As a consequence of loose monetary policy with a fiat currency, the United States is rapidly descending into an economic reality of Modern Monetary Theory, or MMT. While MMT (also known as Chartalism) is typically associated with its Keynesian predecessor and the policies of the Left, new developments reveal that both parties are responsible for the slip into a brave new economic world.
Essentially, there are four preconditions in Modern Monetary Theory:
1) Money enters the economy through government spending, as the total amount of money is constrained not by gold but by the total output of the national economy;
2) Government spending is speculative as it prints as much money as it needs to control production and, as a byproduct, employment, and spending beyond productive capacity leads to inflation;
3) Taxes do not pay for expenditures but are instead a way to throttle private sector demand; and
4) The government is the issuer of the currency, sovereign governments that issue their own currency are never insolvent, so debts essentially don’t matter.
As many of you may already know, insvestment banking firm J.P Morgan recently lost nearly $2.3 billion dollars on some very, very, bad bets.
Sources in the MSM accordingly, show a trader only dignified by the sobriquet ‘London Whale’ was able to hedge together larger shares of Morgan company money and place them on malevolent trade returns. They did not pay off.
Some circles call it business as usual. Other circles call this collusion, or extended risk. Yet others would call this, hedging- or: placing large assets on wide-open targets, at just the right time and place. I don’t need to mention the implications of this; we’re back to 2007, when the Recession we are currently in, evolved- by these means.
Now, clearly- you could claim- the company knew what it’s employees were aiming at with their stoked assets. They didn’t. This story is just emerging, but it seems clear that this is a perfect example of those who don’t know what they are doing, laksadaising large amounts of money; and wielding power so great, there could be serious repercussions.
Gladly, at least so far, there have been few.
Nevertheless, what this shows is not only nefariousness on the part of some, but also the evident close ties in finance between Europe and the United States. We may think this country is just pulling from a recession, when in reality we’re right back to 2007, or earlier.
Entire Markets and nations are tanking in Europe: acidic debt scouring away at the health of entire economies. The European Union ready to dissect into multiple breakaway-province nationalities. National furor is high, while economic support has hit all-time lows.
At first sight, the entire investments-gone-wrong scenario would yearn for more oversight- but beware of what you ask for! Oversight by whom? I don’t think market regulation is a particularly good example of solving fiscal ‘problems’ by any stretch of the economic imagination.
What all the GOP candidates are after, are so-called ‘delegates.’Elected officials that will broker the convention of either party this fall. Officials are parcelled by the amount of votes, the candidates receive in the primary.
During Michigan’s primary recently, for instance, there were 30 official delegates, state-wide. Two were ‘at-large’ candidates, which meant they could be assigned individually to any winning candidate. The other 28 were ‘proportional’ ones, alotted through 14 congressional districts. During the push for the nominations in Michigan last night, Mitt Romney and Rick Santorum spent millions of dollars to influence the voting population; with TV ads, pamphlets, media, interviews, rallies, stickers, and much more. Michigan’s grand sum of politcal expenditure was near six million bucks.
Delegates are what really counts at the GOP convention. What looks to be happening, is that no clear winner will come out victorious. There’s a righteous number: 1444 delegates will win any nominee the victory-nod of the Republican National Committee. Nationwide, 2169 delegates are extended for contestation, until the RNC celebration in Tampa, Florida. From the RN Committee, an additional 117 delegates are added into the mix, ostensibly to keep debate lively and clear-up dead locks. So what appears, on first looks, to be a rather hot-headed and fast paced Republican rocket-launch to the RNC, is more like a jammed or misfired pistol in a duel.
Momentarily, Mitt Romney is in the lead, with 167 total delegates. Rick Santorum is second with roughly half, at 87. Newt Gingrich won only one state and has 32, while Ron Paul has 19 carefully collected delegations. The count may reshuffle at any moment, since constitutionalism and populism together, ring alarm-bells in states such as Arkansas, Kentucky, Tennessee, Texas, Oklahoma and New Mexico.
I didn’t put it in my “14 Fixes for our Messed up Country” list, since I thought it was long enough, but one of the things I really think needs to be reformed is the utterly insane institution of “baseline budgeting,” aka “Washington accounting,” aka “DC moonbattery.”
