One of the lies promoting neoliberalism was, "China will buy more of our stuff"! Now why would they spend five times more to buy our stuff? I hope if Kamala Harris becomes president, she will hire Tom hartmann and Robert Reich as advisors. That is pretty close to exactly the way I see it also. Excellent writing.
We are suckers. We have fought foreign wars, spent money and blood to defend foreign powers that undermine our economy. OPEC/Saudi/Russia control oil production and impose the equivalent of taxes that affect everyone. Oil profits are funding the Russian war on Ukraine. Saudis own our largest refineries, control companies like Exxon.
This isn't an "unseen hand." We should be recouping trillions for price fixing and price gouging.
I point out that the irony in a democracy is that ignorant cult members will vote to end their own benefits. Only 58% of the electorate own any stock and most of that is through retirement mutual funds. The average investor, like me, has little or no control of our own investments because we have to rely on retirement funds.
I have a unique perspective because I heard Sarbanes Oxley/Dodd Frank whistleblower cases. Individuals have virtually no clout. Institutional investors rule. Those that are public (like state and local government funds) should consider the public interest before investing.
Most of the people I know who play individual stocks rely entirely on advice from brokers, who in the abstract can care less if the customer wins or loses.
42% of the electorate have nothing but Social Security and maybe a home as savings.
SSI provides a subsistence existence to disabled people and to anyone over age 65 who is destitute. Funded through general taxation, part of the budget.
This is the place to become educated. Here, and in a variety of other places, I have learned much, much more than I ever learned in a civics course, a history class, or in a four year liberal arts college program. You cannot condense and recreate this kind of well-thought out, lived, and studied knowledge into a class or course and hope that students will eat it up as conscripts in schools. People have to come voluntarily seeking information, truth, and knowledge, and because others have recognized this as a trusted and reliable source. There is more accurate, detailed, and insightful truth in this one "daily take" than in most college courses. There are reasons for that, of course. Spread the word. Unfortunately, truth is not what many people are looking for or willing to accept.
Another great source is Robert Reich's messages. The following is an excerpt from a speech he gave 30 years ago, which he posted yesterday. It is a stunningly correct assessment from 1994 of what was coming and what has indeed taken place.
"My friends, we are on the way to becoming a two-tiered society composed of a few winners and a larger group of Americans left behind, whose anger and disillusionment are easily manipulated. Once unbottled, mass resentment can poison the very fabric of society, the moral integrity of society, replacing ambition with envy, replacing tolerance with hate. Today the targets of that rage are immigrants and welfare mothers and government officials and gays, and an ill-defined counterculture. But as the middle class continues to erode, who will be the targets tomorrow?”
Reich was writing for a group called Inequality Media Civic Action.
The audience was not ready then for the insights and truths Reich articulated in 1994. Maybe more people are ready for Thom's and Reich's messages now. Maybe not. Everything ultimately depends on the audience and how forcefully and urgently they act. Civics classes will not make the difference. Children must be lured and invited, not led and compelled.
The excerpt from Reich was in a newsletter or fundraising request in my inbox yesterday in which he regretfully noted his foresight. I was particularly struck by his framing and eloquence in predicting what would, and did, happen. His work is brilliant an he has always been an ardent fighter for the little guy, as you must know. My best friend's daughter worked with him in Berkeley.
Why do people (even people "in the know") not realize why the US economy today has recovered far better from the Covid pandemic than any other developed country..... It's because Smokin' Joe Biden called up the ghost of John Maynard Keynes and applied Keynes' principles to support the economy during the shutdowns and keep the base intact for better days ahead. Thanks for the (nasty reminder) trip down memory lane..... We should have done much better than we did. The important thing to remember is that every decision of the neoliberal crowd to screw the US economy and workers was a political decision - they will tell you that "economic principles" forced those decisions that tore our country apart (and are still doing that), but it is all bull..... IF we elect Biden again and if we elect enough Democrats, and IF the Democrats are willing to politic and get their agenda done instead of worrying that people would not like them, we can save the country and quickly move to dismantle the evil structures of neoliberalism and its distorted economy, and move back to a new Golden Age.
Bravo Thom!! In one short and to the point article, you have explained in plain easy to read language, what the magical thinking of neoliberalism has wrought for our democracy. We are indeed in deep shit that will not be easy to climb out of.
I hope we can spread this understanding to enough people to create and engage a powerful enough movement for political change before a totally fascist state has rendered us all powerless.
One of the best synopses of where we are now and how we got here.
I have been asking progressive folks and organizations for some time, now, based on what we know,
What is the plan / team building for:
1. Framing the core issues (as presented here) into a clear, evolving message as opposed to the corporate Democratic Party advertising gurus and polling wizards;
2. Building a support network to provide airtight historical back up to support the messaging frames;
3. Establishing a Delivery Network to get the message out. Something in place of the ever diminishing clean journalism platforms that can go head to head with the social media cesspool.
*Remember when rock n roll had the big boys shitting in their pants?*
But think of the loss of status and income those "poor gurus, and polling wizards like Begala and Carville will lose. Do you have no pity for the rich and famous? Eff em, off with their heads, Useless as teats on a boar hog.
You make an important point. Glass-Steagall prohibited commercial banks from using deposit money to speculate in the markets – including derivatives. They were mostly restricted to making their profits by making loans. The high water of neoliberal deregulation, Gramm Leach Bliley,1999, permitted commercial banks to speculate in the markets again without limitation.
The bailout was needed because the banks bet multi-billions with many hedge funds that the housing market would continue to rise. The Big Short movie showed a few of the colourful hedge fund managers outsmarting the banks. The banks lost their bets. The bailout money flowed through the banks to the hedge funds creating a massive upward transfer of wealth from the salaried classes to the .01%.
Why from the salaried classes? The salaried classes paid back the bailout. Where do the banks get their money except from their customers through higher charges.
