....... Ending the Financial Crisis For Good

The evolution of my economic thinking:

"Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has." -Margaret Mead

When I realized something was very wrong before the housing bubble burst, I started looking into the causes of what went wrong which led to this site being created. Since then, I have evolved my thinking on the subject and this site will no longer be updated, merely serving as an archive for others seeking the truth. I have reached the end of the road, so to speak, as I believe the following is the reality of how our economy works so there's not much point in continuing updating this site when there are others who do a better job.

After I read The Lost Science of Money and Web of Debt, it infuriated me that banks were creating money out of thin air and charging interest on it. This is the majority of our money supply. What the banks actually create is credit through double entry bookkeeping, creating both an asset and a liability at the same time. As the loan is paid off, the "money" they created is destroyed. This is called horizontal money in Modern Monetary Theory circles. I still think state and community banks are a great idea and I am still against the monopolization of the banking industry. Bill Black of the neweconomicperspectives.com site and Associate Professor of Economics and Law at the University of Missouri – Kansas City (UMKC) wrote a classic book on control fraud, which to this day, is still a huge problem within the banking industry. We will will never fully recover from this balance sheet recession until that fraud is addressed.

Over the last 30 years, both Democrats and Republicans have deregulated and distorted markets, creating a massive shadow banking industry that threatens to destroy us. On August 1, 2011 Congress passed the antithesis to FDR's New Deal, which some have described as the new Raw Deal. Lawmakers have a fundamental misunderstanding of the national debt and are seeking to cut back spending at a time when it is most needed and begin cutting the social safety nets our country has enjoyed for many decades.

Government (Congress specifically) creates money out of thin air too however, unlike a household or state or Greece, it can never go bankrupt. Inflation is the only issue we need be concerned with as we can can never run out of money we create by clicking keys on a computer. We do not "borrow" money to fund government nor do we need taxes to pay for the things government buys. If the government sells you a $1000 Treasury bond and you pay for it with 10 $100 dollar bills, what have you done? You have traded 10 pieces of paper printed by the government for another piece of paper printed by the government. Does the government really need the tax money you send it, the money they printed in the first place? Of course not. Taxes serve to regulate the economy to keep inflation in check. Government spending goes directly into private (and foreign) savings. When the government pays a soldier...or keeps grandma from starving with Social Security checks...or buys a car, that money increases the amount of money in circulation in the economy. Money which you and I receive in our private sector paychecks. If we didn't have a national debt and had a balanced budget like some propose, we wouldn't be able to grow. Population is still growing at an exponential rate and we will need the economy to grow along with it.

It is true that the FED is privately owned but the big catch that I somehow missed is that the FED returns 97% of the interest it makes by the government supposedly "borrowing" from the FED. I do have big problems with the FED but the interest on the national "debt" is not one of them. One huge problem I have with them is how they are able to loan trillions to their banking buddies at near zero percent interest rates.

The problem we have today is that taxes are imbalanced and spending goes to too many of the wrong people, resulting in the worst income inequality since the Great Depression. Anyone who has played the board game Monopoly knows that someone will always end up winning due to the roll of the dice. Life is not that much different. The simple truth is: Concentrated Wealth Destroys Democracy. By following the links below and learning Modern Monetary Theory (MMT), you will know that the government can either reduce taxes or spend more in a balance sheet recession. Republicans and the Tea Party crowd are all for reducing taxes but the problem is the reductions are for the wrong people! They have skewed the laws in such a way that only the very wealthy are seeing any increase in income. At one time, the marginal tax rate on the richest Americans was over 90% and yet the country did extremely well and the rich, while not getting as rich as fast as they are today, also did quite well. It's the middle class that needs the tax reduction and ending the tax on labor, the payroll tax, would be a good start. The other problem with both the Republicans and the Democrats is that they are reducing government spending at a time when that is the worst thing to do. What government should be spending money on is the same thing that got us out of the last Depression, a WPA-style jobs program to fix our infrastructure. We have the money for it. We will always have the money....we create it out of thin air. Again, the only worry we have is whether it will cause inflation and at a time when our biggest risk is deflation due to everyone trying to cut back their spending at the same time, the answer to whether it would cause inflation is NO!

I won't even get into the standard criticism about how printing money to close the production gap will cause hyperinflation as that is thoroughly discredited in the links below. Deficits do matter and inflation and price stability are exactly where we should focus our attention but solvency is not a problem we will ever face.

The following provide everything you need to know about how our economy actually works and how to fix our economic crisis:

New Economic Perspectives

The Pragmatic Capitalist 

The Center of the Universe