Apparently, though, according to CNS News (no, that’s not a typo) baseline budgeting might be on the ropes:
The House approved a potentially sweeping budget reform Friday that would force federal agencies to justify an annual increase, as opposed to getting an automatic increase under current budget law.
“What we are about to do could be the most responsible financial thing this Congress has done, this House has done in the whole last year,” Rep. Louie Gohmert (R-Texas) said before the vote. “It could be $1.4 trillion in cuts over the next 10 years and all we’re doing is just stopping the automatic increase.”
The Baseline Reform Act of 2012 passed the House by a near party-line vote of 235-177. However, the bill will likely have a difficult time passing the Democrat-controlled Senate.
Under current federal budget law, the amount of money a federal agency will automatically get for the next year is based on the current year’s amount, plus inflation, which is the “baseline” for the next budget year.
Read that last paragraph again, and then ask yourself: where, outside of the federal government, does that sort of accounting work? Do you ever give yourself a budget equal to last year plus inflation automatically? I don’t even think Warren Buffet, as wealthy as he is, does that, nor Mitt Romney. Probably not even Trump, but who really knows what the Donald does.
Well reading Foreign Policy for that North Korean blog entry, I came across “The 14 Biggest Lies of 2011,” by David J. Rothkopf. I like list articles a lot; lots of information, in a very short time span, and gets you to focus on them. Sometimes, lists are completely, totally wrong; other times they are spot on; and in this case, it’s quite mixed. I want to offer some rebuttals to a few of his items, because they seem, to me, to be wildly inaccurate. Perhaps they are lies, but his own answers to them are not exactly encouraging. I will only focus on that we disagree on, to save space, but do read the entire list. I actually find it rather humorous…in a morbid sort of way.
I will start out by agreeing 100% with his introduction, however, that in DC, that lying is not an art form, but rather “is more reflexive, like breathing or taking cash from fat cats.” It is nothing but a pit of lies, and the Great Obamessiah himself is one of the best of them. All for civil liberties and ending the wars while running for president, not so much when he actually got into office. What a shame.
But onto Mr. Rothkopf’s list:
6 - “America is unthreatened by China’s growth.”
Everyone seems to be proposing fixes for our country lately, whether it’s amendments to repeal the First Amendment or ban gays or whatever. I have a few ideas of my own that I think will go a long ways towards restoring some sanity in government and fixing what’s wrong with our society. Some of these will require constitutional amendments, and I don’t expect the entire list to actually get enacted unless magic somehow returns to the world and we resurrect Barry Goldwater, F.A. Hayek, and George Washington all at once.
I originally drafted a list of some 23 ideas, but I figured that it would be way too long for a blog post, so I shortened it to 14, a baker’s dozen. None of these are simple or light fixes, they are not tweaking around the edges to ensure a marginally better outcome. Judging from the situation our government and economy is in, from the horrific hard place our civil liberties are wedged behind, and the unmanageable mess that is Washington, I don’t think that “moderate” or “conservative” changes will do anything. We cannot pussyfoot around the issue; we need radical alterations to how our government works if we’re going to get us out of this morass. Again, most of these may never pass, but that’s to be expected.
Certainly, if you wish to hear my entire list, let me know and I’ll write it up, but for now, here are my 14 ideas for fixing our country:
1. Establish Approval Voting
I’ve already talked about this idea at length here, so I will not bore you again. In this post, all I will say is that I believe if we are to get anything done—and I do mean anything—we need to systematically reform how people actually get into office. That’s the foundation upon which any democracy stands, and when you’re up to your eyeballs in tar, the only way to get that fixed is to drain the swamp and start at the beginning.
Rick Perry, looking to get back on top of the GOP primary, has unveiled a new reform plan that will “uproot, tear down and rebuild Washington, D.C. and our federal institutions,” as he puts it:
Blasting the congressional “creatures of Washington” for being overpaid and detached from the struggles of the people outside the Beltway, Texas Gov. and GOP presidential hopeful Rick Perry vowed Tuesday to eliminate federal agencies, set term limits for federal judges and push for a part-time Congress where both members’ pay and office budgets are sliced in half.