Phase 1: Government—Banks—Hedge Funds
Phase 2: Customers—Banks--Government
The reforms of Dodd Frank initially tried to put some restrictions on the ability of commercial banks to speculate in derivatives and other risky investments (the Volker Rules). Those have been gutted to the point of ineffectiveness.
Actually printed money is the small change, which the Treasury prints and sells to the Fed at cost of printing, and which they in turn sell to member banks, through the regional fed.
A friend and former boss, retired a Colonel, he was offered a job with a Generals slot, and turned it down, he went to work for the local Federal Reserve Regional bank, and said that it was a grand palace, the best that he who "prints" money can buy. He was first the accounting officer, then the VP.
Banks get their money, on demand for debt (loans) apply for a mortgage and if the bank has the Fed established reserve of checking accounts, government securities and corporate bonds in their vault, than can create money by book keeping entry, so long as they have on deposit with the Fed, the reserve base, which is set by the Fed, hence the fractional reserve system.
The money I borrowed to mortgage my property, was wiped off the books as I paid down the principal, and when I paid it off with the proceeds of another sale, that money created out of debt disappeared The interest I didn't pay did not affect inflation, but the interest I paid with monthly payments did. Collectively all interest on debts, public and private is what accounts for inflation.
Jerome Powell gave Trump a gift, for love and appreciation when he dropped interest rates to near zero, that held inflation in check, but with Biden in office, he is now at war at the behest of financial institutions and corporations.
Banks fear, absolutely fear inflation, which their fractional reserve system creates, it enables debtors to pay off loans with cheap money, as happened in the German Hyper inflation of 1922. A workman could punch out, and pay off his mortgage with an hours work.
On the other hand they make out like the bandits they are when there is deflation, because they can repossess real wealth, hold it till the market recovers and sell it at great profit. The lender doesn't lose a penny. when the debtor defaults on real property, because most of, except the fractional reserve, is simply zero'd out with double entry book keeping.
And that is how the system works, stupid university professors, students and experts are kept in the dark like mushrooms, for the truth will upset the apple cart.
However the Fed did spill the beans, for finance grad students, and bank managers by printing chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf
Not to toot my own horn, But three decades ago, almost, I put my paper out free, on the net, then Liberty forum, I've seen parts of it written since in various books, and see it pop up even now on the internet. I wrote it under a pseudonym. It was titled as Things are Not as They Appear to be. A failed attempt to educate the public.
I took a free online course from Professor Mehrling at Bernard College, "The Economics of Money and Banking" where he taught "the money view, money market funding of capital market lending." Shadow banking is as scary as it sounds when they manage huge pension funds, and if I remember, can be outside of regulation. I passed the course the first time but took it again because I felt "shaky" about some concepts. I still can't understand why we went down the road of financing the government by borrowing from private banks that the taxpayers pay back with interest except the system serves the parasitic wealth class. Presidents Jackson and Lincoln didn't like the system at all.
Banking started with Kings, Who stored excess wheat and grains.
The first recognizable bankers were the Knights Templars, they loaned gold and silver, mostly silver, to the Crowned Heads of Europe. And when King Frances couldn't repay the loan, he and the pope, charged them with heresy and confiscated their treasury, or what they could find, and burned them alive. The next bank was the Fugger Brothers of Italy, the also loaned silver to crowned heads, but Ferdinand and Isabella could not repaly the loan, and the Fuggers went bankrupt, and the royals fell on a scheme to fatten their wallets, by evictng on all Muslims and Jews, and the date for leaving was the same day that Columbus set sail for the New World. (There is evidence that he was a Jew, and not a Genoaese Sailor
He found a land that was rich in gold and silver, so rich that there was gold and silver inflation, which devalued their currency, but made the artisans and merchants wealthy, spurring the arts, silver and gold smithing, jewel cutting in the low countries.
Spain then owned the low countries, which had a lot of artisans, Huguenots and Jews which smelted and refashioned gold and silver into jewelry, votive objects, crucifizes, candelabaras and such.
The silver mines of Potosi, Bolivia and Inca gold, more than anything, except the wasting of money building the armada, accounts for the decline of Spain. Silver inflation, devalues money, just as debt money devalues the dollar.
The one thing you never hear about in economics, finance, the media is gold and/or silver inflation. The myth that precious metals have intrinsic value, must be maintained. Alfred Kitson, a 19th Century English Economist, deconsructed that myth with "A Fraudulent Standard"
You are correct about President Jackson, he vetoed the U.S. National Bank idea, which led to a series of depressions, which led ot the Federal Reserve Act.
America suffered a series of depressions for the shortage of silver and gold. then silver was found in Virginia City and there was a boom and inflation, when the country grew and the silver supply diminished we went through serious depressions.
And the country went on the gold standard, The famous cross of gold speech by William Jennings Bryan, was correct (ignoring his right wing populism), eventually Nixon recognized it and severed the gold standard.
Why gold as a standard of value, and a basis for issuing currency is best illustrated by the Soviet Example I mentioned.
When banks need to boost their reserves qt the interest rate set by the Fed as the Open Market Window rate., they buy treasury securities, but then they do pay they pay them back at an interest rate set by the Open Market Window of the Fed
The more reserves they have (meaning corporate bonds, government securities and checking accounts), the more money that can lend, and the more profit they make from interest
I believe his talking of member banks Daniel, they don't arbitrage interest it is set by Powell, currently, and his Open Market committee, but really set by Powell, it is a political decision, almost zero for Trump, for Joe it is 5.5% and as such actually designed to cause inflation and thus elect Trump.
Joe should have fired Jerome, and Merrick Garland (whom he never should have appointed, but he is a nice guy, an ameliorator, a compromiser, raised on bipartisan ship by racist Senate Dixiecrats.
This is as clear and concise a statement as could be made about this disastrous policy decision borne of Republican lies.
The one that has concentrated wealth for the already wealthy corporations and the Republicans stranglehold on money and power.
The authoritarianism necessary to weld this into law is looming, and the Donald is their guy.
