Repubs party platform: comittee to eval return to gold std and audit fed

[MachineGhost]

All money comes from debt in a debt-based society.

Now you're conflating resource scarcity with debt-based money.  In a debt-based money society, there is no limitation on its issuance.  A simple flick of a pen or electrons and it exists for anyone to borrow.  Whether that is Congress, the Fed or private money.

[Gumby]

Lets pretend for a moment that we don't increasingly have a crony capitalist system at present and that its at least 50-years ago.

Now we're going to pretend that the last 50 years of capitalism didn't happen? You make it sounds like cronyism didn't exist before 1950, which is not true. Let's pretend that recessions and depressions didn't happen too, while we're at it. "Post-capitalism" frameworks were invented because of crony capitalism.

Taking on debt to enrich others is an optional choice.

True. But, my point was that for someone to climb out of debt, and pay their interest payments, it requires others to create public or private debt on a macro level. Most debt is private credit. So, in a sense, much of debt-based capitalism appears to be convincing others to go into debt. It's known as aspirational consumption. And if you think aspirational consumption hasn't caused a lot of the inequality and instability in our country, you're deluding yourself. If nobody aspired to take on debt (to buy a home, or buy a car, or go to college) our economy would be dead in the water. The credit markets are essential to our economy. That should be obvious.

All money comes from debt in a debt-based society.

Now you're conflating resource scarcity with debt-based money.  In a debt-based money society, there is no limitation on its issuance.  A simple flick of a pen or electrons and it exists for anyone to borrow.  Whether that is Congress, the Fed or private money.

Where exactly did I say that there is a limitation on the amount of debt that could be created? I didn't. You're mixing up my statements. I said that a scarcity of gold being circulated has often caused a lack of illiquidity and therefore increased the demand to borrow gold, while artificially controlling its price. There just wasn't enough gold being circulated to keep things running smoothly. Read Edison's statement if you don't believe me.

[Gumby]

This is all a fancy way of saying that the legal system matters.  Without a legal system based on common law rights, sanctity of contract, protection of private property and possibly anti-trust law, you do not have democratic capitalism.

I actually agree with you. But one of the main criticism of capitalism is that it concentrates wealth at the top, which enables the wealthiest 0.1% to influence the laws of the land. Which is exactly what has happened.

I have no doubt that all of these hypothetical post-capitalistic societies would have severe and major flaws. We are just talking hypotheticals here, for fun. No need to get all defensive about capitalism. I'm very happy to live in the world's most successful capitalist society. But, I also recognize that not everyone is given the same advantages in our society. Why is that so disagreeable to recognize? The fact that inequality exists should be plainly obvious.

[MachineGhost]

I have no doubt that all of these hypothetical post-capitalistic societies would have severe and major flaws. We are just talking hypotheticals here, for fun. No need to get all defensive about capitalism. I'm very happy to live in the world's most successful capitalist society. But, I also recognize that not everyone is given the same advantages in our society. Why is that so disagreeable to recognize? The fact that inequality exists should be plainly obvious.

I certainly wasn't disagreeing about the lack of fairness and justice in our state capitalist economy, but you make it sound like it is an evil byproduct of any kind of capitalism that the wealth would always be concentrated in the top 1%, rather than as a consequence of using interest-bearing, debt-based money that we're all coerced to use.  That is a freakin' Marxist viewpoint which mischaracterized the Feudalism of England.  Capitalism is about the freedom to engage in win-win voluntary transactions, not concentration of capital.

Besides, there's nothing inherently wrong with capital concentration.  It is the application of initiatory coercion that is wrong.  Only left-wingnuts are naive enough to believe capital per se is bad, such as with the Citizens United case where they think the elite rich pissing away millions of their money on political speech will somehow coerce and brainwash voters into zombies!  Whats really insulting about that elitist way of thinking is they really don't believe that the free average citizen has any sentience or volition...  and such citizens need to be further controlled by government coercion.  Speech or capital is not violence, only threat, duress and coercion is.  Correlation is not causation.

