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Category: federal reserve

  • Progressive Economists Say Interest Rate Hikes Are Wrong Approach to Inflation

    The Federal Reserve’s decision Wednesday to hike interest rates by 75 basis points — the largest increase since 1994 — heightened fears among economists that the central bank’s attempt to tame inflation risks plunging the U.S. economy into recession and inflicting more pain on vulnerable workers.

    The Fed’s move came on the heels of worse-than-expected federal data showing that inflation jumped 8.6% in May compared to a year earlier, prompting central bank officials to pursue more aggressive federal-funds rate increases, the Fed’s blunt tool to rein in consumer prices.

    But progressive economists have argued for months that interest rate hikes — which are aimed primarily at slowing demand — are the wrong medicine for inflation driven in large part by skyrocketing gas prices and supply-chain disruptions caused by the pandemic.

    “Relying on the Fed to bring down prices is like treating someone’s fever by putting them in a freezer,” argued Robert Reich, the former head of the U.S. Department of Labor. “It doesn’t treat the underlying disease, and could make things far worse.”

    With the Fed expected to continue pushing up rates at a similar pace in the coming months, analysts are growing increasingly concerned that the central bank will induce an economic slowdown and throw millions out of work in its bid to tackle inflation — a potential echo of the infamous Volcker shock of the 1980s.

    “As is well understood, much of the inflation we now see stems from factors that have little to do with the strength of the U.S. economy,” said Dean Baker, senior economist at the Center for Economic and Policy Research. “The soaring price of oil is due to Russia’s invasion of Ukraine and subsequent sanctions. Fed rate hikes will not bring down the price of gas.”

    Jerome Powell, the chair of the Federal Reserve, admitted as much during a press conference following the Federal Open Market Committee’s closed-door meeting on Wednesday.

    “Lots of countries are looking at inflation of 10%, and it’s largely due to commodities prices,” said Powell, a Trump appointee renominated by President Joe Biden in November. “Gas prices — you know, all-time highs and things like that. That’s not something we can do something about.”

    Powell told reporters that while the Fed is not actively trying to cause a recession in a bid to bring down prices, “there’s always a risk of going too far” with rate hikes. Powell also acknowledged that “wages are not principally responsible for the inflation that we’re seeing,” though just last month he said the central bank’s goal is to “get wages down” even amid evidence that workers’ share of income is declining.

    In a blog post on Wednesday, Reich stressed that “wages are lagging behind inflation.”

    “A more accurate description of what we’re now seeing might be called ‘profit-price inflation’ — prices driven upward by corporations seeking increased profits,” Reich argued, pointing to a recent analysis by the Economic Policy Institute showing that record-shattering corporate profits have been contributing disproportionately to inflation.

    “I understand the Fed’s urgency, but it has entered dangerous territory,” Reich wrote. “If the Fed continues down this path — as it has signaled it will — the economy will be plunged into a recession. Every time over the last half-century the Fed has raised interest rates this much and this quickly, it has caused a recession.”

    “A recession will be especially harmful to people who are most vulnerable to downturns in the economy — who are the first to be fired (and last to be hired again when the economy turns upward): lower-wage workers, disproportionately women and people of color,” he added. “The Fed is making a big mistake.”

    Baker, for his part, noted that Powell is the “first chair in recent decades to explicitly recognize the full employment side of the Fed’s dual mandate and note the huge benefits of low unemployment to Black and Hispanic workers, people with criminal records, and other groups disadvantaged in the labor market.”

    “In keeping with this recognition,” Baker said, “the Fed would be well-advised to resist the frenzy of inflation fighters who want to see a whole series of large rate hikes.”

    Rampant inflation, a problem that is hardly unique to the U.S., has become a significant economic and political issue for the Biden administration, particularly as the pivotal midterm elections approach.

    In an op-ed for the Wall Street Journal late last month, Biden declined to criticize the Fed’s approach to combating inflation, writing that he has “appointed highly qualified people from both parties to lead that institution.”

    “The Federal Reserve has a primary responsibility to control inflation,” the president wrote. “My predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this … I agree with their assessment that fighting inflation is our top economic challenge right now.”

    Biden proceeded to voice support for legislative action to drive down housing and prescription drug costs, Democratic priorities that are stalled in the Senate due largely to Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.). On Tuesday, the president sent a letter to the top executives of major U.S. oil and gas companies imploring them to ramp up production to reduce prices.

    But recent survey data indicates that voters overwhelmingly want the president to more forcefully crack down on price-gouging corporations as a way to bring down costs at gas pumps, grocery stores, pharmacies, and elsewhere across the economy. Voters also support a windfall tax on oil and gas giants that are exploiting Russia’s war on Ukraine to rake in huge profits.

    “Ahead of the midterms, voters across the nation are eager to support candidates who embrace economic populism and prove to the American people that corporations are no longer above the law,” said Helen Brosnan, executive director of Fight Corporate Monopolies.

    This post was originally published on Latest – Truthout.

  • Answers from the MMTers

    Jared Bernstein, longtime economic advisor to Joe Biden asked the MMT academics some questions. They answered.

    This post was originally published on Real Progressives.

  • A Reset that Serves the People (Part 2)

    Instead of buying into the World Economic Forum’s dystopian “Great Reset,” we can build an alternative system with a mandate to serve the people.

    This is part two to a May 4, 2022 article called “A Monetary Reset Where the Rich Don’t Own Everything,” the gist of which was that national and global debt levels are unsustainably high. We need a “reset,” but of what sort? The “Great Reset” of the World Economic Forum (WEF) would leave the people as non-owner tenants in a feudalistic technocracy. The reset of the Eurasian Economic Union would allow participating nations to opt out of the Western capitalist system altogether, but what of the Western countries that are left? That is the question addressed here.

    Our Forefathers Had Some Innovative Solutions

    Fortunately for the United States, our national debt is in U.S. dollars. As former Federal Reserve Chairman Alan Greenspan once observed, “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.”

    Paying government debt by just printing the money was the innovative solution of the cash-strapped American colonial governments. The problem was that it tended to be inflationary. The paper scrip they issued was considered an advance against future taxes, but it was easier to issue the money than to tax it back, and over-issuing devalued the currency. The colony of Pennsylvania fixed that problem by forming a government-owned “land bank.” Money was issued as farm credit that was repaid. The new money went out from the local government and came back to it, stimulating the economy and trade without devaluing the currency.