Of course this DJT fluent in thievery of every kind wants to run the ship onto the reef .
Who else is destructive and depraved enough to make this happen ?
The Republicans have been having guests address their conventions in the past several years to change their thinking to authoritarian BS . One Victor Orban has impressed them thoroughly . Putin another GOP hero is favored by these traitors to Americas
“ Freedom for All” bedrock and White Supremacy and militant ignorance knows no bounds.
This must be forcefully pushed back and Democrats and any who love Lady Liberty must waste no time in opposing them .
New Republic has printed those books? That amazes me, because along with Reason it is libertarian. And Andrew Sullivian one of their editors and writers is a transphobic gay.
Waking up requires the proper message to be repeated over and over again. That is not happening with our side but the other side has it in spades. The Dems need to send free Speech TV video to replay and replay like the Putinites do on Fox confederate news. The Dems only need to do 2 things to win. First to choose 3 or 4 economic issues that the Dems base of low information voters will be moved wit;h and second daily repeat that message by every Dem elected official so by election day every person on the planet knows what those 3 or 4 economic issues are. No we are better than the Putinites or any non economic issue. That did not work in the 2022 election for the base of the Dems and the house was lost,
For additional background to Thom's cogent account here, I recommend "Democracy in Chains" by Nancy MacLean for an excellent account of the roots and development of "neoliberalism" --essentially property rights vs. human rights. Also, her earlier book "Liberty Is Not Enough" is and excellent account the of the before and after struggle between minority labor and capitalism following the passage of Title Six of the Civil Rights Act of 1965.
If this is a crossroads for the Democratic Party, despite Thom's optimism, it's hard to see how they are going to take the road less travelled. I am highly doubtful they have it in them. I'd love to be wrong.
One thing that would complement this excellent overview of how Neolib capitalism creates Billionaires at the expense of Middle-Class Americans is a brief discussion of Modern Monetary Theory (MMT). Sadly, most Americans have no clue how the Dollar (money) works, much less understand that money accrues value through government taxing and spending.
MMT is really not a theory so much as a description of how our monetary system works and the role played by the Federal Reserve Banks and Congress. After reading the paper, it will likely become clear that few, very few, legislators have a clue how their own economy functions and their role in it. They cut taxes on the wealthy and/or underfund IRS staffing to enable rampant corporate tax-dodging (Trump), and then they rant about government spending raising the national debt which they cause by diverting tax revenue our undertaxed billionaires; not honest middle class taxpayers.
The GOP solution to the debt is always to cut government spending on pensions , welfare, education, public healthcare, etc. I encourage Hartmannites to read up on MMT. Economist Stephanie Kelton published an interesting MMT book in 2020 - The Deficit Myth. It is full of useful MMT insights. Or just Google "Mosler," or "Kelton," or "MMT."
I looked at MMT and not impressed. Value is subjective, We value an item based on (ultimately) how much of our time (I am not talking of the rich here) and energy we expend to acquire the purchase price of the item. Wealth is also subjective. Wealth is that which makes one happy, not a pile of paper and coins, for they are soon gone, what is and is not wealth depends on where you sit in the food chain, and what it takes to fulfill your needs and make you comfortable and happy. Some folk are never satisfied, some will do with a full belly, a warm shelter, a cup of hot chocolate and the love of their family.
Rupert Murdoch can never be happy, so he acquires money, power and control to fill the hole in his belly and heart.
I have s suspicion that MMT was written from information I put out free of charge on the net back in the late 1990's, but with a personal spin.
By the way, increasing IRS auditors, does not adversely effect the Plutocrats, auditors get promotions and benies based on the amount of dollars they recoup, it is always a numbers game, whether it is the IRS or war. Numbers are the metric that decides reward and punishment.
It is time consuming and difficult to audit the billonaires the Plutocrats, and the reward is not there, there are so many loop h oles, credits, exclusions and exemptions available to them, not us.
End result is increase the IRS staff and you increase the audits on we the people, who struggle to pay our taxes.
It is not so straight forward as we are led to believe by the Treasury and the media.
Everything you say seems reasonable. However, MMT is about the dynamics of macro economics and not particularly one's experienced economics. I, and many others, have found MMT to be a useful model of monetary dynamics. For example, when you cut taxes, how does that affect the national debt as well as the stock market as well as the degree of wealth inequality? Even Yellen seems to discount the role played by taxation when the economy gets sick. Of course part of that is sensitivity to the fact that spending to increase jobs in a recession seems counter-intuitive to many voters. But Biden avoided a recession, so far, by doing just that - spending. After all, he cannot tell the Fed what to do - or Congress for that matter.
One interesting footnote that captured my attention is a study Stephanie Kelted and Randy Wray did looking at the recent past of deficits and surpluses between 1952 and 2012. What they observed was that everytime the US balanced the budget - it triggered a national recession. That is counter-intuitive and refutes GOP pearl-clutching about the size of the dept. They also point out that much of that debt is owed to ourselves and trading partners. No debt, trade is slow because most countries used dollars in international trade exchanges.
I will have to study MMT, as I see it is Modern Money Mechanics for the layman
People can't seem to understand debt money, aka fractional reserve banking, and how the interest is the primary mover of inflation. That is why inflation was slow under Trump, Powell dropped the interest rate for member banks on government securities to almost zero. And why they are torturing us under Biden, he has raised it to 5.5% I fear that the author of MMT doesn't get it.
On the other hand I was raised a Friedmanite, but once I studied the Fed and International Financial Institutions I am a Keynesian.
You are right the debt is owed to ourselves. And countries who tie their currency to the dollar, or like Argentina now replaces the Peso with the Dollar are in a shit load of trouble.
Argentina will have a depression if they switch to the US Dollar bill, because there is a shortage of money and that is a depression. The Soviet Union had a 100 % gold standard. Where a ruble equaled .9871 grams fine gold, and they only printed enough rubles that the gold on hand could cover.
