Reverse the Flow: The Federal Reserve Part III

First published December 6, 2010

It was the era of “trickle down” economics. Congress and the administration “devised tax credits, refunds and abatements to benefit private corporations, and they enacted four major reductions in income tax rates, skewed to benefit the upper income brackets.”

Inflation was defeated and the stock market roared. But there were signs of trouble.

Families “were working longer hours for the same wages and borrowing more heavily to keep up… the struggling labor movement was decimated; unions lost nearly 30 percent of their membership.”

It reads like recent history, but is in fact a description of the 1920s, when the term trickle down was coined, the decade before the First Great Depression.

Then as now, the Fed failed.

Prior to each failure, money was flowing up in the U.S. to its richest citizens. With the New Deal, FDR and his newly appointed Fed Chairman, a Republican banker from Utah, reversed the flow and the nation began to recover.

They understood that the spending of the rich few cannot sustain a great economy. The sale of thousands of $500 a pair sneakers and $300,000 cars cannot generate the same volume and velocity of money moving through the economy – economic activity – as the sale of millions of less expensive shoes or cars.

That flow of money to the many was the foundation of the remarkable prosperity of post World War II America . It lasted until Ronald Reagan, with the support of a Democratic Congress and the Fed combined to shut it down.

Reagan and Congress revived regressive tax cuts for the wealthy and trickle down economics, allowed the combinations that led to “too-big-to-fail” banks and legalized usurious interest rates on consumer credit.

The Fed crushed inflation with interest rates that devastated the real economy but protected accumulated wealth, and bailed out Wall Street when their bubble of bad loans to the third world burst.

Historically, when the Fed thinks the wealthy will not be unduly burdened and decides to expand the economy or overcome an economic contraction, one of its tools is to “flood the street with money;” that is, to pump a lot of cash into the system where it is loaned, used, circulated and exchanged in the many millions of transactions that add up to a recovery.

With the crash of 2008, the Congress and the Fed did indeed “flood the street.” But the money never got past Wall Street to your street. This was intentional.

As the Fed pumped trillions into the banks and finance companies, it risked massive inflation in the U.S. (remember that inflation destroys accumulated wealth). The remedy to this threat was to simultaneously keep interest rates low. But much of the rest of the world’s major and developing economies have higher interest rates.

The money that flows through the world’s financial system has a property similar to liquid, and like water money seeks its own level. And the level money seeks is the highest interest and rate of return

So the money of America has been flowing in a massive flight of capital into the rest of the world, protecting accumulated wealth while beggaring the future of most Americans.

The Ford Motor Company is about to open its newest and most modern plant – in China, where the government is raising wages and pumping billions into infrastructure; while across America workers are forced to accept wages cuts to keep their jobs and infrastructure begins to resemble the third world.

What to do? Reverse the flow.

Interest rates in the U.S. must rise from their historic lows to attract capital and investment in the U.S. Funds must flow massively into jobs creating, taxpayer creating, revenue creating U.S. infrastructure. The first stimulus was unfocused and insufficient. The president’s proposal for a $50 billion transportation infrastructure initiative is inadequate.

A fair share of the accumulated wealth of America must be made to flow down into many more hands. Income, capital gains and inheritance must be taxed at higher rates. The argument that this will choke investment is a patent fraud. That wealth has been protected from meaningful taxation for decades, but do you see a new washing machine or tractor plant going up nearby?

The out-of-control U.S. military must be disciplined. Wars and by some reports as many as a thousand U.S. military bases in 152 foreign nations are a huge flow of dollars and tax revenue out of the U.S.

Federal taxes on gasoline must be increased. There will be an immediate reduction in the import of foreign oil and the massive out-flow of dollars to buy it. But exempt, subsidize and invest in all mass transit systems (including school bus fleets), and rebate the mostly suburban, auto dependent middle class.

