[Majorityrights News] Trump will ‘arm Ukraine to the teeth’ if Putin won’t negotiate ceasefire Posted by Guessedworker on Tuesday, 12 November 2024 16:20.
[Majorityrights News] Alex Navalny, born 4th June, 1976; died at Yamalo-Nenets penitentiary 16th February, 2024 Posted by Guessedworker on Friday, 16 February 2024 23:43.
[Majorityrights Central] A couple of exchanges on the nature and meaning of Christianity’s origin Posted by Guessedworker on Tuesday, 25 July 2023 22:19.
[Majorityrights News] Is the Ukrainian counter-offensive for Bakhmut the counter-offensive for Ukraine? Posted by Guessedworker on Thursday, 18 May 2023 18:55.
Crushing the States, Saving the Banks: The Fed’s Generous New Rules
The new terms could be harnessed for local governments to own and operate their own banks.
by Ellen Brown, 3 May, for Common Dreams.Org:
the Fed’s relaxed liquidity rules have made it easier for state and local governments to set up their own publicly-owned banks. (Photo: Phillipp/cc/flickr)
Congress seems to be at war with the states. Only $150 billion of its nearly $3 trillion coronavirus relief package – a mere 5% – has been allocated to the 50 states; and they are not allowed to use it where they need it most, to plug the holes in their budgets caused by the mandatory shutdown. On April 22, Senate Majority Leader Mitch McConnell said he was opposed to additional federal aid to the states, and that his preference was to allow states to go bankrupt.
No such threat looms over the banks, which have made out extremely well in this crisis. The Federal Reserve has dropped interest rates to 0.25%, eliminated reserve requirements, and relaxed capital requirements. Banks can now borrow effectively for free, without restrictions on the money’s use. Following the playbook of the 2008-09 bailout, they can make the funds available to their Wall Street cronies to buy up distressed Main Street assets at fire sale prices, while continuing to lend to credit cardholders at 21%.
If there is a silver lining to all this, it is that the Fed’s relaxed liquidity rules have made it easier for state and local governments to set up their own publicly-owned banks, something they should do post haste to take advantage of the Fed’s very generous new accommodations for banks. These public banks can then lend to local businesses, municipal agencies, and local citizens at substantially reduced rates while replenishing the local government’s coffers, recharging the Main Street economy and the government’s revenue base.
The Covert War on the States
Payments going to state and local governments from the Coronavirus Relief Fund under the CARES Act may be used only for coronavirus-related expenses. They may not be used to cover expenses that were accounted for in their most recently approved budgets as of March 2020. The problem is that nearly everything local governments do is funded through their most recently approved budgets, and that funding will come up painfully short for all of the states due to increased costs and lost revenues forced by the coronavirus shutdown. Unlike the federal government, which can add a trillion dollars to the federal debt every year without fear of retribution, states and cities are required to balance their budgets. The Fed has opened a Municipal Liquidity Facility that may buy their municipal bonds, but this is still short-term debt, which must be repaid when due. Selling bonds will not fend off bankruptcy for states and cities that must balance their books.
States are not legally allowed to declare bankruptcy, but Sen. McConnell contended that “there’s no good reason for it not to be available.” He said, “we’ll certainly insist that anything we borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs.” And that is evidently the real motive behind the bankruptcy push. McConnell wants states put through a bankruptcy reorganization to get rid of all those pesky pension agreements and the unions that negotiated them. But these are the safety nets against old age for which teachers, nurses, police and firefighters have worked for 30 or 40 years. It’s their money.
It has long been a goal of conservatives to privatize public pensions, forcing seniors into the riskier stock market. Lured in by market booms, their savings can then be raided by the periodic busts of the “business cycle,” while the more savvy insiders collect the spoils. Today political opportunists are using a crushing emergency that is devastating local economies to downsize the public sector and privatize everything.
Free Money for Banks: The Fed’s Very Liberal New Rules
Unlike the states, the banks were not facing bankruptcy from the economic shutdown; but their stocks were sinking fast. The Fed’s accommodations were said to be to encourage banks to “help meet demand for credit from households and businesses.” But while the banks’ own borrowing rates were dropped on March 15 from an already-low 1.5% to 0.25%, average credit card rates dropped in the following month only by 0.5% to 20.71%, still unconscionably high for out-of-work wage earners.
According to an April 6 article on CNBC.com, Spain is slated to become the first country in Europe to introduce a universal basic income (UBI) on a long-term basis. Spain’s Minister for Economic Affairs has announced plans to roll out a UBI “as soon as possible,” with the goal of providing a nationwide basic wage that supports citizens “forever.” Guy Standing, a research professor at the University of London, told CNBC that there was no prospect of a global economic revival without a universal basic income. “It’s almost a no-brainer,” he said. “We are going to have some sort of basic income system sooner or later….”