[stone]

I'm definitely suggesting an asset tax as an alternative to the current taxes not as an addition. I think transaction taxes tend to shut down the real economy. Shifting to an asset tax and away from transaction taxes might be what we need to get the economy up and running again IMO.

We already have asset taxes in the USA.  Its called a direct tax, as opposed to income taxes which are indirect (measured by the source of the income, wherever derived).  Direct taxes have to be apportioned among the states to be fair and just.  It's politically unpopular because a direct tax is seen as a tax on the right to exist, just as your asset tax is.

So screw that.

Machine Ghost, your direct tax has two parts according to wikipaedia, a capitation (what in the UK is called a poll tax) and a real estate value tax. I think the two parts are very different because the capitation is a tax on existence as you say but the real estate value tax is a tax on what ever fanciful price bank lending has inflated real estate values up to. Real estate values (and asset prices in general) are a key leakage point where the real economy hemorages into financialization. If that leakage point isn't stemmed we loose an effective real economy IMO.

[stone]

Debt free money could also be used to dish out financial power to cronies.

That's a great point. It really doesn't matter what backs a currency. What really matters is who controls its issuance.

Gumby, that is why I'm so against the "state bank" set up that Schweickart (and Bill Mitchell ) advocate. To my mind if you genuinely believe that the economy should represent what everyone wants then you believe that it should be directed by how everyone spends and invests their own money. If you pay people a citizens' dividend and leave people with all of the profits from the companies they own and all of the wages they earn, then if they believe that some enterprise is worthwhile, they will put that money towards it themselves. Why bring political structures such as state banks into it? Why not have direct democracy rather than elected democracy since with money there is the perfect mechanism for things to be direct?
I think people who favour state banks actually want the economy to serve those with the loudest political voice. They want to replace financial elitism with political elitism not with economic democracy.
An asset tax to my mind is a tax on financial power over other people. Anyone who is providing other people with goods and services and so gets a revenue flow will have the means to pay the asset tax. Anyone who is not getting such a revenue won't have the means to pay the tax and so it would be best all round if they passed the batton over to someone more competant.
I think a key difference between a state bank system and a citizens dividend system would be that people might choose to cast off some of the consumerist treadmill. People might choose to make home cooked food rather than working long hours in a burger joint. People might choose not to work all hours making some pointless software upgrade that has no more utility than the previous one etc etc.

Banks are public, not private, institutions that make grants, not loans, to business enterprises. According to Schweickart, these grants do not represent "free money", since an investment grant counts as an addition to the capital assets of the enterprise, upon which the capital-asset tax must be paid. Thus the capital assets tax functions as an interest rate. A bank grant is essentially a loan requiring interest payments but no repayment of principal.

[MachineGhost]

If you take the price of an F-22 and you divide it by its weight, you get that, per pound, cost something between silver and gold. It's that expensive! . Now, take your F-22 and crash it against a hill, or crash it against the ocean, blow it up into tiny little bits and pieces. How valuable it is now? It's probably way less valuable than silver. It's probably almost worthless after it's broken down. So, where was the value?

The value cannot be in any of the parts or in any of the materials, or in anything other than the complexity of how these things come together. So actually, value is set by the property of organization. It's more of an entropic, or anti-entropic more precisely, idea of value.

When I read Adam Smith or I read Hayek, at some points in their narratives they always include a more tangible narrative, or story, or description of the economy. It's what I like to call a fairy tale economy, or a Disney economy, in which you have the butcher and the baker and the brewer and the horseshoe maker. They all have a small business and they trade with each other. Basically through the price system, they're able to adjust supply and demand and whatnot, so they're like these little villages of nice small business owners.

Nowadays, obviously if you go to most important cities and you deal with relatively large organizations, they are very different from that. An organization, a multilateral organization, like the World Bank, or the UN, or a company like Xerox or IBM they're like these monsters with hundreds of thousands of people, or at least tens of thousands of people. They're not this fairytale economy in which there's the brewer, the baker and the horseshoe maker.