But above all, the Federal Reserve must be brought inside the American democracy and Constitution and made part of the Treasury Department, its accounts audited, so that the elected government of the United States may assume the authority and responsibility for the decisions about money that determine the future well being of every American man, woman and child.

This is what must be done, but will not soon be done. The new Congress will be as bought as the current Congress; because there is one other flow that must be halted – the tidal wave of lobbying and campaign cash that buys and sells U.S. federal elections for America ’s established, accumulated wealth.

Blue Wall Blues

“The destruction of the prosperity of the American middle class has been a slow moving social catastrophe, an event of seismic magnitude. It set off a political tsunami that breached the Electoral College “Blue Wall” and continues to roll over the American political landscape.”

A steady diet of sugar can lead to diabetes. Steady smoking will damage your lungs. A steady diet of fats will clog your arteries and lead to heart disease. Who doesn’t know that?

So it is reasonable to suggest that a steady diet of anti Trump venom, invective, derision and slander, force-fed by the mainstream media may be hardening the political arteries of Never Trumpers and impairing their political judgment.

First, they believed an Electoral College “Blue Wall” would keep Trump out of their establishment kingdom. Now, they believe a “Blue Wave” will drive out the invader.

At the end of a yearlong temper tantrum, Democrats in Congress voted against a tax bill that in many ways advantages the constituencies they claim to represent.

As they warn of the “threat” Trump poses to “our” democracy, Never Trumpers overlook the mounting evidence that the leadership of our intelligence agencies, Department of Justice and FBI were recruited into an effort to advantage one candidate for president over another; and when that failed to defend their kingdom, they were willing parties to an elaborate ploy to subvert the results of the election.

The Trump/Russia/Collusion story never made any sense. If you really want to rig U.S. elections, nobody I know would ask a Russian how to do it. You would get expert advice; for example, from ward leaders in Philly, Chicago, LA or NYC (where the art was first perfected).

The most obvious symptom of the dystopia consuming our politics is the arrogance exhibited by our established elites.

How many lawmakers and other elected or appointed officials – federal, state or municipal –  have been indicted, convicted, removed from office, resigned  from office or been embroiled in charges of graft or misconduct over the past year?  Like me, you’ve probably lost count.

Why did they do it? They thought they could get away with it and saw no reason not to try, like the privileged college basketball players caught shoplifting in China. Monstrous arrogance, sanctioned from the top down. Establishment “follow the leader.”

Hillary Clinton did not by-pass the legally required use of a secure State Department server in favor of a Mickey Mouse home server for the sake of “convenience.” She did so to remove her correspondence from the obligations of the Freedom of Information Act and shield whatever it was she was doing from the eyes of the American people. She thought she could get away with it and saw no reason not to try. Period.

The Obama administration subverted the leadership of the Justice Department, FBI and Intelligence agencies, suborned them as political operatives because they knew Hillary was going to win and no one – like, say, the American people – would ever be the wiser. Period.

Adam Schiff, the Democratic Ranking Member of the House Intelligence Committee has prattled on for months with a straight face, oozing his ever so sincere concern for “our” democracy, expressing the certainty that the Special Prosecutor is only moments way – after a year and $10 million dollars – from proving that President Trump is an agent of the Russian government. Why would he peddle that absurdity?

That’s easy. He’s the “Ranking Member,” meaning minority. If all goes well, as he sees it, he gets to be the majority chairman of the committee. More staff, power and prestige, maybe a cabinet post in a future Democratic administration. But at least a bigger pay check when he leaves the Congress.

It’s the defining characteristic of our establishment elites, as one wit so aptly described it: “a degree of self interest that would alienate a shark.”

Period.

There is a reason Trump was able to overcome the entire American political establishment to win the presidency, and a reason he will likely achieve many (but not all, of course) of the changes he promised; as he did in passing the tax bill. It’s in his Twitter handle:  @RealDonaldTrump.

It’s the “Real” part. From the get-go, Trump understood what he was up against and what the American people are rejecting: a political universe of phonies and their failures.