“Where will the government find the money?” is no longer a valid objection to providing an economic safety net for the people. The government can find the money in the same place it just found more than $5 trillion for Wall Street and Corporate America: the central bank can print it. In an April 9 post commenting on the $1.77 trillion handed to Wall Street under the CARES Act, Wolf Richter observed, “If the Fed had sent that $1.77 Trillion to the 130 million households in the US, each household would have received $13,600. But no, this was helicopter money exclusively for Wall Street and for asset holders.”
“Helicopter money” – money simply issued by the central bank and injected into the economy – could be used in many ways, including building infrastructure, capitalizing a national infrastructure and development bank, providing free state university tuition, or funding Medicare, social security, or a universal basic income. In the current crisis, in which a government-mandated shutdown has left households more vulnerable than at any time since the Great Depression, a UBI seems the most direct and efficient way to get money to everyone who needs it. Critics argue that it will trigger inflation and collapse the dollar. As gold proponent Mike Maloney complained on an April 16 podcast:
Typing extra digits into computers does not make us wealthy. If this insane theory of printing money for almost everyone on a permanent basis takes hold, the value of the dollars in your purse or pocketbook will … just continue to erode …. I just want someone to explain to me how this is going to work.
Having done quite a bit of study on that, I thought I would take on the challenge. Here is how and why a central bank-financed UBI can work without eroding the dollar.
In a Debt-Based System, the Consumer Economy Is Chronically Short of Money
First, some basics of modern money. We do not have a fixed and stable money system. We have a credit system, in which money is created and destroyed by banks every day. Money is created as a deposit when the bank makes a loan and is extinguished when the loan is repaid, as explained in detail by the Bank of England here. When fewer loans are being created than are being repaid, the money supply shrinks, a phenomenon called “debt deflation.” Deflation then triggers recession and depression. The term “helicopter money” was coined to describe the cure for that much-feared syndrome. Economist Milton Friedman said it was easy to cure a deflation: just print money and rain it down from helicopters on the people.
Our money supply is in a chronic state of deflation, due to the way money comes into existence. Banks create the principal but not the interest needed to repay their loans, so more money is always owed back than was created in the original loans. Thus debt always grows faster than the money supply, as can be seen in this chart from WorkableEconomics.com:
When the debt burden grow so large that borrowers cannot take on more, they pay down old loans without taking out new ones and the money supply shrinks or deflates.
The Financial Times, the strange colored newspaper you see at airports, is not known for its skepticism of modern global economics. Therefore, it was a bit of a shock to see the mouthpiece of global finance come out in favor of a radical rethinking of the economic order. They argued that all options must be on the table in order to address the tattered relationship between the people and their governments. In their words, the social contract must be restored after the virus panic ends.
The alleged sentiments behind the editorial are not wrong. The primary duty of any government is the welfare of the people. It’s why we have government. Sure, we assign it functions like protecting private property and enforcing contracts, but that’s not the reason we invented government. Similarly, the state defends the privileges of the rich at the expense of everyone else. This has been true since the dawn of man, but again, this is not why human societies have governments.
The point of government is the general welfare of the people. That means defending against attacks from abroad and attacks from within. The former is straight forward, but the latter is where things get complicated. Defending against internal threats is about a set of laws and customs for the purpose of maintaining order. The character and nature of the people will determine these internal structures. Good order in the lands of the Mohammedan is different than good order in the Orient.
This is not a concern in a world of nations and nation states. In a world of global capital and the free flow of goods and people across borders, it is nearly impossible. The state cannot enforce the customs of its people when its people change with each generation, maybe with each decade. When economics requires the people to yield their ancient customs and liberties, the point of government is no longer the welfare of the people, but as middle-man, facilitating conformity to economic necessity.
This is where the globalist on the Financial Times editorial board fail in their analysis of the current crisis. The social contract, if there is one, is not built around a set of economic policies. It is not a set of rules imposed by the keepers of the economy in order to make transactions as efficient as possible. The social contract is the invisible bonds between the people. It is this dedication to the shared welfare that necessitates the creation of the state in order to maintain those bonds.
Those invisible bonds are not the creation of the state, but the result of the mating decisions of our ancestors. The social contract between Finns is just the conceptualization of their shared history and ancestry. It is unique to them. What makes a Finn and Finn is not where he stands on the map or how he does business. What makes him a Finn is he is the fruit of the Finnish family tree. To be Finn means the ability to one day make more Finns. That’s biology, not economics.
The social contract can only exist among a people with a shared ancestry. If the goal is to restore the social contract, the first step is not a new round of economic fads, but a restoration of the ancient bonds among people. The West must first become a collection of nations again. Only in a world of nations can the governments of those nations preserve and defend the social contract. Safeguarding the welfare of the people can only happen when there is a people, rather than just people.