The citizen could not go to the GosBank or one of the seven trust banks, and demand gold for rubles, but a foreigner could present a ruble at the windown of their NordBank in Paris, and demand gold, but that diminished the supply of gold, and thus the money supply.
That is why the USSR was in a perpetual depression, which very conveniently the cold war bailed them out of, as it gave the Kremlin an excuse for the depression.
In 1919 Congress passed the Edge Act. This act permits banks to set up offshore subsidiaries, among them are Panama and Liberia.
I lived in Panama for three years, so know how it works. Panama, at least at the time I left in 1978, used the paper dollar as currency, and it's coins were made in the Philadelphia Mint, of the exact same stock, weight and size, as U.S. Coins. When I returned to the states, I got rid of my Panamanian coins in vending machines. The only difference being the obverse and reverse.
I didn't have much money then, but I ate chateaubriand (cut small it is filet mignon), camerones and prawns almost every day. Cheap at the local market, on Avendia Balboa, Panama City, there was no inflation, and also much in the way of goods that money can buy, because the currency was US Dollars.
Then in 1979 or 1980, according to my ex wife, a Panamanian naturalized American, there was a massive campaign by Citigroup to entice Panamanians to get credit cards. It worked, and now they have inflation. Interest on the debs (credit cards, etc) causes inflation.
Does MMT explain that? If it doesn't, then it is a distraction.
Thanks, very interesting points. I'm a psychologist, so my economics reading has been a post-retirement hobby derived from working with economists studying health service delivery systems in one of my NIH grant portfolios - I also ate lunch most days with an economist. To me, most of economics is an artform; not science. There are exceptions. I think that MMT will eventually dominate economic thinking but there are a lot of old models that econ profs and bankers were taught in school that will have to die off as they continue to prove to be inefficient. Mosler. Wray, and Kelton all have numerous papers and some books if you want to learn more. Steph was on Bernie Sanders' campaign staff before DNC sabotaged his run. Yellen is open to MMT, but she is running Treasury too conservatively from my perspective.
Until I retired, I was part of an NIH cabal promoting dynamical models. Linear models (which dominate most research analyses) work most the time when there are no intervening variables between X and Y. Of course, most the time there are (P<.001). Dynamical models do not need to rely on normal distribution assumptions that yield odds (P values) for being valid. They either predict or they do not. When they do, it is amazing. I see MMT as offering a model that is dynamic - it just has not been exploited using modern modeling approaches. So, like linear statistical analyses, I think MMT will just have to slowly evolve as older models dye off - or become irrelevant if a better model comes along.
In 1984 I researched the Fed, and international banks, like the Bank for International Settlement, the Banking and Money system of the USSR, the Bank of Israel, and wrote a 136 page paper, in 1997 or 1998 I put it out sans copyright on the internet, under the pseudonym of Lee Markland, I have seen it show up , part and parcel, in books and on the internet like MMT, but always tweaked to accommodate the authors needs. I don't mind, my purpose was to expose how money is used to control nations.
After I obtained my masters, I visited my undergrad Econ 101 professor with whom I had a good relationship (he is a Friedmanite)
I asked him to review the paper. He did, when I returned a week later,, he handed it back saying "I don't understand money".
You see money, it's history and uses is separate from economics which is theory,, math, terms like inelastic, supply demand, marginal utility. Thanks that can be quantified and displayed on a white board
Economists aren't taught the theory of money. My undergraduate is in economics. The terms are useful, like inelastic demand, but it skips over, and I believe purposefully, modern money mechanics, that is how money is created, and what is the root cause of inflation.
The one thing I never learned in university, or in text books, or even discussions in or out of the media. Is the history of precious metals, in particularly gold inflation.
BTW in case it is you who mentioned Lincoln Lincoln financed the war by issuing bonds, bonds that were sold in England and America,
When the south surrendered bond holders demanded redemption in gold. America did not have the gold to cover the bonds, so he offered Greenbacks (which are still legal tender), and the bond holders refused greenbacks they wanted gold.
Lincoln's assassination Andrew Johnson would not redeem the bonds for gold either, At the subsequent election, U.S. Grant promised and did redeem the bonds for gold, but only $.10 on the dollarinstance in the election of 1868, The World, a NY based neswpaper owned and controlled by August Belmont(of the Rothschilds), withdrew support for the conservative candidate, Horatio Seymour, because his party would not endorse redemption of American War Bonds in Gold. A European banking syndicate(Rothschild Baring) owned a large amount of these bends and the bonds, by terms of issue (act of Feb 25,1862) were payable in greenbacks 'this treachery threw the election to Grant.
It's been nothing but lies since the Gulf of Tonkin (in my memory). I guess if you live in a society built on a fantasy (white male entitled superiority) that shouldn't be a surprise. What does surprise me (not so much George Orwell) is how many are so fucking clueless.
Yes, that was the great deregulation ogf the banks by Gramm Leech Bliley. FDR's reforms gave the US a stable financial system from the 1930s. What Clinton did not only laid the groundwork for the 2008 collapse, but the continuing fragility of the financial system.
One of the lies promoting neoliberalism was, "China will buy more of our stuff"! Now why would they spend five times more to buy our stuff? I hope if Kamala Harris becomes president, she will hire Tom hartmann and Robert Reich as advisors. That is pretty close to exactly the way I see it also. Excellent writing.
We are suckers. We have fought foreign wars, spent money and blood to defend foreign powers that undermine our economy. OPEC/Saudi/Russia control oil production and impose the equivalent of taxes that affect everyone. Oil profits are funding the Russian war on Ukraine. Saudis own our largest refineries, control companies like Exxon.
This isn't an "unseen hand." We should be recouping trillions for price fixing and price gouging.
We've been addressing the same issue on Robert Reich today. https://robertreich.substack.com/p/the-biggest-myth-of-all?utm_source=post-email-title&publication_id=365422&post_id=138710410&utm_campaign=email-post-title&isFreemail=false&r=zc69i&utm_medium=email
I point out that the irony in a democracy is that ignorant cult members will vote to end their own benefits. Only 58% of the electorate own any stock and most of that is through retirement mutual funds. The average investor, like me, has little or no control of our own investments because we have to rely on retirement funds.