The economy is very different because what you have now is that these organizations transfer resources to one another in different ways, and these resources basically enter these organizations pretty much through the top. Within these organizations, however, there is not a price system or a market system determining how resources are located. It's rather a political battle in which people get together and strategize and try to argue why their group within the organization, or why their unit should get which slice of the pie. It's a very different economy. I call this the permission economy.

I feel very strongly about that because, obviously, as a scientist, in order to do work, many times you have to first write a grant, or find a way of getting permission to get the funds to be able to do it. It's not a direct economy like the one that you would have in Adam Smith's interpretation of the world, or even Hyeck's famous paper. He has a description in which he uses these type of Disney characters.

Many times what I see is that more effort goes into asking permission than in doing the job that you asked permission for, simply because the system is getting more and more structured into these bureaucracies and these political structures that consume a large amount of resources. You have to basically do the whole research, and you have to spend more time writing the grant than eventually running the experiments or writing the paper, simply because that's the only way of getting the resources that you need to get a grad student to help you, or to have a team working with you.

http://edge.org/conversation/what-is-value

[stone]

Machine Ghost, I completely agree with the piece you quote. My better half has just quit her job in disgust with a multinational company that took over the small company she was working for. Basically the company seems to run not on the basis of people getting what needs to be done done but rather on the basis of people ingratiating themselves with superiors within the company.
A citizens' dividend might give scientists etc genuine academic freedom and free them up from the grant writing (and grant reviewing) BS that your quote describes. Some of the best science ever done was by self funded scientist free to persue what they saw fit. Darwin did almost all of his work whilst self funded. Einstein was working in a patent office and doing science in his spare time when he worked out relativity etc. In principle even some major enterprise such as the large hadron collider could be done by a self assembled group of dedicated scientists and engineers largely living on citizen's dividends but perhaps with some donations from science enthusiasts. I'm always amazed that the cathedrals built in 1200s England were built largely by expert volunteers. These cathedrals were the large hadron colliders of their day.

[Pointedstick]

stone, let's say a bunch of scientists did build a Large-Hadron-Collider-type scientific marvel out of their yearly/monthly citizens dividend payments. Once they're finished and it begins to produce data, the government tax assessor comes out and is blown away. He is a bit of a science junkie himself and he sees the incredible value of what they've created. He declares it to be worth $500 million. Uh oh. Now suddenly the scientists need to come up with $25 million every year to pay the asset tax or else the government will seize their creation! So the scientists now need to produce economically valuable data and sell it just to pay the tax. Doesn't that represent a corruption of the pure scientific process if they need to focus on present economic value rather than the advance of pure knowledge for the betterment of all that they were previously focusing on?

Which actually gets to another question: under your asset tax, what happens to assets seized by the government for inability to pay the tax? Are they destroyed? Nationalized? Auctioned off to the highest bidder at a profit to the government? Given away in a random drawing?

If they're nationalized or sold, it's hard for me to avoid seeing how that wouldn't concentrate power in the hands of a privileged few--either the wealthy who can buy up the assets, or the government bureaucrats who gain political control over them.

[stone]

Pointed stick, I worried about the exact point you make about the large hadron collider being a taxable asset. I'm not sure that it is such a problem though. Remember it would be taxed according to whatever value it could be sold for. I don't think it could be sold for much. It doesn't actually produce anything of financial value. It has astronomical maintainance costs. To my mind it would be a bit like those loss making heavy industry companies that get sold for £1 to anyone intrepid enough to take them on.

[stone]

Pointed Stick

 under your asset tax, what happens to assets seized by the government for inability to pay the tax? Are they destroyed? Nationalized? Auctioned off to the highest bidder at a profit to the government? Given away in a random drawing?

I guess they would be auctioned off and the excess after tax would be returned to the owner. Is that what happens when people fail to pay inheritance tax? Presumably exactly the same issue arises with inheritance tax. I actually know someone (through rock climbing ) who works as a surveyor assessing the value of commercial properties for the UK inheritance tax collectors.