    But in the mid-eighteenth century, at the behest of the Bank of England, the colonies were forbidden by King George to issue their own currencies, triggering a recession and the American Revolution. The colonists won the war, but by the end of it the currency was so devalued (chiefly from British counterfeiting) that the Founding Fathers were afraid to include the power to issue paper money in the Constitution.

    Hamilton’s Solution: Debt-for-equity Swaps

    That left Treasury Secretary Alexander Hamilton in a bind. After the war, the colonies-turned-states were heavily in debt, with no way to repay it. Hamilton solved the problem by turning the states’ debts into equity in the First United States Bank. The creditors became shareholders in the bank, earning a 6% dividend on their holdings.

    Might that work today? H.R. 3339, a bill currently before Congress, would form a National Infrastructure Bank (NIB) modeled on Hamilton’s U.S. Bank, capitalized with federal securities acquired in debt-for-equity swaps. Shareholders would receive a guaranteed 2% dividend on non-voting preferred stock in the bank, with the option of recovering the principal after 20 years.

    If the whole $30 trillion U.S. federal debt were turned into bank capital, leveraged into loans at 10 to 1 as banks are allowed to do, the bank could do $300 trillion in infrastructure loans. To start, the Federal Reserve could buy NIB stock with the $5.76 trillion in U.S. Treasury securities currently on its balance sheet, capitalizing potential loans of $57 trillion. The possibilities are breathtaking; and because the money would enter the money supply in the form of low-interest loans to local governments that would be paid back over time, the result need not be inflationary. Loans for infrastructure and other productive ventures would raise supply to meet demand, keeping prices stable.

    Lincoln’s Solution: Just Issue the Money

    Hamilton’s solution to an unsustainable federal debt was terminated when President Andrew Jackson closed down the Second U.S. Bank. That left Abraham Lincoln in a bind. Faced with a massive debt at usurious interest rates to fund the Civil War, he solved the problem by reverting to the solution of the American colonists: just issue the currency as paper money.

    In the 1860s, these U.S. Notes or Greenbacks constituted 40% of the national currency. Today, 40% of the circulating money supply would be $7.6 trillion. Yet massive Greenback issuance during the Civil War did not lead to hyperinflation. U.S. Notes suffered a drop in value as against gold, but according to Milton Friedman and Anna Schwarz in A Monetary History of the United States, 1867-1960, this was due not to “printing money” but to trade imbalances with foreign trading partners on the gold standard. The Greenbacks aided the Union not only in winning the war but in funding a period of unprecedented economic expansion, making the country the greatest industrial giant the world had yet seen. The steel industry was launched, a continental railroad system was created, a new era of farm machinery and cheap tools was promoted, free higher education was established, government support was provided to all branches of science, the Bureau of Mines was organized, and labor productivity was increased by 50 to 75 percent.

    The Japanese “Free Lunch”

    Another option is for the U.S. government to “monetize” its debt by having the central bank purchase and hold it or write it off. The Federal Reserve returns interest and profits to the Treasury after deducting its costs.

    This alternative, too, need not be inflationary, as has apparently been demonstrated by the Japanese. The Bank of Japan (BOJ) started buying government bonds in 1999, after reducing interest rates to zero, then dropping them into negative territory in 2015. Today Japan’s government debt is a whopping 260% of its Gross Domestic Product, and the Bank of Japan owns half of it. (Even the outsized U.S. debt to GDP ratio is only 126%.) Yet annual inflation is now only 1.2% in Japan, not even up to the BOJ’s longstanding 2% target. To the extent that prices are rising, it is not from money-printing but from lockdowns and supply chain disruptions and shortages, the same disruptions triggering price inflation globally.

    Hedge fund manager Eric Peters discussed the Japanese experiment in a recent article titled “Can a Modern Nation Pull Off a Debt Jubilee Without Full Monetary Collapse?” Noting that “core prices in Japan’s economy remain almost identical today as they were when its zero-interest-rate experiment began,” he asked:

    Could the central bank create money, buy all the outstanding bonds, and simply burn them? Execute a modern version of an Old Testament debt Jubilee? …. [M]ight it be possible for a country to pull off such a feat without full monetary collapse? We don’t know, yet.

    A Treasury Issue of Special Coins or E-cash

    For future budget expenses, rather than borrowing, the government could follow President Lincoln and just issue the money it needs. As Thomas Edison observed in the 1920s:

    If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%.

    When the Constitution was ratified, coins were the only officially recognized legal tender. By 1850, coins made up only about half the currency. The total face value of all U.S. coins ever produced as of January 2022 is $170 billion dollars, or less than 0.9% of a $19 trillion circulating money supply (M2). These coins, along with about $25 million in U.S. Notes or Greenbacks, are all that is left of the Treasury’s money-creating power. As the Bank of England has acknowledged, the vast majority of the money supply is now created privately by banks  as deposits when they make loans.

    In the early 1980s, a chairman of the Coinage Subcommittee of the House of Representatives observed that the Constitution gives Congress the power to coin money and regulate its value, and that no limit is put on the value of the coins it creates. He said the government could pay off its entire debt with some billion dollar coins. In a 2007 book called Web of Debt I wrote about this and said in today’s America it would have to be trillion dollar coins.

    In 1982, Congress chose to choke off this remaining vestige of its money-creating power by imposing limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allows to be minted in any amount for commemorative purposes (31 U.S. Code § 5112). In 2013, Georgia attorney Carlos Mucha proposed issuing a platinum coin to capitalize on this loophole, in order to solve the gridlock then in Congress over the debt ceiling. Philip Diehl, former head of the U.S. Mint and co-author of the platinum coin law. He said:

    In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years . . . under power expressly granted to Congress in the Constitution (Article 1, Section 8).

    Prof. Randall Wray explained that the coin would not circulate but would be deposited in the government’s account at the Fed, so it would not inflate the circulating money supply. The budget would still need Congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full employment without creating price inflation (since supply and demand would rise together). After that, it would need to tax — not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

    A more modern option is for the Treasury to issue “e-cash,” an electronic form of cash transferred on secure hardware not requiring an internet connection. The ECASH Act,  H.R. 7231, introduced on March 28, 2022 by Rep. Stephen Lynch, “directs the Secretary of the Treasury to develop and introduce a form of retail digital dollar called ‘e-cash,’ which replicates the off-line-capable, peer-to-peer, privacy-respecting, zero transaction-fee, and payable-to-bear features of physical cash….”

    Unlike the central bank digital currencies now being developed by central banks globally, e-cash would be anonymous and not traceable, having all the privacy attributes of physical cash. Various models are in development, including one already introduced in China in 2021, an offline-capable smart payments card that was part of the government’s digital yuan rollout.