I have a unique perspective because I heard Sarbanes Oxley/Dodd Frank whistleblower cases. Individuals have virtually no clout. Institutional investors rule. Those that are public (like state and local government funds) should consider the public interest before investing.
Most of the people I know who play individual stocks rely entirely on advice from brokers, who in the abstract can care less if the customer wins or loses.
42% of the electorate have nothing but Social Security and maybe a home as savings.
SSI provides a subsistence existence to disabled people and to anyone over age 65 who is destitute. Funded through general taxation, part of the budget.
Thanks Daniel for the reference.
This is the place to become educated. Here, and in a variety of other places, I have learned much, much more than I ever learned in a civics course, a history class, or in a four year liberal arts college program. You cannot condense and recreate this kind of well-thought out, lived, and studied knowledge into a class or course and hope that students will eat it up as conscripts in schools. People have to come voluntarily seeking information, truth, and knowledge, and because others have recognized this as a trusted and reliable source. There is more accurate, detailed, and insightful truth in this one "daily take" than in most college courses. There are reasons for that, of course. Spread the word. Unfortunately, truth is not what many people are looking for or willing to accept.
Another great source is Robert Reich's messages. The following is an excerpt from a speech he gave 30 years ago, which he posted yesterday. It is a stunningly correct assessment from 1994 of what was coming and what has indeed taken place.
"My friends, we are on the way to becoming a two-tiered society composed of a few winners and a larger group of Americans left behind, whose anger and disillusionment are easily manipulated. Once unbottled, mass resentment can poison the very fabric of society, the moral integrity of society, replacing ambition with envy, replacing tolerance with hate. Today the targets of that rage are immigrants and welfare mothers and government officials and gays, and an ill-defined counterculture. But as the middle class continues to erode, who will be the targets tomorrow?”
Reich was writing for a group called Inequality Media Civic Action.
The audience was not ready then for the insights and truths Reich articulated in 1994. Maybe more people are ready for Thom's and Reich's messages now. Maybe not. Everything ultimately depends on the audience and how forcefully and urgently they act. Civics classes will not make the difference. Children must be lured and invited, not led and compelled.
Thank you for recalling Secty. Reich's prescient words from '94.
Chris,
The excerpt from Reich was in a newsletter or fundraising request in my inbox yesterday in which he regretfully noted his foresight. I was particularly struck by his framing and eloquence in predicting what would, and did, happen. His work is brilliant an he has always been an ardent fighter for the little guy, as you must know. My best friend's daughter worked with him in Berkeley.
Why do people (even people "in the know") not realize why the US economy today has recovered far better from the Covid pandemic than any other developed country..... It's because Smokin' Joe Biden called up the ghost of John Maynard Keynes and applied Keynes' principles to support the economy during the shutdowns and keep the base intact for better days ahead. Thanks for the (nasty reminder) trip down memory lane..... We should have done much better than we did. The important thing to remember is that every decision of the neoliberal crowd to screw the US economy and workers was a political decision - they will tell you that "economic principles" forced those decisions that tore our country apart (and are still doing that), but it is all bull..... IF we elect Biden again and if we elect enough Democrats, and IF the Democrats are willing to politic and get their agenda done instead of worrying that people would not like them, we can save the country and quickly move to dismantle the evil structures of neoliberalism and its distorted economy, and move back to a new Golden Age.
Bravo Thom!! In one short and to the point article, you have explained in plain easy to read language, what the magical thinking of neoliberalism has wrought for our democracy. We are indeed in deep shit that will not be easy to climb out of.
I hope we can spread this understanding to enough people to create and engage a powerful enough movement for political change before a totally fascist state has rendered us all powerless.
I will follow Senator Chris Murphy as well. 👍🏻🇺🇸
I'm 80 years old, still healthy and strong... I can confirm all the truths spoken here. The lust for wealth has blinded Lady Liberty!
One of the best synopses of where we are now and how we got here.
I have been asking progressive folks and organizations for some time, now, based on what we know,
What is the plan / team building for:
1. Framing the core issues (as presented here) into a clear, evolving message as opposed to the corporate Democratic Party advertising gurus and polling wizards;
2. Building a support network to provide airtight historical back up to support the messaging frames;
3. Establishing a Delivery Network to get the message out. Something in place of the ever diminishing clean journalism platforms that can go head to head with the social media cesspool.
*Remember when rock n roll had the big boys shitting in their pants?*
Anyone?
Donald
But think of the loss of status and income those "poor gurus, and polling wizards like Begala and Carville will lose. Do you have no pity for the rich and famous? Eff em, off with their heads, Useless as teats on a boar hog.
You make an important point. Glass-Steagall prohibited commercial banks from using deposit money to speculate in the markets – including derivatives. They were mostly restricted to making their profits by making loans. The high water of neoliberal deregulation, Gramm Leach Bliley,1999, permitted commercial banks to speculate in the markets again without limitation.
The bailout was needed because the banks bet multi-billions with many hedge funds that the housing market would continue to rise. The Big Short movie showed a few of the colourful hedge fund managers outsmarting the banks. The banks lost their bets. The bailout money flowed through the banks to the hedge funds creating a massive upward transfer of wealth from the salaried classes to the .01%.
Why from the salaried classes? The salaried classes paid back the bailout. Where do the banks get their money except from their customers through higher charges.
Phase 1: Government—Banks—Hedge Funds
Phase 2: Customers—Banks--Government
The reforms of Dodd Frank initially tried to put some restrictions on the ability of commercial banks to speculate in derivatives and other risky investments (the Volker Rules). Those have been gutted to the point of ineffectiveness.
Also Bill Clinton signed the legislation that revoked Glass Steagall, one of the acts I will forever hold against him, and his wife..
"Where do the banks get their money?"
A cynic would say that the Fed just prints it.