[Gumby]

I certainly wasn't disagreeing about the lack of fairness and justice in our state capitalist economy, but you make it sound like it is an evil byproduct of any kind of capitalism that the wealth would always be concentrated in the top 1%, rather than as a consequence of using interest-bearing, debt-based money that we're all coerced to use.

Well, if you got that impression, I'm sorry. Honestly, that wasn't my intention. My intention was (and I thought I was clear about this) that interest causes much of the problems we see in capitalism. It's not a conspiracy. More likely, bankers just realized they would turn lower profits if they ever lost the ability to charge interest and fought off any attempt at anti-usury laws.

As history shows, the stability and responsibility of government issuing it is the deciding factor in the acceptance of that government's currency--not gold, silver, or iron buried in some hole in the ground. Proof is America's currency today. Our gold and silver is practically gone, but our currency is accepted. But if the government was about to collapse our currency would be worthless.

Under the present system, the extra burden of interest forces workers and businesses to demand more money for the work and goods to pay their ever increasing debts and taxes. This increase in prices and wages is called "inflation." Bankers, politicians and "economists" blame it on everything but the real cause, which is the interest levied on money and debt by the Bankers.

This "inflation" benefits the money-lenders, since it wipes out savings of one generation so they can not finance or help the next generation, who must then borrow from the money-lenders and pay a large part of their life's labor to the usurer.

With an adequate supply of interest-free money, little borrowing would be required and prices would be established by people and goods, not by debts and usury.

Source: http://liberty-tree.ca/research/Billion ... he.Bankers

Perhaps "inflation," by way of interest, makes it difficult for inflation to take hold — when most of the population is regularly handing money over to wealthy creditors on a macro level? Maybe that's why the cost of living extremely well has seen a lot of inflation, while the CPI has been relatively steady.

Now, full disclosure... the quote, above, is from a known anti-semite, named Pastor Sheldon Emry. As TBV pointed out earlier, much of the anti-usury rhetoric often led into shameful and distracting discussions about "Jewish" control of banking (Rothschilds, etc.). Banking certainly isn't a "Jewish" thing (I am Jewish, myself, by the way), and the discussion should have remained focussed on interest — since that is the mechanism that transfers wealth to the banking industry.

It's also worth pointing out that Buddhism, Judaism, Christianity, and Islam all had condemnations of usury in their religious texts and bibles.

See: http://en.wikipedia.org/wiki/Usury#Religious_context

Perhaps that is why some crazies made it a religious issue, instead of making it a common sense issue.

Most religions, and early debt-based cultures, also had some form of debt forgiveness (at least every generation or so) to prevent the populations from getting sucked into a debt hole. And yet, today, irresponsible usury is (partly) the cause for much of the problems we face in our society.

So, I think it's pretty clear that if you were going to improve upon capitalism, it would probably be beneficial to do so without usury. What about interest-free loans for tuition or small startups? Would you agree? If not, why?

[Gumby]

Interesting... I had read that Islamic banking bans the use of interest:

"Islamic banking:
In a partnership or joint venture where money is lent, the creditor only provides the capital yet is guaranteed a fixed amount of profit. The debtor, however, puts in time and effort, but is made to bear the risk of loss. Muslim scholars argue that such practice is unjust. As an alternative to usury, Islam strongly encourages charity and direct investment in which the creditor shares whatever profit or loss the business may incur (in modern terms, this amounts to an equity stake in the business)."
Source: http://en.wikipedia.org/wiki/Usury#Islamic_banking

Islamic banking is banking or banking activity that is consistent with the principles of sharia law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba, or usury) for loans of money.
Source: http://en.wikipedia.org/wiki/Islamic_banking

...and today, I suppose we are seeing a growth of interest-free micro-investing, through websites such as kickstarter. Although, it probably doesn't help that the macro money funding these kickstarter startups is still technically from interest-bearing debt based loans from banks (or public debt). Still, much better than no funding at all.

[stone]

Also Japan has had zero inflation since they adopted a zero interest rate policy. I think the inflationary effect of interest gets masked by the effect of capital flows which tend to flow towards currencies with higher interest rates causing shifts in currency exchange rates resembling inflation of imported goods for the currency that has fallen in value.