    A People’s Reset

    Those are alternatives for relieving the government’s debt burden, but what about the massive sums in student debt, medical debt, and rent and mortgage payments now in arrears? Biden promised in his presidential campaign to forgive student debt or some portion of it. But whether this can legally be done by presidential order, without congressional approval, is controversial. Arguments have been made both ways.

    For most student debt, however, the creditor is actually the Department of Education, a cabinet-level department established by Congress with some limited power to cancel debt. In August 2021, for example, the Department canceled the student debt of the disabled. Congress itself could also write off the debt. The challenge is getting agreement on which debts to cancel and by how much.

    What of the student debt, mortgage debt, and credit card debt held by private banks? Private banks have a contractual right to repayment. They also have an obligation to balance their books, meaning they could go bankrupt if unable to collect. But as British economist Michael Rowbotham observed, these debts too could be written off if the accounting standards were changed. Banks don’t actually lend their own money or their depositors’ money. The money they lend is created simply by writing the borrowed sums into the deposit accounts of their customers, so voiding out the debts would be cost-free. The accounting standards would just need to be changed so that the books would not need to balance. The debts could be carried as nonperforming loans or moved off the books in special purpose vehicles, as the Chinese have been known to do with their nonperforming loans. As for which debts to write off and by how much, that is a policy question for legislators.

    Would that sort of debt jubilee be inflationary? Yes, to the extent that students and other debtors would have money to spend from their incomes that they did not have before, money that would be competing for a limited supply of goods and services. Again, however, inflation could be avoided by powering up the production of goods and services sufficiently to meet demand.

    That means powering up small and medium-sized businesses, which generate most local productivity and employment; and that means providing them with affordable credit. As UK Prof. Richard Werner observes, big banks don’t lend to small businesses. Small banks do, and their numbers are rapidly shrinking. A national infrastructure bank could do it but would have trouble making prudent loans for businesses and farms across the country. The Soviet Union tried that and failed. Prof. Werner proposes instead to form a network of local public, cooperative and community banks.

    Arguably, local publicly-owned banks could also be capitalized with debt-for-equity swaps, using the ballooning state bond debts. We have plenty of debt to go around! A network of state-owned public banks on the model of the Bank of North Dakota would be good.

    Other Options

    To the extent that taxes are needed to balance the money supply, a land value tax (LVT) would go far toward replacing income taxes, without taxing labor or productivity. See “Pennsylvania’s Success with Local Property Tax Reform” in the book Earth Belongs to Everyone by Alanna Hartzok. An LVT excludes physical structures (e.g. houses) and taxes only the value of the land itself, including the natural resources on and under it. It thus returns to the public a portion of any appreciation in value due to public works (new schools, subway stops, etc.), without taxing improvements made by the property owners themselves. It helps curb land hoarding and speculation, and ensures that land sites are put to good use.

    Independent community currency and cryptocurrency systems are other possibilities for circumventing debts in the national currency, but those topics are beyond the scope of this article.

    In any case, if the global economy comes crashing down as many pundits are predicting, it is good to know there are viable alternatives to the technocratic feudalism of the WEF’s Great Reset. In his 2020 book The Great Reset, WEF leader Klaus Schwab declared that the COVID-19 pandemic “represents a rare but narrow window of opportunity to reflect, reimagine and reset our world,” making way for a polycentric technocracy. It is also a rare opportunity for us to implement an alternative system with a mandate to serve the people. We might call it the People’s Great Reset.

    • Read Part 1 here

    • This article was first posted on ScheerPost.

    The post A Reset that Serves the People (Part 2) first appeared on Dissident Voice.

    This post was originally published on Dissident Voice.

  • A Monetary Reset Where the Rich Don’t Own Everything (Part 1)

    We have a serious debt problem, but solutions such as the World Economic Forum’s “Great Reset” are not the future we want. It’s time to think outside the box for some new solutions.

    In ancient Mesopotamia, it was called a Jubilee. When debts at interest grew too high to be repaid, the slate was wiped clean. Debts were forgiven, the debtors’ prisons were opened, and the serfs returned to work their plots of land. This could be done because the king was the representative of the gods who were said to own the land, and thus was the creditor to whom the debts were owed. The same policy was advocated in the Book of Leviticus, though it is unclear to what extent this biblical Jubilee was implemented.

    That sort of across-the-board debt forgiveness can’t be done today because most of the creditors are private lenders. Banks, landlords and pension fund investors would go bankrupt if their contractual rights to repayment were simply wiped out. But we do have a serious debt problem, and it is largely structural. Governments have delegated the power to create money to private banks, which create most of the circulating money supply as debt at interest. They create the principal but not the interest, so more money must be repaid than was created in the original loan. Debt thus grows faster than the money supply, as seen in the chart from WorkableEconomics.com below. Debt grows until it cannot be repaid, when the board is cleared by some form of market crash such as the 2008 financial crisis, typically widening the wealth gap on the way down.

    Today the remedy for an unsustainable debt buildup is called a “reset.” Far short of a Jubilee, such resets are necessary every few decades. Acceptance of a currency is based on trust, and a “currency reset” changes the backing of the currency to restore that trust when it has failed. In the 20th century, major currency resets occurred in 1913, when the Federal Reserve was instituted following a major banking crisis; in 1933 following another catastrophic banking crisis, when the dollar was taken off the gold standard domestically and deposits were federally insured; in 1944, at the Bretton Woods Conference concluding World War II, when the US dollar backed by gold was made the reserve currency for global trade; and in 1974, when the US finalized a deal with the OPEC countries to sell their oil only in US dollars, effectively “backing” the dollar with oil after Richard Nixon took the dollar off the gold standard internationally in 1971. Central bank manipulations are also a form of reset, intended to restore faith in the currency or the banks; e.g., when Federal Reserve Chairman Paul Volcker raised the interest rate on fed funds to 20% in 1980, and when the Fed bailed out Wall Street banks following the Great Financial Crisis of 2008-09 with quantitative easing.

    But quantitative easing did not fix the debt buildup, which today has again reached unsustainable levels. According to Truth in Accounting, as of March 2022 the US federal government has a cumulative debt burden of $133.38 trillion, including unfunded Social Security and Medicare promises; and some countries are in even worse shape. Former investment banker Leslie Manookian stated in grand jury testimony that European countries have 44 trillion euros in unfunded pensions, and there is no source of funds to meet these obligations. There is virtually no European bond market, due to negative interest rates. The only alternative is to default. The concern is that when people realize that the social security and pension systems they have paid into for their entire working lives are bankrupt, they will take to the streets and chaos will reign.