Actually printed money is the small change, which the Treasury prints and sells to the Fed at cost of printing, and which they in turn sell to member banks, through the regional fed.
A friend and former boss, retired a Colonel, he was offered a job with a Generals slot, and turned it down, he went to work for the local Federal Reserve Regional bank, and said that it was a grand palace, the best that he who "prints" money can buy. He was first the accounting officer, then the VP.
Banks get their money, on demand for debt (loans) apply for a mortgage and if the bank has the Fed established reserve of checking accounts, government securities and corporate bonds in their vault, than can create money by book keeping entry, so long as they have on deposit with the Fed, the reserve base, which is set by the Fed, hence the fractional reserve system.
The money I borrowed to mortgage my property, was wiped off the books as I paid down the principal, and when I paid it off with the proceeds of another sale, that money created out of debt disappeared The interest I didn't pay did not affect inflation, but the interest I paid with monthly payments did. Collectively all interest on debts, public and private is what accounts for inflation.
Jerome Powell gave Trump a gift, for love and appreciation when he dropped interest rates to near zero, that held inflation in check, but with Biden in office, he is now at war at the behest of financial institutions and corporations.
Banks fear, absolutely fear inflation, which their fractional reserve system creates, it enables debtors to pay off loans with cheap money, as happened in the German Hyper inflation of 1922. A workman could punch out, and pay off his mortgage with an hours work.
On the other hand they make out like the bandits they are when there is deflation, because they can repossess real wealth, hold it till the market recovers and sell it at great profit. The lender doesn't lose a penny. when the debtor defaults on real property, because most of, except the fractional reserve, is simply zero'd out with double entry book keeping.
And that is how the system works, stupid university professors, students and experts are kept in the dark like mushrooms, for the truth will upset the apple cart.
However the Fed did spill the beans, for finance grad students, and bank managers by printing chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf
Not to toot my own horn, But three decades ago, almost, I put my paper out free, on the net, then Liberty forum, I've seen parts of it written since in various books, and see it pop up even now on the internet. I wrote it under a pseudonym. It was titled as Things are Not as They Appear to be. A failed attempt to educate the public.
I learned that in grad school for Health Services Administration.
I took a free online course from Professor Mehrling at Bernard College, "The Economics of Money and Banking" where he taught "the money view, money market funding of capital market lending." Shadow banking is as scary as it sounds when they manage huge pension funds, and if I remember, can be outside of regulation. I passed the course the first time but took it again because I felt "shaky" about some concepts. I still can't understand why we went down the road of financing the government by borrowing from private banks that the taxpayers pay back with interest except the system serves the parasitic wealth class. Presidents Jackson and Lincoln didn't like the system at all.
Parasitic wealth Gloria
Parasitic wealth is the reason.
Banking started with Kings, Who stored excess wheat and grains.
The first recognizable bankers were the Knights Templars, they loaned gold and silver, mostly silver, to the Crowned Heads of Europe. And when King Frances couldn't repay the loan, he and the pope, charged them with heresy and confiscated their treasury, or what they could find, and burned them alive. The next bank was the Fugger Brothers of Italy, the also loaned silver to crowned heads, but Ferdinand and Isabella could not repaly the loan, and the Fuggers went bankrupt, and the royals fell on a scheme to fatten their wallets, by evictng on all Muslims and Jews, and the date for leaving was the same day that Columbus set sail for the New World. (There is evidence that he was a Jew, and not a Genoaese Sailor
He found a land that was rich in gold and silver, so rich that there was gold and silver inflation, which devalued their currency, but made the artisans and merchants wealthy, spurring the arts, silver and gold smithing, jewel cutting in the low countries.
Spain then owned the low countries, which had a lot of artisans, Huguenots and Jews which smelted and refashioned gold and silver into jewelry, votive objects, crucifizes, candelabaras and such.
The silver mines of Potosi, Bolivia and Inca gold, more than anything, except the wasting of money building the armada, accounts for the decline of Spain. Silver inflation, devalues money, just as debt money devalues the dollar.
The one thing you never hear about in economics, finance, the media is gold and/or silver inflation. The myth that precious metals have intrinsic value, must be maintained. Alfred Kitson, a 19th Century English Economist, deconsructed that myth with "A Fraudulent Standard"
You are correct about President Jackson, he vetoed the U.S. National Bank idea, which led to a series of depressions, which led ot the Federal Reserve Act.
America suffered a series of depressions for the shortage of silver and gold. then silver was found in Virginia City and there was a boom and inflation, when the country grew and the silver supply diminished we went through serious depressions.
And the country went on the gold standard, The famous cross of gold speech by William Jennings Bryan, was correct (ignoring his right wing populism), eventually Nixon recognized it and severed the gold standard.
Why gold as a standard of value, and a basis for issuing currency is best illustrated by the Soviet Example I mentioned.
Thanks for the fascinating history lesson.
Don't the banks have to pay this money back, albeit at a low interest rate?
When banks need to boost their reserves qt the interest rate set by the Fed as the Open Market Window rate., they buy treasury securities, but then they do pay they pay them back at an interest rate set by the Open Market Window of the Fed
The more reserves they have (meaning corporate bonds, government securities and checking accounts), the more money that can lend, and the more profit they make from interest
At low interest rates, they arbitrage.
I believe his talking of member banks Daniel, they don't arbitrage interest it is set by Powell, currently, and his Open Market committee, but really set by Powell, it is a political decision, almost zero for Trump, for Joe it is 5.5% and as such actually designed to cause inflation and thus elect Trump.
Joe should have fired Jerome, and Merrick Garland (whom he never should have appointed, but he is a nice guy, an ameliorator, a compromiser, raised on bipartisan ship by racist Senate Dixiecrats.
This is as clear and concise a statement as could be made about this disastrous policy decision borne of Republican lies.
The one that has concentrated wealth for the already wealthy corporations and the Republicans stranglehold on money and power.