[Reub]

http://www.bloomberg.com/video/should-t ... BY1kQ.html

Here is an excellent debate on the merits of returning to a gold standard with Jim Rickards.

[MachineGhost]

So, I think it's pretty clear that if you were going to improve upon capitalism, it would probably be beneficial to do so without usury. What about interest-free loans for tuition or small startups? Would you agree? If not, why?

Interest is pretty much a derivative function of the price setting mechanism of free enterprise.  Without interest rates, how is risk to be determined and quantified?  Are public state banks just a way to get around the assessment of risk necessary in private lending so taxpayers bear the losses for bureaucrats ignoring or misjudging risk?  Bureaucrats are not driven by the profit motive and allegience to the consumer.

Islamic banking may ban interest, but they circumvent it with other methods it so the net effect is people still pay interest.  Since interest keeps popping its head up no matter how many times its been whacked, it must be a fundamental force of the universe.  If that is so, I feel uncomfortable with the rich monopolizing it, but then we go right back to the "free banking" days and that was a disaster.

I also feel very uncomfortable with an asset tax or a public state bank.  They are a direct assault on volitional freedom.  No one should be taxed for mere existence or on the property they've collected through their own effort.  Over my dead body!

[Gumby]

Without interest rates, how is risk to be determined and quantified?  Are public state banks just a way to get around the assessment of risk necessary in private lending so taxpayers bear the losses for bureaucrats ignoring or misjudging risk?

I've been glancing at a few articles over at IED.info (The Institute for Economic Democracy) — where many Economic Democracy theories have been hashed out in way more detail than I would ever care to know about. I know you probably won't like any of their ideas, since it doesn't resemble "capitalism" as we know it, but it goes something like this...

From what I can tell (and I could be wrong) society would be completely different, in the sense that workers own the businesses (i.e. no overpaid/unproductive ownership-type bosses, and no more wage slavery) — land is owned by everyone (which reduces business costs considerably) and the only tax levied would be minimal (i.e. an asset tax that is less than the cost of owning or renting land in our current society). So, the operational costs are theorized to be much less for every business (compared to what we know in our current society). This is theorized to lower risk considerably and make society and businesses much more efficient.

Furthermore, financiers could either just do micro-funding (i.e. kickstarter), where interest-free loans are handed out and repaid by entrepreneurs... Or bankers could take an equity stake in the business and accept a portion of profits rather than interest. In a way, much of Silicon Valley already operates this way.

Of course, all of this is super-hypothetical. It's not like anyone in the United States would be willing to let their land become public land (However, I find it interesting that many people on this forum have previously pointed out that land ownership is really only recognized as an artificial piece of paper granted by the government.) But, yeah, I have no idea how land would be divvied up if nobody "owns" land.

Again... all of this is waaay hypothetical. And I probably got most of it wrong. Anyway,I'm currently very happy owning my own parcel of land here in America. (Yay capitalism!)

[Gumby]

By the way... Apparently up until 150 years ago, nobody wanted to work for wages — it was considered to be "wage slavery"...

Wage slavery refers to a situation of quasi-voluntary slavery where a person's livelihood depends on wages, especially when the dependence is total and immediate. It is a negatively connoted term used to draw an analogy between slavery and wage labor, and to highlight similarities between owning and employing a person. The term wage slavery has been used to criticize economic exploitation and social stratification, with the former seen primarily as unequal bargaining power between labor and capital...

The exchange of money and debt for prolonged and unfulfilling work choices traces back to the disintegration of hunter-gatherer gift economies and the origin of prostitution as a "fundamental feature of human civilization". Similarities between wage labor and slavery were noted in ancient Rome by Cicero, while the pervasive practice of voluntary slavery in medieval Russia indicates the previous historical coexistence of slavery and voluntary choice. Before the American Civil War, Southern defenders of African American slavery invoked the concept of wage slavery to favorably compare the condition of their slaves to workers in the North...