The three-term governor, speaking on a campaign swing in Bettendorf, Iowa, said he would lead by example by cutting his salary as president until the federal budget is balanced, and said that lawmakers who use information to profit from stock trades should go to jail — in what appeared to be a clear reference to recent news reports alleging insider trading involving House Minority Leader Nancy Pelosi.
“I do not believe Washington needs a new coat of paint, it needs a complete overhaul,” Mr. Perry said, according to prepared remarks. “We need to uproot, tear down and rebuild Washington, D.C. and our federal institutions.”
I’m reading his actual plan right here, and I have to say, there are some good ideas here, and one very bad one.
That little gem is from a new page on Facebook, called “Crony Capitalism is Phony Capitalism.” Now, you may be wondering why I posted this. I mean yes, it’s kinda cute (c’mon, this is the postmodern 21st century, zombies and Cthulhu are automatically cute), short, pithy, and expresses a libertarian message, even if it generalizes it. A lot. But a 30-second video from a Facebook page? Really?
The reason I did so is because I feel this is the Number #1 message we need to be getting out there (well, that and how feeling up women at airports is just wrong.) Back in college, when I argued about government intervention in the marketplace, “corporatism” and “crony capitalism” were just not mentioned. It was an important discovery for me when I found these terms, because previously I had been just trying to defend capitalism, no adjectives. It was difficult, because everyone associated large businesses ripping them off with the capitalist system, and they just could not understand how government so heavily involved itself in the market, but that system was not what we libertarians were espousing. Oh, how useful these new terms were! How sharp were their blades in cutting away the web of lies! How deep were their inkwells in writing the new papers blogs on liberty and the free market!
Federal Reserve Chairman Ben Bernanke just announced Operation Twist, a new combat operation that will supposedly fix our market woes. Supposedly. (Hey, pass the vodka, will you? I need a drink before I listen to this guy.)
I am not a financial markets expert, and I have not heard that much on the actual details of Operation Twist, but, courtesy of CNN, here’s a brief explanation:
NEW YORK (CNNMoney) — The Federal Reserve announced “Operation Twist” Wednesday, a widely expected stimulus move reviving a policy from the 1960s.
The policy involves selling $400 billion in short-term Treasuries in exchange for the same amount of longer-term bonds, starting in October and ending in June 2012.
While the move does not mean the Fed will pump additional money into the economy, it is designed to lower yields on long-term bonds, while keeping short-term rates little changed.
The intent is to thereby push down interest rates on everything from mortgages to business loans, giving consumers and companies an additional incentive to borrow and spend money.
So basically, they’re selling bonds and buying bonds. Nothing exactly Earth shattering here. And definitely not anything that will get us out of this rut.
Interestingly, some members of the FOMC agree with my assessment, and one of them had a speech about it. Mr. Richard W. Fisher, president and CEO of the Federal Reserve Bank of Dallas, had this to say about recent monetary policy, using a Nordic weather station as a metaphor:
Man, I looove me some fireworks. The bright flashes, the intense color, the wave of energy expanding across the room—
Oh, you thought I meant that stuff they light off at the Fourth of July. No, I was referring to the fireworks that occur in a debate. And what a debate we’re going to have!
The sparks started flying when Matt Yglesias, poster boy for the Center for Authoritarian Propaganda American Progress tweeted “David Boaz is dumb.” (Hmm, I wonder what he had to say about naughty rhetoric back in January…) Boaz then retorted that Yglesias had completely missed the point, which I guess is not surprising. Yglesias then decided to tackle Daniel J. Mitchell’s take on Paul Krugman’s…well, I’m not really sure what you could call it. Lunacy? Let’s be nice and just call it “absurdity.” Anyways, Yglesias basically stated that “money doesn’t matter” and that the broken window fallacy itself is broken. A very succint summary of modern progressive thought, I would imagine.
So why do I bring this all up?
Because tomorrow, Cato On Campus is hosting (at the Cato Institute, natch) a debate titled: “US Debt and the Millennials: Is Washington Creating a Lost Generation?” Attending will be Megan McArdle of The Atlantic, Matt Mitchell of Mercatus, and Matt Yglesias of Center for American Progress. Three guesses as to who will be moderating. Yes, Dan Mitchell of Cato.