The authoritarianism necessary to weld this into law is looming, and the Donald is their guy.
Of course this DJT fluent in thievery of every kind wants to run the ship onto the reef .
Who else is destructive and depraved enough to make this happen ?
The Republicans have been having guests address their conventions in the past several years to change their thinking to authoritarian BS . One Victor Orban has impressed them thoroughly . Putin another GOP hero is favored by these traitors to Americas
“ Freedom for All” bedrock and White Supremacy and militant ignorance knows no bounds.
This must be forcefully pushed back and Democrats and any who love Lady Liberty must waste no time in opposing them .
Along these lines I would recommend the new book by Naomi Oreskes and Erik M. Conway -
The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market.
A review of the book in The New Republic: https://newrepublic.com/article/171434/big-business-hijacked-freedom-oreskes-conway-interview
These two wrote Merchants of Doubt which is also an eye-opener.
New Republic has printed those books? That amazes me, because along with Reason it is libertarian. And Andrew Sullivian one of their editors and writers is a transphobic gay.
No .... that's not what I wrote. They REVIEWED.
Another link in the New Yorker:
https://www.newyorker.com/magazine/2023/07/24/the-rise-and-fall-of-neoliberalism
Or a discussion in the Nation with Claudia Dreifus.:
https://www.thenation.com/article/society/qa-naomi-oreskes/
Thanks Joan for the references.
Waking up requires the proper message to be repeated over and over again. That is not happening with our side but the other side has it in spades. The Dems need to send free Speech TV video to replay and replay like the Putinites do on Fox confederate news. The Dems only need to do 2 things to win. First to choose 3 or 4 economic issues that the Dems base of low information voters will be moved wit;h and second daily repeat that message by every Dem elected official so by election day every person on the planet knows what those 3 or 4 economic issues are. No we are better than the Putinites or any non economic issue. That did not work in the 2022 election for the base of the Dems and the house was lost,
For additional background to Thom's cogent account here, I recommend "Democracy in Chains" by Nancy MacLean for an excellent account of the roots and development of "neoliberalism" --essentially property rights vs. human rights. Also, her earlier book "Liberty Is Not Enough" is and excellent account the of the before and after struggle between minority labor and capitalism following the passage of Title Six of the Civil Rights Act of 1965.
If this is a crossroads for the Democratic Party, despite Thom's optimism, it's hard to see how they are going to take the road less travelled. I am highly doubtful they have it in them. I'd love to be wrong.
One thing that would complement this excellent overview of how Neolib capitalism creates Billionaires at the expense of Middle-Class Americans is a brief discussion of Modern Monetary Theory (MMT). Sadly, most Americans have no clue how the Dollar (money) works, much less understand that money accrues value through government taxing and spending.
Warren Mosler has an excellent 5-page white paper which is free to download that overviews MMT. https://docs.google.com/document/d/1gvDcMU_ko1h5TeVjQL8UMJW9gmKY1x0zcqKIRTZQDAQ/edit?pli=1 [5 pages]
MMT is really not a theory so much as a description of how our monetary system works and the role played by the Federal Reserve Banks and Congress. After reading the paper, it will likely become clear that few, very few, legislators have a clue how their own economy functions and their role in it. They cut taxes on the wealthy and/or underfund IRS staffing to enable rampant corporate tax-dodging (Trump), and then they rant about government spending raising the national debt which they cause by diverting tax revenue our undertaxed billionaires; not honest middle class taxpayers.
The GOP solution to the debt is always to cut government spending on pensions , welfare, education, public healthcare, etc. I encourage Hartmannites to read up on MMT. Economist Stephanie Kelton published an interesting MMT book in 2020 - The Deficit Myth. It is full of useful MMT insights. Or just Google "Mosler," or "Kelton," or "MMT."
I looked at MMT and not impressed. Value is subjective, We value an item based on (ultimately) how much of our time (I am not talking of the rich here) and energy we expend to acquire the purchase price of the item. Wealth is also subjective. Wealth is that which makes one happy, not a pile of paper and coins, for they are soon gone, what is and is not wealth depends on where you sit in the food chain, and what it takes to fulfill your needs and make you comfortable and happy. Some folk are never satisfied, some will do with a full belly, a warm shelter, a cup of hot chocolate and the love of their family.
Rupert Murdoch can never be happy, so he acquires money, power and control to fill the hole in his belly and heart.
I have s suspicion that MMT was written from information I put out free of charge on the net back in the late 1990's, but with a personal spin.
By the way, increasing IRS auditors, does not adversely effect the Plutocrats, auditors get promotions and benies based on the amount of dollars they recoup, it is always a numbers game, whether it is the IRS or war. Numbers are the metric that decides reward and punishment.
It is time consuming and difficult to audit the billonaires the Plutocrats, and the reward is not there, there are so many loop h oles, credits, exclusions and exemptions available to them, not us.
End result is increase the IRS staff and you increase the audits on we the people, who struggle to pay our taxes.
It is not so straight forward as we are led to believe by the Treasury and the media.
Everything you say seems reasonable. However, MMT is about the dynamics of macro economics and not particularly one's experienced economics. I, and many others, have found MMT to be a useful model of monetary dynamics. For example, when you cut taxes, how does that affect the national debt as well as the stock market as well as the degree of wealth inequality? Even Yellen seems to discount the role played by taxation when the economy gets sick. Of course part of that is sensitivity to the fact that spending to increase jobs in a recession seems counter-intuitive to many voters. But Biden avoided a recession, so far, by doing just that - spending. After all, he cannot tell the Fed what to do - or Congress for that matter.
One interesting footnote that captured my attention is a study Stephanie Kelted and Randy Wray did looking at the recent past of deficits and surpluses between 1952 and 2012. What they observed was that everytime the US balanced the budget - it triggered a national recession. That is counter-intuitive and refutes GOP pearl-clutching about the size of the dept. They also point out that much of that debt is owed to ourselves and trading partners. No debt, trade is slow because most countries used dollars in international trade exchanges.