    Hence the need for another reset. Private creditors, however, want a reset that leaves them in control. Today a new sort of reset is setting off alarm bells, one that goes far beyond restoring the stability of the currency. The “Great Reset” being driven forward by the World Economic Forum would lock the world into a form of technocratic feudalism.

    The WEF is that elite group of businessmen, politicians and academics that meets in Davos, Switzerland, every January. The Great Reset was the theme of its (virtual) 2021 Summit, based on a July 2020 book titled Covid-19: The Great Reset co-authored by WEF founder Klaus Schwab. Some of the WEF’s proposals are summarized in a video on its website titled “8 Predictions for the World in 2030.” The first prediction is, “You’ll own nothing. And you’ll be happy. Whatever you want you’ll rent. And it will be delivered by drone.”

    Schwab’s proposal would reset more than the currency. At a virtual meeting in June 2020, he said, “We need a ‘Great Reset’ of capitalism.” But as talk show host Kim Iversen observes, the proposed solution is more capitalism by a new name: “stakeholder capitalism,” where ownership will be with corporate stakeholders. You will have an account with the central bank and a mandatory federal digital ID. You will receive a welfare payment in the form of a marginally adequate basic income – so long as you maintain a proper social credit score. Your central bank digital currency will be “programmable” – rationed, controlled, and canceled if you get out of line or disagree with the official narrative. You will be kept happy with computer games and drugs.

    According to WEF speaker and author Prof. Yuval Harari, “Covid is critical, because this is what convinces people to accept, to legitimize total biometric surveillance…. We need not just to monitor people, we need to monitor what’s happening under the skin.”

    Harari is aware of the dangers of digital dictatorships. He said at a pre-Covid Davos presentation in January 2020:

    In Davos we hear so much about the enormous promises of technology – and these promises are certainly real. But technology might also disrupt human society and the very meaning of human life in numerous ways, ranging from the creation of a global useless class to the rise of data colonialism and of digital dictatorships.…

    We humans should get used to the idea that we are no longer mysterious souls – we are now hackable animals. … [I]f this power falls into the hands of a twenty-first century Stalin, the result will be the worst totalitarian regime in human history…

    In the not-so-distant future, … algorithms might tell us where to work and who to marry, and also decide whether to hire us for a job, whether to give us a loan, and whether the central bank should raise the interest rate….

    What will be the meaning of human life, when most decisions are taken by algorithms?

    Clearing the Chessboard by Controlled Economic Demolition?

    Before the game can be reset, the board must be cleared. What would make the population accept giving up their private property, surviving on a marginal basic income, and submitting to constant surveillance, internal and external?

    The global pandemic and the lockdowns that followed have gone far toward achieving that result. Lockdowns not only eliminated smaller business competitors but drove up the debts of small countries, forcing them to increase their loans from the International Monetary Fund. The IMF is notorious for onerous loan terms, including imposing strict austerity measures, relinquishing control of natural resources, and marching in “lockstep” with pandemic restrictions.

    In a June 2020 article on the blog of the IMF titled “From Great Lockdown To Great Transformation,” IMF Managing Director Kristalina Georgieva called the global policy response to the 2020 crisis the “Great Lockdown.” She is quoted as saying to the US Chamber of Commerce:

    We call the current period ‘the Great Lockdown’ because we are fighting a health emergency by bringing production and consumption to a standstill….

    In March, around one hundred billion dollars left emerging markets and developing countries—three times more than during the global financial crisis.

    But in April and May—thanks to this massive injection of liquidity in advanced economies—some emerging markets were able to go back to the markets and issue bonds with competitive yields, with total issuance of around seventy-seven billion dollars. This is almost three and a half times as much as in the same two months last year. [Italics added.]

    In other words, by bringing production and consumption to a standstill, the Great Lockdown had already, by June 2020, managed to strip emerging markets of $100 billion in additional assets and to lock them into $77 billion in new debt.

    That helps explain why so many countries acquiesced to the Great Lockdown so quickly, even when some had only a handful of Covid-19 deaths. Lockdown was apparently a “conditionality” required for getting an IMF loan. At least that was true for Belarus, which rejected the offer. Said Belarus’ President:

    We hear the demands … to model our coronavirus response on that of Italy. I do not want to see the Italian situation to be repeated in Belarus. We have our own country and our own situation. … [T]he IMF continues to demand from us quarantine measures, isolation, a curfew. This is nonsense. We will not dance to anyone’s tune.

    Unlike Belarus, most countries acquiesced, and so did households and businesses locked into the debt trap by an economy in which production and consumption were brought to a standstill. Like most emerging economies, they acquiesced to whatever terms were imposed for returning to “normal.”

    The lockdowns have now been lifted in most places, but the debt trap is about to snap shut. A moratorium on U.S. rents and student debt is due to come to an end, and cumulative arrears may need to be paid. Debtors unable to meet that burden could be out in the street, joining the “useless class” described by Prof. Harari. They may be forced into accepting the technocratic feudalism of the WEF Great Reset, but is not the sort of future most people want. However, what are the alternatives?

    A Eurasian Jubilee?

    For sovereign debt (the debt of national governments), a form of jubilee is envisioned by Sergei Glazyev in conjunction with the alternative monetary system currently being designed by the Eurasian Economic Union (EAEU), detailed in my last article here. Glazyev is the Minister for Integration and Macroeconomics of the Eurasia Economic Commission, the regulatory body of the EAEU. An article in The Cradle titled “Russia’s Sergey Glazyev Introduces the New Global Financial System” is headlined:

    The world’s new monetary system, underpinned by a digital currency, will be backed by a basket of new foreign currencies and natural resources. And it will liberate the Global South from both western debt and IMF-induced austerity.

    The article quotes Glazyev as stating:

    Transition to the new world economic order will likely be accompanied by systematic refusal to honor obligations in dollars, euro, pound, and yen. In this respect, it will be no different from the example set by the countries issuing these currencies who thought it appropriate to steal foreign exchange reserves of Iraq, Iran, Venezuela, Afghanistan, and Russia to the tune of trillions of dollars. Since the US, Britain, EU, and Japan refused to honor their obligations and confiscated wealth of other nations which was held in their currencies, why should other countries be obliged to pay them back and to service their loans?