This is the fundamental flaw of the current order. Cosmopolitan globalism rests on the false notion of homo economicus. This is the assumption that humans are rational, self-interested, and pursue their subjectively-defined ends optimally. More important, it assumes that people are defined internally, rather than by the untold number of invisible bonds and interactions with their society. Globalism assumes man lives in a particular society, because it benefits in some way to do so.
Not only is this false, but homo economicus is in direct contradiction with the concept of a social contract. Socrates could not flee Athens and avoid death, because to do so would mean he was no longer Socrates. Who he was as a person was defined by his membership in the polis called Athens. The social contract cannot exist in a world of atomized individuals. The social contract can only exist in a world where people are defined by their membership in a society of their people.
It took only a few days for Congress to unanimously pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will be doling out $2.2 trillion in crisis relief, most of it going to Corporate America with few strings attached. (Photo: Public domain)
Was the Fed Just Nationalized?
Did Congress just nationalize the Fed? No. But the door to that result has been cracked open.
It took only a few days for Congress to unanimously pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will be doling out $2.2 trillion in crisis relief, most of it going to Corporate America with few strings attached.
Mainstream politicians have long insisted that Medicare for all, a universal basic income, student debt relief and a slew of other much-needed public programs are off the table because the federal government cannot afford them. But that was before Wall Street and the stock market were driven onto life-support by a virus. Congress has now suddenly discovered the magic money tree. It took only a few days for Congress to unanimously pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will be doling out $2.2 trillion in crisis relief, most of it going to Corporate America with few strings attached. Beyond that, the Federal Reserve is making over $4 trillion available to banks, hedge funds and other financial entities of all stripes; it has dropped the fed funds rate (the rate at which banks borrow from each other) effectively to zero; and it has made $1.5 trillion available to the repo market.
It is also the Federal Reserve that will be picking up the tab for this bonanza, at least to start. The US central bank has opened the sluice gates to unlimited quantitative easing, buying Treasury securities and mortgage-backed securities “in the amounts needed to support smooth market functions.” Last month, the Fed bought $650 billion worth of federal securities. At that rate, notes Wall Street on Parade, it will own the entire Treasury market in about 22 months. As Minneapolis Fed President Neel Kashkari acknowledged on 60 Minutes, “There is an infinite amount of cash at the Federal Reserve.”
In theory, quantitative easing is just a temporary measure, reversible by selling bonds back into the market when the economy gets back on its feet. But in practice, we have seen that QE is a one-way street. When central banks have tried to reverse it with “quantitative tightening,” economies have shrunk and stock markets have plunged. So the Fed is likely to just keep rolling over the bonds, which is what normally happens anyway with the federal debt. The debt is never actually paid off but is just rolled over from year to year. Only the interest must be paid, to the tune of $575 billion in 2019. The benefit of having the Fed rather than private bondholders hold the bonds is that the Fed rebates its profits to the Treasury after deducting its costs, making the loans virtually interest-free. Interest-free loans rolled over indefinitely are in effect free money. The Fed is “monetizing” the debt.
This French postcard from 1942 depicts our mother Europe sheltering her chicks with Switzerland and Sweden nearby and Britain heading towards the USA. Note the Star of David on the lid of the American box, and the striking image of Marshal Philippe Petain on the postage stamp. Seventy-eight years later things are much the same.
The Marshall has gone from France but their current president, Emmanuel Macron, fancies himself as ‘Father of the Nation’. Switzerland belongs to EFTA which is just outside the EU. Sweden is a member of the EU but with her own currency and an air of detachment. The Swedes, like the British, talk about ‘Europe’ as though it’s a separate place. And Britain is still drawn to America where the Star of David is as dominant as ever. As the French say: “Plus ca change…”
The big difference today is the coronavirus pandemic that has circled the world. When the EU offered us ventilators to treat the infection, Boris Johnson put Brexit before breathing by rejecting them, but now he has tested positive. His petty nationalism is in contrast to the co-operation between the EU states that are helping each other. President Donald Trump insists on calling it “the Chinese virus” but viruses don’t recognise nationalities, even paranoid North Korea is effected.
Our Day Will Come
We have quit the European Union just in time to be struck down by the coronavirus pandemic. Boris Johnson is doing his best but the crisis has revealed that we have fewer hospital beds and doctors than Spain or Italy. It has also exposed the fragility of our gig economy. Tim Martin the boss of Wetherspoons who is an apostle of the free market has told his redundant workers to get a job at Tescos.