The destruction of the prosperity of the American middle class has been a slow moving social catastrophe, an event of seismic magnitude. It set off a political tsunami that breached the Electoral College “Blue Wall” and continues to roll over the American political landscape.

Changing the “Lord’s Prayer”

“Forgive us our debts, indeed.”

Pope Francis has proposed a re-write of the English language version of the “Lord’s Prayer.” The words “Lead us not into temptation” will be revised as a poor translation and contrary to the nature of a God who does not lead us into temptation. We get there all on our own, thank you very much.

But inasmuch as the Pope has opened a discussion, I have a suggestion.

The familiar words in the prayer of most Christian churches, “Forgive us our trespasses, as we forgive those who trespass against us” are not the words of Christ as recorded in the Gospel of Matthew. They were, “And forgive us our debts, as we also have forgiven our debtors,” and should be revised accordingly.

Christ and his listeners were well familiar with the “boom and bust” cycle of the economy of the ancient Middle East. But they had a memory of a time before the busts led to widespread poverty for the 99% of that day.

Money was issued by either the Temple or the Court (centers of religious and civil authority) and loaned to the people, mostly farmers. Debt built up. Owing to the vagaries of farming, the debt got so high that farmers were pushed off their land into poverty. Suppliers, carpenters like Christ and his father Joseph suffered in the bust. Civil unrest threatened.

In those earlier times, when that happened the Temple or Court stepped in and declared debts forgiven: the year of the “Jubilee.” It was in some places institutionalized on a seven year basis.

Christ was arguing for the restoration of the justice of an earlier time. But the idea of debt forgiveness was anathema to the money men and mercantilists of old Europe that pioneered modern capitalism. Christ’s words were edited. “Debt” became “trespasses.”

Not much has changed over the centuries. The cycle of boom and bust continues. Except now, debt is never extinguished – except for the banksters who get bailed out.

There is still both a Temple and a Court controlling American money. The Temple – the Federal Reserve – decides how much money to put in circulation and its cost. The Court – the Congress of the United States – now has only the limited function of collecting taxes to pay for the principal and interest on the money the Fed borrows.

It is a simple scheme, a thing of beauty if you’re one of the parasites in pinstripes who set it up. It works like this.

Instead of the U.S. Treasury creating our money, as the Constitution stipulates, the job was outsourced by Congress in a “public private partnership” to the bankster owned Federal Reserve. The Fed uses the “full faith and credit of the United States” (no gold or silver) to back bonds it sells to the banksters, at interest.  The credit raised goes to the Treasury to pay the bills, along with the obligation to repay the bonds at interest. That is the national debt.

Americans today live in virtual debt servitude to the global cabal of parasites in pinstripes. The middle class is an endangered species. In places like Greece, it is virtually extinct.

There is an alternative, urged by Jefferson and others and employed by Lincoln in the Civil War to by-pass the banksters’ cartel. It is to do as the Constitution stipulates and issue American money directly from the Treasury at low or no interest. This cuts out the Fed and bankster middlemen.

Think this through. Local and state governments, school districts and authorities nationwide have at least $1 trillion of debt, borne by taxpayers. An estimated $3 trillion dollars is needed for job creating, economy expanding infrastructure.

We can “refinance” debt at interest as is proposed in Pennsylvania today, robbing Peter to pay Paul and diverting revenue from the general fund to debt service. We can raise taxes and fees on everything, and we can borrow for infrastructure at interest in more “public private partnerships” of the kind proposed by President Trump – and pay back almost twice the amount borrowed.

Or, we can loan the money to ourselves from our Treasury, to local and state governments and agencies, pay off existing debt, fund infrastructure, and pay it back to ourselves at low or no interest over decades: a cost easily absorbed in the growing prosperity of the nation.

Americans can finally escape the “Web of Debt” spun by the money changers down at the Temple. Forgive us our debts, indeed.