    In any case, participation in the new economic system will not be constrained by the obligations in the old one. Countries of the Global South can be full participants of the new system regardless of their accumulated debts in dollars, euro, pound, and yen. Even if they were to default on their obligations in those currencies, this would have no bearing on their credit rating in the new financial system. Nationalization of extraction industry, likewise, would not cause a disruption. Further, should these countries reserve a portion of their natural resources for the backing of the new economic system, their respective weight in the currency basket of the new monetary unit would increase accordingly, providing that nation with larger currency reserves and credit capacity. In addition, bilateral swap lines with trading partner countries would provide them with adequate financing for co-investments and trade financing.

    That may largely eliminate the sovereign debt overhang in the EAEU member countries, but what of the United States and other Western countries that are unlikely to join? Some innovative possibilities will be covered in Part 2 of this piece. Stay tuned.

    • This article was first posted on ScheerPost.

    The post A Monetary Reset Where the Rich Don’t Own Everything (Part 1) first appeared on Dissident Voice.

    This post was originally published on Dissident Voice.

  • Belabored: What’s Up With Inflation, with J.W. Mason

    Economist J.W. Mason joins the podcast to talk about inflation and how to organize around price increases.

    This post was originally published on Dissent MagazineDissent Magazine.

  • “Liberal” Economists Cheered the New Democrats’ Deregulation of Finance

    The Clintons and Gore delivered for Wall Street by embracing deregulation, desupervision, and de facto decriminalization.

    This post was originally published on Real Progressives.

  • “Long COVID”: Economic Devastation and Quarter of a Billion Pushed Into Extreme Poverty  

    There is a terrifying prospect that in excess of a quarter of a billion more people will fall into extreme levels of poverty in 2022 alone. Without immediate radical action, we could be witnessing the most profound collapse of humanity into extreme poverty and suffering in memory.

    That is according to Oxfam International Executive Director Gabriela Bucher.

    She adds this scenario is made more sickening given that trillions of dollars have been captured by a tiny group of powerful men who have no interest in interrupting this trajectory.

    In its January 2021 report ‘The Inequality Virus’, Oxfam stated that the wealth of the world’s billionaires increased by $3.9tn between 18 March and 31 December 2020. Their total wealth then stood at $11.95tn, a 50 per cent increase in just 9.5 months.

    In 2021, an Oxfam review of IMF COVID-19 loans showed that 33 African countries were encouraged to pursue austerity policies. This despite the IMF’s own research showing austerity worsens poverty and inequality.

    Barely days into the shutdown of the global economy in April 2020, the Wall Street Journal ran the headline ‘IMF, World Bank Face Deluge of Aid Requests From Developing World‘. Scores of countries were asking for bailouts and loans from financial institutions with $1.2 trillion to lend.

    Prior to that, in late March, World Bank Group President David Malpass said that poorer countries would be ‘helped’ to get back on their feet after the various COVID-related lockdowns. However, any assistance would be on condition that further neoliberal reforms became embedded.

    Malpass said:

    For those countries that have excessive regulations, subsidies, licensing regimes, trade protection or litigiousness as obstacles, we will work with them to foster markets, choice and faster growth prospects during the recovery.

    Two years on and it is clear what ‘reforms’ really mean. In a press release issued on 19 April 2022, Oxfam International insists the IMF must abandon demands for austerity as a cost-of-living crisis continues to drive up hunger and poverty worldwide.

    According to Oxfam’s analysis, 13 out of the 15 IMF loan programmes negotiated during the second year of COVID require new austerity measures such as taxes on food and fuel or spending cuts that could put vital public services at risk. The IMF is also encouraging six additional countries to adopt similar measures.

    Kenya and the IMF agreed a $2.3 billion loan programme in 2021, which includes a three-year public sector pay freeze and increased taxes on cooking gas and food. More than three million Kenyans are facing acute hunger as the driest conditions in decades spread a devastating drought across the country. Oxfam says nearly half of all households in Kenya are having to borrow food or buy it on credit.

    At the same time nine countries, including Cameroon, Senegal and Surinam are required to introduce or increase the collection of VAT, a tax that disproportionately impacts people living in poverty.

    In Sudan, nearly half of the population live in poverty. However, it has been told to scrap fuel subsidies which will hit the poorest hardest. A country already reeling from international aid cuts, economic turmoil and rising prices for everyday basics such as food and medicine. More than 14 million people need humanitarian assistance (almost one in every three people) and 9.8 million are food insecure in Sudan.

    In addition, 10 countries are likely to freeze or cut public sector wages and jobs, which could mean lower quality of education and fewer nurses and doctors in countries already short of healthcare staff. Consider that Namibia had fewer than six doctors per 10,000 people in early 2020.

    Prior to Covid, the situation was bad enough. The IMF had consistently pushed a policy agenda based on cuts to public services, increases in taxes paid by the poorest and moves to undermine labour rights and protections. As a result, 52 per cent of Africans lack access to healthcare and 83 per cent have no safety nets to fall back on if they lose their job or become sick.

    Nabil Abdo, Oxfam International’s senior policy advisor, says:

    The IMF must suspend austerity conditions on existing loans and increase access to emergency financing. It should encourage countries to increase taxes on the wealthiest and corporations to replenish depleted coffers and shrink widening inequality.”

    It is interesting to note what could be achieved. For instance, Argentina has collected about $2.4 billion from its one-off pandemic wealth tax. Oxfam estimates that a ‘Pandemic Profits Tax’ on 32 super-profitable global companies could have generated $104 billion in revenue in 2020 alone.

    Many governments are nearing debt default and being forced to slash public spending to pay creditors and import food and fuel. The world’s poorest countries are due to pay $43 billion in debt repayments in 2022, which could otherwise cover the costs of their food imports. Oil and gas giants are reporting record-breaking profits, with similar trends expected to play out in the food and beverage sector.

    Oxfam and Development Finance International (DFI) have also revealed that 43 out of 55 African Union member states face public expenditure cuts totalling $183 billion over the next five years.

    Oxfam says that, despite COVID costs piling up and billionaire wealth rising more since COVID than in the previous 14 years combined, governments — with few exceptions — have failed to increase taxes on the richest.

    Gabriela Bucher rejects any notion that governments do not have the money or means to lift all people out of poverty and hunger and ensure their health and welfare. She says the G20, World Bank and IMF must immediately cancel debts and increase aid to poorer countries and act to protect ordinary people from an avoidable catastrophe.

    Nabil Abdo says:

    The pandemic is not over for most of the world. Rising energy bills and food prices are hurting poor countries most. They need help boosting access to basic services and social protection, not harsh conditions that kick people when they are down.