I will have to study MMT, as I see it is Modern Money Mechanics for the layman
People can't seem to understand debt money, aka fractional reserve banking, and how the interest is the primary mover of inflation. That is why inflation was slow under Trump, Powell dropped the interest rate for member banks on government securities to almost zero. And why they are torturing us under Biden, he has raised it to 5.5% I fear that the author of MMT doesn't get it.
On the other hand I was raised a Friedmanite, but once I studied the Fed and International Financial Institutions I am a Keynesian.
You are right the debt is owed to ourselves. And countries who tie their currency to the dollar, or like Argentina now replaces the Peso with the Dollar are in a shit load of trouble.
Argentina will have a depression if they switch to the US Dollar bill, because there is a shortage of money and that is a depression. The Soviet Union had a 100 % gold standard. Where a ruble equaled .9871 grams fine gold, and they only printed enough rubles that the gold on hand could cover.
The citizen could not go to the GosBank or one of the seven trust banks, and demand gold for rubles, but a foreigner could present a ruble at the windown of their NordBank in Paris, and demand gold, but that diminished the supply of gold, and thus the money supply.
That is why the USSR was in a perpetual depression, which very conveniently the cold war bailed them out of, as it gave the Kremlin an excuse for the depression.
In 1919 Congress passed the Edge Act. This act permits banks to set up offshore subsidiaries, among them are Panama and Liberia.
I lived in Panama for three years, so know how it works. Panama, at least at the time I left in 1978, used the paper dollar as currency, and it's coins were made in the Philadelphia Mint, of the exact same stock, weight and size, as U.S. Coins. When I returned to the states, I got rid of my Panamanian coins in vending machines. The only difference being the obverse and reverse.
I didn't have much money then, but I ate chateaubriand (cut small it is filet mignon), camerones and prawns almost every day. Cheap at the local market, on Avendia Balboa, Panama City, there was no inflation, and also much in the way of goods that money can buy, because the currency was US Dollars.
Then in 1979 or 1980, according to my ex wife, a Panamanian naturalized American, there was a massive campaign by Citigroup to entice Panamanians to get credit cards. It worked, and now they have inflation. Interest on the debs (credit cards, etc) causes inflation.
Does MMT explain that? If it doesn't, then it is a distraction.
Thanks, very interesting points. I'm a psychologist, so my economics reading has been a post-retirement hobby derived from working with economists studying health service delivery systems in one of my NIH grant portfolios - I also ate lunch most days with an economist. To me, most of economics is an artform; not science. There are exceptions. I think that MMT will eventually dominate economic thinking but there are a lot of old models that econ profs and bankers were taught in school that will have to die off as they continue to prove to be inefficient. Mosler. Wray, and Kelton all have numerous papers and some books if you want to learn more. Steph was on Bernie Sanders' campaign staff before DNC sabotaged his run. Yellen is open to MMT, but she is running Treasury too conservatively from my perspective.
Until I retired, I was part of an NIH cabal promoting dynamical models. Linear models (which dominate most research analyses) work most the time when there are no intervening variables between X and Y. Of course, most the time there are (P<.001). Dynamical models do not need to rely on normal distribution assumptions that yield odds (P values) for being valid. They either predict or they do not. When they do, it is amazing. I see MMT as offering a model that is dynamic - it just has not been exploited using modern modeling approaches. So, like linear statistical analyses, I think MMT will just have to slowly evolve as older models dye off - or become irrelevant if a better model comes along.
In 1984 I researched the Fed, and international banks, like the Bank for International Settlement, the Banking and Money system of the USSR, the Bank of Israel, and wrote a 136 page paper, in 1997 or 1998 I put it out sans copyright on the internet, under the pseudonym of Lee Markland, I have seen it show up , part and parcel, in books and on the internet like MMT, but always tweaked to accommodate the authors needs. I don't mind, my purpose was to expose how money is used to control nations.
After I obtained my masters, I visited my undergrad Econ 101 professor with whom I had a good relationship (he is a Friedmanite)
I asked him to review the paper. He did, when I returned a week later,, he handed it back saying "I don't understand money".
You see money, it's history and uses is separate from economics which is theory,, math, terms like inelastic, supply demand, marginal utility. Thanks that can be quantified and displayed on a white board
Economists aren't taught the theory of money. My undergraduate is in economics. The terms are useful, like inelastic demand, but it skips over, and I believe purposefully, modern money mechanics, that is how money is created, and what is the root cause of inflation.
The one thing I never learned in university, or in text books, or even discussions in or out of the media. Is the history of precious metals, in particularly gold inflation.
BTW in case it is you who mentioned Lincoln Lincoln financed the war by issuing bonds, bonds that were sold in England and America,
When the south surrendered bond holders demanded redemption in gold. America did not have the gold to cover the bonds, so he offered Greenbacks (which are still legal tender), and the bond holders refused greenbacks they wanted gold.
Lincoln's assassination Andrew Johnson would not redeem the bonds for gold either, At the subsequent election, U.S. Grant promised and did redeem the bonds for gold, but only $.10 on the dollarinstance in the election of 1868, The World, a NY based neswpaper owned and controlled by August Belmont(of the Rothschilds), withdrew support for the conservative candidate, Horatio Seymour, because his party would not endorse redemption of American War Bonds in Gold. A European banking syndicate(Rothschild Baring) owned a large amount of these bends and the bonds, by terms of issue (act of Feb 25,1862) were payable in greenbacks 'this treachery threw the election to Grant.
It's been nothing but lies since the Gulf of Tonkin (in my memory). I guess if you live in a society built on a fantasy (white male entitled superiority) that shouldn't be a surprise. What does surprise me (not so much George Orwell) is how many are so fucking clueless.
Yes, that was the great deregulation ogf the banks by Gramm Leech Bliley. FDR's reforms gave the US a stable financial system from the 1930s. What Clinton did not only laid the groundwork for the 2008 collapse, but the continuing fragility of the financial system.