The view that working for wages is akin to slavery was already present in the ancient world, beginning with the notion of prostitution as temporary slavery. At a time when self-sale contracts were one of the most direct ways to become a citizen in ancient Rome, Cicero wrote in his De Officiis that

   "whoever gives his labor for money sells himself and puts himself in the rank of slaves"
...

...Self-employment became less common as the artisan tradition slowly disappeared in the later part of the 19th century. In 1869 The New York Times described the system of wage labor as "a system of slavery as absolute if not as degrading as that which lately prevailed at the South".

Source: http://en.wikipedia.org/wiki/Wage_slavery

Pretty crazy! And this was all Pre-Marxism.

Makes you wonder if any of us would recognize our own society 150 years from now.

EDIT: I suppose it's no coincidence that "Compulsory Education" started in the United States just after 1850 — which was ushered in by wealthy benefactors to "educate" the future workforce and prepare them for factory/wage earning life.

[stone]

Gumby thanks for all the links so Economic Democracy stuff. I had never even heard the term before you mentioned it. I'm still struck though by how the Economic Democracy movement seems to be so much centered around state banks (eg http://www.ied.info/blog/1414/an-unders ... -170-words ). I don't see where banks fit into the logic of an economy supposidly governed by the individual choice of a multitude of people with similar financial power. The only role of a bank is to go over the heads of what everyone is deciding to do with their money. I don't see why people who had money to invest but didn't want to do so directly couldn't buy shares in somelike like the "venture capital trusts" we have today. That doesn't entail any credit creation either by a private bank or a state bank. The key thing is that an asset tax would render wanton credit creation as an extractive device very tax inefficient.
Basically what the economic democracy movement seems to advocate is essentially the same as the current Chinese system except with an elected government. They even use  China as a supposed good example:

Between 1979 and 1984, in only four short years, under socially-owned banks and socially-collected resource rents, “the number of rural Chinese living in poverty declined from more than 200 million to 70 million”? (Jean Dréze and Amartya Sen, Hunger and Public Action, Oxford: Clarendon, 1989, p. 216.). So this thesis of full and equal rights eliminating both poverty and war has already been proven.

Dispersing financial power would solve many of our problems but replacing concentrated financial power with concentrated political power would not IMO.

[stone]

So, I think it's pretty clear that if you were going to improve upon capitalism, it would probably be beneficial to do so without usury. What about interest-free loans for tuition or small startups? Would you agree? If not, why?

Interest is pretty much a derivative function of the price setting mechanism of free enterprise.  Without interest rates, how is risk to be determined and quantified?  Are public state banks just a way to get around the assessment of risk necessary in private lending so taxpayers bear the losses for bureaucrats ignoring or misjudging risk?  Bureaucrats are not driven by the profit motive and allegience to the consumer.
Islamic banking may ban interest, but they circumvent it with other methods it so the net effect is people still pay interest.  Since interest keeps popping its head up no matter how many times its been whacked, it must be a fundamental force of the universe.  If that is so, I feel uncomfortable with the rich monopolizing it, but then we go right back to the "free banking" days and that was a disaster.
I also feel very uncomfortable with an asset tax or a public state bank.  They are a direct assault on volitional freedom.  No one should be taxed for mere existence or on the property they've collected through their own effort.  Over my dead body!

I agree with your dislike of state banks. To my mind they amount to throwing away most of the valuable attributes of the free market. I don't see though why you don't believe equity financing couldn't replace much of current day fixed interest financing. After all there has been an enormous increase in the amount of credit and debt over the past thirty years. That process of massive credit creation is unneccessary for free market enterprise.
I find it curious that you rile against an asset tax as being a charge on property collected through peoples' own effort. An asset tax would be replacing taxes on wages, profits, capital gains etc. Without those taxes, people would be able to get more property from a given amount of effort in the first place. All that an asset tax would be circumventing is the extent to which wealth, already aquired, passively gathers more wealth. It would avoid the crazy situation that we have now where credit creation by banks by the stroke of a pen creates a paper "asset" that gathers wealth. That artifact of our current system is entirely diverting the private sector away from the real economy.