    The ‘pandemic’ is not over for most of the world – for sure. People too often conflate the effects of COVID-related policies with the impact of COVID itself. It is these policies that have caused the ongoing devastation to lives and livelihoods.

    What it has amounted to is a multi-trillion-dollar bailout for a capitalist economy that was in meltdown prior to COVID. This came in the form of trillions of dollars pumped into financial markets by the US Fed (in the months prior to March 2020) and ‘COVID relief’.

    As the world’s richest people lined their pockets even more in the past two years, COVID IMF loans are now piling more misery on some of the world’s poorest people. For them, ‘long COVID’ is biting austerity – their ‘new normal’.

    All this resulting from policies supposedly brought in to protect public health – a claim that rings hollower by the day.

    The post “Long COVID”: Economic Devastation and Quarter of a Billion Pushed Into Extreme Poverty   first appeared on Dissident Voice.

    This post was originally published on Dissident Voice.

  • States that cut their pandemic unemployment checks early saw virtually no impact on hiring.

    There is strong evidence suggesting that stopping the checks basically caused nothing but avoidable harm according to a new report by the Federal Reserve Bank of San Francisco.

    By: Greg Iacurci

    See original post here.

    _____________________________________

    Key points:

    • About half of states cut federal unemployment benefits in June or July 2021, a few months ahead of their scheduled expiration.
    • State officials thought pulling funds would help ease the challenges employers were facing in hiring workers.
    • But a paper by the Federal Reserve Bank of San Francisco found that policy didn’t seem to have its intended effect on employment.

    ______________________________________

    State cuts to pandemic unemployment benefits last summer had a small impact on hiring, suggesting enhanced funding for the unemployed didn’t play a big role in labor shortages, according to a recent report.

    The federal government greatly expanded the social safety net for the jobless in March 2020. It offered hundreds of dollars in additional weekly benefits to individuals and gave aid to millions of previously ineligible people, like gig workers and the self-employed.    

    Governors of roughly half the states, most of them Republican, withdrew federal benefits in June or July 2021 — a few months before their scheduled expiration nationwide on Sept. 6.

    The debate at the time centered on what was seen as the likelihood that the benefit boost was contributing to employers’ hiring challenges.

    Some officials believed federal assistance kept people from looking for work, while others argued that factors like ongoing pandemic health risks and family-care duties (kids home from school, for example) played a bigger role in the job crunch.

    But an analysis by researchers at the Federal Reserve Bank of San Francisco found states that withdrew benefits early didn’t experience the intended effect of spurring a big increase in jobs. It compared hiring rates from July to September 2021 in the states that ended benefits with those that kept them intact.

    Hiring picked up a minuscule 0.2 percentage point in the “cutoff” states compared to the benefit-keeping states — a “quite small” increase considering states’ average monthly hiring rates of about 4%-5%, according to the analysis.

    Put differently, if a state that maintained federal benefits had a 4.5% hiring rate, a state that cut them would have had a 4.7% rate.  

    “That would be pretty much imperceptible,” said Robert Valletta, senior vice president and associate director of research at the Federal Reserve Bank of San Francisco, who co-authored the analysis.

    The hiring rate measures the number of hires during a month relative to overall employment; it serves as a “natural starting point” to assess the policy impact, the analysis said.

    Earlier research into the effects of pandemic unemployment benefits have largely had similar findings.

    One study in August 2021 also found little impact on jobs and suggested an early withdrawal of benefits might harm state economies.

    Other studies have examined a $600 weekly enhancement offered from March to July 2020 and found the extra benefit didn’t prove to be a big disincentive on returning to work.

    Some research does conflict with this assessment, however. For example, a paper from December found a large uptick in employment among “prime age” unemployed workers (ages 25 to 54) in states that opted out of federal benefit programs in June.

    Varying results boil down to different economic data sets that researchers have used to examine the dynamic, according to Valletta.

    One caveat to the San Francisco Fed’s report is that it doesn’t account for different labor market conditions in the “cutoff” states versus those that maintained federal benefits.

    For example, a small hiring impact in cutoff states might have been partly attributable to labor markets that had already rebounded to a greater degree than comparable non-cutoff states. In that case, there might have been less of a chance of a hiring boom.

    “It’s important to keep in mind that some meaningful fraction of people suffered real hardship.”

    Robert Valletta; Sr. VP & Associate Director of Research at the Federal Reserve Bank of San Francisco

    Valletta and his colleagues have studied this point in preliminary follow-up work, he said. So far, they’ve also found subdued hiring rates in the states that lost federal benefits in early September — suggesting the elimination of benefits didn’t cause a big pickup in hiring regardless of the relative labor market conditions, he said.

    However, Valletta and the co-authors go on to note that their findings seem to indicate that while hiring didn’t surge, the early benefit cutoff didn’t harm the states’ labor markets.

    “But it’s important to keep in mind that some meaningful fraction of people suffered real hardship as a result,” Valletta said.

    The post States that cut their pandemic unemployment checks early saw virtually no impact on hiring. appeared first on Basic Income Today.

    This post was originally published on Basic Income Today.

  • GOP States Gutting Unemployment Didn’t Bring Workers Back Faster, Study Shows

    A new study has revealed that Republican-run states prematurely ending unemployment benefits last year did not have a significant impact on getting people back to work, as GOP lawmakers claimed it would — but it did result in financial hardship for millions of Americans.

    In the summer of 2021, as many areas of the country were dealing with a supposed “worker shortage,” several Republican-led states’ governors decided to end extended federal unemployment benefits that included weekly increases to the typical insurance payment. The move affected some 4.1 million unemployed workers in the 25 states that ended the program, which had been initiated in response to the economic downturn brought on by the coronavirus pandemic.

    Republican governors justified ending the benefits by arguing that the additional unemployment benefits disincentivized workers from returning to their jobs. In reality, the so-called “worker shortages” were likely due to workers wanting to return to jobs that provided better pay and benefits than many employers were willing to give.

    The move to prematurely end the extended unemployment benefits seemed to have had little, if any, effect on getting people back to work, according to a paper published last week by the Federal Reserve Bank of San Francisco. In states that ended the unemployment benefits, hiring did pick up at a faster pace, on average — but the rate difference, when compared to states that didn’t end extended unemployment benefits, is incredibly miniscule.

    The states that ended the benefit early only saw a hiring rate difference of 0.2 percent compared to other states, the study found — a difference that is “pretty much imperceptible,” said Robert Valletta, associate director of research at the Federal Reserve Bank of San Francisco and co-author of the paper.

