalation in the conflict with Iran soothed investor fears, energy prices settled, and Apple posted record gains on higher-than-expected sales in China.
Gains in Apple, Goldman Sachs, and healthcare stocks helped push the index upwards." 
     Notice how specific those reasons are. Energy prices settled, we didn't have a war, and Apple did really well. Gains by Apple, the biggest investment firm in the country, and the healthcare industry pushed us over the top. Great work team!

     Except they don't mention that these numbers were purchased with $128B from the Federal Reserve. This was the first time the Fed had taken this kind of action since 2009, when it was done as part of the Obama era financial stimulus package. This time it was done so the Fed could cut interest rates and banks could keep lending.
   "Separately on Wednesday, the Fed is expected to announce it will lower interest rates by a quarter of a percentage point as officials look to insulate the economy from a downturn. Though hiring and spending remain solid in the US, investors have grown increasingly jittery about slower global growth and trade tensions."
     Apparently the September investment by the Fed soothed those investment jitters. Yet this was done solely to enrich stock and bond holders, while keeping banks lending money to corporations. We are not benefiting from this decision in any meaningful way because most of us don't have significant money in the stock market. 10% of the population owns 84% of share value. While many working class Americans "own stock" through their 401k retirement accounts, these shares are part of the remaining 16% of total share value. That's not significant at all and the investment firms that manage those accounts are keeping a lot of the value on profits.

     When we can casually drop $128B into the stock market for the benefit of Wall Street bookies and billionaire landlords, it's ridiculous to say that we can't afford policy that would benefit the American people directly instead of indirectly. Especially since we just print money to pay the interest on the bonds held by those billionaires. The right hand holds up the stock market, the second prints money to keep up interest payments on bonds. The federal debt just enriches the same people borrowing the money in the end.

     Bring the Pentagon budget under control, end the Forever War, and turn the power of the coinage into a tool for the benefit of the working people of America instead of the landlords. If we can do that then we can issue the money needed for a Green New Deal, Federal Jobs Guarantee and Medicare For All without fear. We're going to pay for it whether we do it or not.

     This is really the important part. The federal government will continue to sell bonds and to pay interest to the holders of those bonds with our without a Green New Deal. If we are proceeding with the Green New Deal anyway, then interest payments on debt created along the way will continue to benefit the same billionaires they do now. The only difference is that we will have clean fuel and workplace democracy.

     The landlords will be a lot less powerful, however, and that's the real root of opposition to progressive Congressional candidates and Bernie Sanders. If they lose their power then they will again have to provide the federal revenue instead of successfully leaving the working class with the bill. That scares them more than anything else.

1 comment:

Matthew said...

Hey Chris,

I stumbled across your blog on Twitter and really appreciate what you're pointing out. I'm looking for people who are calling out anyone and everyone who's spewing a belief system out into the world even if they don't fully comprehend. The ones who when you really poke at their story it falls apart like wet noodles. The ones who are so scared of change they're willing to destroy this planet to maintain their own fragile egos. Basically most of the people making up (and somehow enforcing) rules in the world today.

Here's what gets me, we were never given a choice about participating in this system. Maybe that's a bit to existentialist for most but hear me out on this one? It took me a long time to figure out that was really at the root of much of the anger I felt for so many years. But now that I see it my issues with authority makes way more sense. That realization opened my eyes to many assumptions that have shaped our world. The first being citizens are born not made. Others include; Greed is necessary for a healthy capitalist society, the invisible hand is infallible, trickle down economics is the only way to grow the middle and working class, GDP is a good way to measure economic performance... And my favorite to confront religious people with, "Well, have you ever actually asked God if that's what he meant? You talk to him all the time right?"

Back to my point.There are all these assumptions that are decades, centuries, even millennia old yet I rarely hear anyone question them. Hell most people don't even realize they believe them much less understand that all the social rules we follow were simply imagined at some point in history. They don't even think to think about them! And they certainly don't realize that when we shine a light on these assumptions we can start imagining new directions to point the great ship of humanity. For example, what kind of world could we build if governments had no borders and had to compete to keep citizens? There's problems with that, the big one being how can we allocate resources and prevent wholesale land rape. But I'm willing to bet we can find a way to work that out. I already have a few ideas anyway. Problems aside for the moment, can you imagine how much more participation in a government at ANY level would mean in that world? If I didn't agree with a government and my participation didn't affect their decisions I could simply take my taxes elsewhere. Governments who didn't listen to their citizens would end up bankrupt.

Yeah, it all sounds a bit Utopian when I say it like that, it's not. As I said, there's a lot of problems to solve in that world. Fortunately we're already building tools that can be used to overcome some of them. Smart contracts that keep track of and automatically enforce land use agreements, Swarm AI to help large groups of people reach consensus and make better choices, blockchain currencies that render physical borders irrelevant, etc, etc. As angry as I get with most of humanity at times I do have a lot of faith in our ability to co-create and collectively problem solve (when there's sufficient motivation).

I'm not holding my breath for something this radical to happen in my lifetime, it would be amazingly fun if it did but I'm not convinced our rate of change is that advanced. I'm working towards creating that future now by looking for ways to reshape the most common narratives and I really feel like it starts by pointing out those really deeply rooted assumptions in a way that people can hear and digest. You're already doing that in a lot of ways from what I've read so far but would you be interested in exploring some of these in depth? I'd love to get a full blown twitter conversation going about some of this stuff.

Just throwing it out there,