[Gumby]

I'm still struck though by how the Economic Democracy movement seems to be so much centered around state banks

IED cites the following article (by Web of Debt author, Ellen Brown) to explain a few reasons why state banks are better for society and the economy than private banks are:

http://www.huffingtonpost.com/ellen-bro ... 21747.html

This might be one of the reasons...

A new public bank would have a clean set of books, untainted by the Wall Street addiction to gambling in complex derivatives; and its profits would go back to the local government and community, rather than being siphoned off in exorbitant salaries, bonuses and dividends. A publicly-owned bank could funnel credit where it is needed most, directly into the local economy.
Source: http://www.huffingtonpost.com/ellen-bro ... 21747.html

The State Bank of North Dakota has also been quite successful at doing this in recent years, so there's some evidence that it actually can work quite well.

[MachineGhost]

Social Security can easily be paid. After the 2007 crash the Fed printed $13 trillion on its computers to give to bankers. It can do the same for Social Security – and for federal grants-in-aid to America’s states and cities. It can pay state and local pension obligations in the same way it has paid Wall Street’s 1%. The problem is that the Fed is only willing do what central banks were founded to do – finance government deficits – to give to the banks. The aim is to save bondholders and the banks’ high-flying counterparties, not the 99%.

The problem is that the financial system itself is rotten. This has turned today’s class war into a financial war, with the major tactic being to shape how voters perceive the problem. The trick is to make them think that cutting taxes will lower their living costs and make housing cheaper, rather than enabling banks to take what the tax collector used to take. That is the key perception that needs to be spread: cutting taxes leaves more “free lunch”? income available for banks to lend against, loading the economy deeper into debt.

Here’s why the present track can’t possibly work. State and local pension funds are $3 trillion behind because they are only making 1% returns these days (the only safe return), not the 8+% that they were told to make in order to pay pensions by “capital”? gains (that is, the bank-financed free lunch). The Fed is keeping interest rates low in an attempt to re-inflate real estate and other asset prices back to the happy decade of Bubblemeister Greenspan. If interest rates rise – by enough to enable California, Chicago and other localities to obtain enough interest to pay retirees what they promised – then banks will see the collateral for their mortgage loans fall.

Here’s why the present track can’t possibly work. State and local pension funds are $3 trillion behind because they are only making 1% returns these days (the only safe return), not the 8+% that they were told to make in order to pay pensions by “capital”? gains (that is, the bank-financed free lunch). The Fed is keeping interest rates low in an attempt to re-inflate real estate and other asset prices back to the happy decade of Bubblemeister Greenspan. If interest rates rise – by enough to enable California, Chicago and other localities to obtain enough interest to pay retirees what they promised – then banks will see the collateral for their mortgage loans fall.

At issue is the old Who/Whom choice. Given the mathematical fact that debts that can’t be paid, won’t be, the question is who should get priority: the 1% or the 99%?

http://www.counterpunch.org/2012/08/31/ ... he-cities/

[stone]

Machine Ghost, I've just got a copy of Michael Hudson's Bubble and Beyond book from Amazon. He seems to make more sense to me than other economists I've read bits by.

Gumby, I wasn't really comparing state banks with commercial banks. I was questioning the entire role of credit creation. Do you get my point that if everyone has financial power, then what role do banks of any kind have? All a bank is, is an institution to issue new money and in so doing disempower existing money. If existing money is dispersed amongst everyone, then issuing new money is acting counter to genuine economic democracy IMO.

[Gumby]

If existing money is dispersed amongst everyone, then issuing new money is acting counter to genuine economic democracy IMO.

I do see your point. For what it's worth, IED tries to argue the case for socially owned banks here...

http://www.ied.info/articles/an-honest- ... han-armies

[stone]

If existing money is dispersed amongst everyone, then issuing new money is acting counter to genuine economic democracy IMO.

I do see your point. For what it's worth, IED tries to argue the case for socially owned banks here...
http://www.ied.info/articles/an-honest- ... han-armies

It is simply the standard argument used for state control of the economy. I'm not that taken with that argument.