    Put another way, for every 1,000 people that were hired in states that kept the unemployment benefits in place, 1,002 people were hired in states that removed the benefits — hardly the significant change that GOP lawmakers promised would come from ending the benefits.

    At the same time, Valletta added, a “meaningful fraction of people suffered real hardship as a result” of the cuts. Among the millions of Americans who saw their unemployment insurance curtailed, the average worker lost around $6,000 in benefits compared to workers in states that kept them intact.

    Progressive lawmakers, including Sen. Bernie Sanders (I-Vermont), largely rejected conservatives’ claims that unemployment insurance benefits were hurting businesses seeking workers. Even if that was the case, Sanders said, it wouldn’t justify ending the extended benefits.

    If such benefits were “preventing employers from hiring low-wage workers there’s a simple solution,” Sanders said in the spring of 2021. “Raise your wages. Pay decent benefits.”

    This post was originally published on Latest – Truthout.

  • ‘She Intended Not to Ignore Things Related to Climate, as There Is Pressure to Do’

     

     

    Janine Jackson interviewed Public Citizen’s David Arkush about fossil fuels’ Federal Reserve veto for the March 18, 2022, episode of CounterSpin. This is a lightly edited transcript.

          CounterSpin220318Arkush.mp3

     

    Janine Jackson: The disjuncture between what really day-to-day matters in the lives of people around the country—food, shelter, work you can live on—and what elected officials do is the stuff of political science.

    We all know that the connection isn’t direct. People want healthcare, for instance. When they have to choose between their medicine and keeping the lights on, nobody is saying, “Yay, this is a choice I made that redounds overall to my benefit.”

    But when it comes to media coverage, people and their needs and their problems often get subsumed into an abstract story about economic interests and industry and government and blah, blah, blah.

    Journalism could provide a different connection between human needs and policy decisions, that might spur action rather than frustration. And it seems as though a failure to connect those dots is part of why a candidate for a position at the Federal Reserve, Sarah Bloom Raskin, had her nomination derailed because her record indicated that she recognized that climate disruption is real, and will have economic impacts.

    So what happened here is the sausage is being made, and there’s a reason that the joke is that you don’t want to see it. But we have to see it if we want to be the democracy of, by and for the people we claim we want to be.

    David Arkush is the managing director of Public Citizen’s climate program, and a fellow at the Roosevelt Institute. He joins us now by phone from Washington, DC. Welcome to CounterSpin, David Arkush.

    David Arkush: Thanks, Janine. Thanks for having me on.

    Sarah Bloom Raskin

    Sarah Bloom Raskin (cc photo: New America)

    JJ: Let’s start at the center here. Sarah Bloom Raskin was up for Federal Reserve vice chair for supervision. She was confirmed by the White House, obviously, but by others as well. So what happened?

    DA: That’s a great question. And you know, your introduction had me thinking, there’s one thing worse than seeing how the sausage gets made, and that is seeing it fail to be made up close.

    This is a job—I’ll start with maybe a little background on what this role is. So the position of vice chair for supervision at the Federal Reserve was created after the financial crisis of 2008. When Congress passed the big bill, the Dodd/Frank Wall Street Reform Act, one of the pieces in it was creating this position at the Fed, so that there would be a high-up official at the Fed monitoring the safety of banks and monitoring the stability of the financial system, and looking out, looking at the horizon for emerging risks, and figuring out what to do about it.

    Sarah Bloom Raskin—it is hard to think of a person who is better suited to that job. She’s the most qualified person in the country that I know of by far. She is a former state bank regulator. She was the supervisor of banks in Maryland and the top financial regulator in Maryland. She has already been on the board of the Federal Reserve, which, this vice chair for supervision is one of the governors on the board; she’s already been one. And she was the No. 2 person at the Treasury. So she has high-level experience.

    At Treasury, she led work on cybersecurity risks to finance, so she’s actually also the nation’s leading expert on cybersecurity threats to financial institutions and to financial stability, something that would squarely be within her jurisdiction at the Federal Reserve, and something that is a really heightened concern right now, given the war between Russia and Ukraine. We are actually facing heightened cyber threats on critical infrastructure in this country, including banks and the financial system. So it’s really hard to imagine somebody who’s more qualified.

    Now, one of the things that somebody who is that qualified and that expert thinks about, in the context of making sure that we have a sound economy and a sound financial system right now, is climate. It is impossible to ignore that climate harms are imposing really severe costs on a lot of sectors, and a lot of whole states, and a lot of geographies. There are insurers who are pulling out of insuring homes in large regions of California. These things have major economic impacts, and it’s also hard to ignore that there are a lot of climate-related risks to financial institutions and to financial stability.

    And that is basically a consensus view among most financial regulators these days. And Sarah Bloom Raskin also agrees with that view, and was very clear that she intended not to ignore things that were related to climate, as there is often pressure to do in the United States, because of our bizarre politics and the power of the fossil fuel industry, but that she would look at those risks the same way she would look at any others, and take them on if need be, in regard to how they affect banks and how they affect finance.

    Public Citizen's David Arkush

    David Arkush: “Oil and gas has, for a long time, pressured financial regulators, pressured bank regulators, to adopt essentially biased rules.”

    JJ: Which businesses and banks should want, right? I mean, they’re reality-based organizations, as we understand them to be. So what was it about what she said, matter-of-factly, about climate disruption and its impact that was the problem?

    DA: This is what’s surprising and unusual about this situation. Sarah Bloom Raskin, in addition to all the other things I have said, has already been confirmed twice by the US Senate—she wouldn’t have been on the Fed board and she wouldn’t have been the No. 2 at Treasury if she hadn’t been—twice confirmed unanimously. And this time around, she also had broad bipartisan support. She’s supported by consumer groups, by civil rights groups, by unions, by many businesses, and by banks—by big banks and small banks. It’s a really uncommon thing to find somebody who virtually everybody agrees is actually extremely expert, competent and reasonable.

    There was one major group that does not agree, and that is the oil and gas industry. And not even the whole oil and gas industry. It’s interesting, having seen this fight up close: The large oil companies didn’t bother. It was small oil and gas companies who were opposed.

    And it’s not hard to figure out why. If you pay attention to these issues, a lot of the smaller oil and gas companies are in pretty shaky financial condition. Some of them have never been profitable, over the 10- or 15-year history of the company. And oil and gas markets are really volatile, everybody knows this; prices go up, prices go down; and it’s really hard for them to get loans, in part because a combination of how, basically, the companies are just really risky, and all the financial institutions know it, and they have trouble getting bank loans.