Boris is spending money like a drunken sailor to show his concern for the workers, but at heart he is an old-fashioned Tory who described the poorest twenty percent of the population as: “chavs, losers, burglars and drug addicts.” He called single mothers: “uppity and irresponsible” and accused their children of being: “ill raised, ignorant, aggressive and illegitimate.” When Ken Bigley was beheaded by Isis terrorists, his home city of Liverpool mourned him, but Boris Johnson condemned: “the mawkish sentimentality of a society that is hooked on grief and likes to wallow in a sense of vicarious victimhood.” Nevertheless, the punters still voted for him.
When slavery was abolished in America most of the liberated slaves stayed on the plantations because there was nowhere else to go, and it seems that the British electorate are in the same position. We don’t trust the Labour Party, and if we vote Liberal Democrat our vote will be cancelled out by an unfair ‘first past the post’ system. So we stay where we are, with a government directed by the unelected advisor Dominic Cummings.
Our new Home Secretary Priti Patel has vowed to cut inward migration by 70%, and treat all applicants equally. We shall have to see what happens but every Immigration Act so far has failed to stem the tide.
Much of our industry relies on imported labour and some of our biggest companies are foreign-owned. This makes our workers vulnerable to cutbacks and redundancies. HSBC have announced 35,000 redundancies worldwide, many of them in the UK. Naturally, as a Chinese bank they are looking after their own people. And the same is true of Honda who will be making their electric cars in Japan.
Is there any hope? Yes, we can talk, read and write. We can express our contempt for the Old Gang parties and propose alternative policies. Ideas can’t be destroyed and nothing lasts forever. One day our class-ridden country will be liberated from plutocracy. The blatant hypocrites who preach peace and make war will be gone. So will the inverted racists who promote every nation except our own. Not to mention; faux patriots, metric martyrs, Luddites, Morris dancers, flat earthers, conspiracy freaks, Holocaust deniers, and assorted fruitcakes who support Boris Johnson. Don’t despair comrades; our day will come.
Union Movement Policy
Under Priti Patel’s points based immigration policy our fellow Europeans are to be excluded but West Indians, Africans and Asians are welcome. The Tories are anxious to improve trade with the Third World and they have already promised China and India that they will make life easier for their students and workers.
They have separated us from Europe but those of us who believe in genuine liberation are not satisfied with a country divided by class, where ex-servicemen sleep in doorways and beg for food, and where whole families live in bed and breakfast accommodation. We despise the politicians who misgovern us and we recall Union Movement’s policy from 1948 which is still relevant, except for point six about Africa.
1) To secure the Union of the European peoples.
2) To resist the menace of International Communism and International Finance.
3) To win the consent and enthusiasm of the people for a new way of life.
4) To win power in Britain by the vote of the people.
5) To abolish the Party game and thus to create a system of united national action.
6) To develop Africa as an estate of the European which can solve the economic problem of our continent.
7) To abolish the values and influence of class which rests on hereditary wealth and impedes the life of the nation.
8) To provide continuing security in creative service of the people for the man who has built his own means of livelihood and desires his children to follow after him in heredity, science, art, craft, profession or business.
9) To assert the right and will of the whole British people above every faction and thus to enable all to earn what they are worth with full security in sickness and old age.
10) To create a new sense of service and a new morality in the State.
Union Movement no longer exists but Mosley’s ideas are still discussed and Brexit has actually encouraged the European movement. As the elderly Brexiteers pass away the younger generation will reverse the decision to leave Europe. It’s only a matter of time.
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.
German mathematician Daniel Regenberg contacted me to share his data on how many people are likely to get infected. I was very skeptical and did not believe it. But when I checked his numbers against publicly available data, and checked his math, I could not find any flaws. I felt it was important to share this data and he agreed to let me do it.
24 thousand people in the world have died as of March 26th, and 500K infections. But this is the tip of the iceberg. Surprisingly, the growth rate of infections is about the same everywhere - 25% to 30% per day. I am using an average of 27%. This means that every three days, the number of people getting infected with the virus doubles – according to this equation: 1.27^3 – 2.05. And every 10 days, the number infected goes up by 10X.
So in the U.S., the number of infected people as of March 25th is about 62,000, in 10 days will be 675,000, and in another 10 days, it will be 7.3 million, And in 10 more ays it will be 80 million. This is a 1300X increase in one month!
But here’s the important point to remember, a university of Massachusetts Amherst study shows that the median incubation period for the virus is about 5-12 days. This means that the number of people infected with the virus in the US, is likely to be 4 times what the current numbers show.
#coronavirus
#covid19
#sarscov2
If we do not all make some sacrifices in terms of doing our part to stay socially isolated, the number of infected people in the US could soar.
It took only a few days for Congress to unanimously pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will be doling out $2.2 trillion in crisis relief, most of it going to Corporate America with few strings attached. (Photo: Public domain)
Ellen Brown is an attorney, chairman of the Public Banking Institute; author of twelve books including “Web of Debt” and “The Public Bank Solution.”