    And so, oil and gas has, for a long time, pressured financial regulators, pressured bank regulators, to adopt essentially biased rules that either give them, directly, special bailouts or favors, or pressure banks to lend to companies that the banks think are too risky.

    And one thing that was clear about Sarah Bloom Raskin was she was not going to do that. She was going to take a measured, serious, expert approach. And she’s well within the mainstream of what any honest and competent regulator should and would do, and frankly, most do, particularly on the one side of the aisle here.

    But she had said some things about recognizing the threats from climate risks to financing to banks, and her opponents just seized on that, and I think we all know what often happens in US politics if you start painting somebody as a climate radical. She very quickly lost, in the US Senate, the support of basically every Republican and Sen. Joe Manchin from West Virginia. Ultimately, that was the end of her nomination, basically on the basis of her having viewpoints that are completely mainstream and reasonable. The chair of the Fed, who is a Republican, Chair Powell, agrees with and is about to sail through his confirmation. But in her case, they were used basically to smear her and treat her like she was some kind of radical.

    FAIR.org: Manchin’s Coal Conflict of Interest Not of Interest to Corporate News

    Joe Manchin, arguably the single biggest obstacle to Congressional action on climate, whose deep conflicts of interest rarely interest corporate journalists (FAIR.org, 7/27/21)

    JJ: Let me just ask you, finally, for your thoughts about media coverage, because when I looked at the coverage, I saw a reference to Bloom Raskin as “embattled.” And when you hear that word, or that kind of language, it makes it sound as though, you know, the jury was out, it was kind of 50/50, and she was on the losing side. What you’re telling me is, there was a whole lot of support and understanding, and then there was a faction that was able to whipsaw the rest. So if people are reading journalism, media coverage about this, and they want to really understand what happened, maybe “embattled” isn’t going to really tell them the story in the way that they should understand it.

    So I would just ask you, finally, what would you like to see journalists doing more of or less of in terms of, not just this nomination, but in terms of the relationship between climate disruption and financial regulation?

    DA: Well, that’s interesting. It is a big topic. I think that people do need to hear more about it and understand more about it. It couldn’t be more obvious; again, it’s very quickly becoming totally uniform among financial regulators to be taking it seriously, and lots of them are acting on the issue. And, frankly, a lot of the private sector is, a lot of the big banks are, a lot of the big asset managers are.

    I think the coverage has been improving. Frankly, it’s a new area; a lot of people haven’t heard about the idea that there’s a connection between climate change and finance, although the moment you start talking to people about it, it’s obvious that it’s right, and there is, and that we ought to be thinking about it. And so it’s catching on very quickly.

    But I think, yeah, increased awareness of that, increased awareness of the seriousness of the risks and what needs to be done. And that’s around the issue in general.

    And then I think, in terms of this type of political fight, I started thinking toward the end of it that the US Senate is such a strange institution. And it’s so undemocratic. In a society that has such a long and proud tradition of democracy in so many ways, that is not one of them. And almost everything that happens there needs to be painstakingly contextualized as happening in this sort of bizarro alternate reality.

    There’s a real world in which someone like Sarah Bloom Raskin is supported by basically everybody, including the banks that she’s going to regulate, and including consumer advocates and civil rights groups and unions; and then there’s the bizarro world of the US Senate, where the representation does not match the population of the United States, what they do does not match public opinion in the United States, and they operate under bizarre rules.

    And, yeah, what happens there, it’s like a parallel universe. I think sometimes things that happen there get treated as if they’re real world things, or that they reflect real opinions, or that they reflect where the American people are. And I think that does some real harm, because it’s actually important for us to understand how that institution actually works, and frankly, in my view, how broken it is, and how much we need to be taking on that issue as well.

    JJ: We’ve been speaking with David Arkush; he’s managing director of Public Citizen’s climate program. They’re online at Citizen.org. David Arkush, thank you so much for joining us this week on CounterSpin.

    DA: Thank you, Janine.

    The post ‘She Intended Not to Ignore Things Related to Climate, as There Is Pressure to Do’ appeared first on FAIR.

    This post was originally published on FAIR.

  • Shireen Al-Adeimi on Yemen, David Arkush on Fed Climate Veto

     

     

    Child Observing Sanaa Ruins

    Sanaa, Yemen (cc photo: Yahya Arhab/European Pressphoto Agency)

    This week on CounterSpin: It’s worth our while to think about why everyone we know is talking about Ukraine and Russia’s unlawful incursion—and equally worthwhile to ask why the same principles of concern don’t seem to apply in other cases. Those feelings don’t have to fight. But to hear Yemen put forward as just an example of an underconsidered concern is galling from the same people who underprioritized it in the first place.

    Yemen is not a rhetorical device. It’s a country of human beings in crisis. We talk about that with Yemeni activist and advocate Shireen Al-Adeimi, who is also assistant professor of education at Michigan State University.

          CounterSpin220318Al-Adeimi.mp3

     

    Sarah Bloom Raskin

    Sarah Bloom Raskin (cc photo: New America)

    Also on the show: Sarah Bloom Raskin was up for a job at the Federal Reserve. Everyone was for her nomination, including the bankers she would oversee. So why did she withdraw her nomination, and what does it tell us about the possibility of making any advances at all in facing the reality of climate change? Helping us see why issues media divide are completely related is David Arkush, managing director of the climate program at Public Citizen.

          CounterSpin220318Arkush.mp3

     

    The post Shireen Al-Adeimi on Yemen, David Arkush on Fed Climate Veto appeared first on FAIR.

    This post was originally published on FAIR.

  • Coal Baron Manchin Says He’ll Vote Against Biden’s Climate-Friendly Fed Nominee

    Sen. Joe Manchin talks with Senators Mitt Romney, Susan Collins and Lisa Murkowski before President Joe Biden delivers the State of the Union address during a joint session of Congress in the U.S. Capitol’s House Chamber on March 1, 2022, in Washington, D.C.

    Conservative Democrat and coal baron Sen. Joe Manchin (West Virginia) has announced that he is opposed to President Joe Biden’s nomination of Sarah Bloom Raskin to the Federal Reserve board, throwing uncertainty into whether she will have enough votes to be confirmed by the Senate.

    In a statement, Manchin said that he is “unable” to support Raskin’s nomination. “Her previous public statements have failed to satisfactorily address my concerns about the critical importance of financing an all-of-the-above energy policy to meet our nation’s critical energy needs,” he said, implying that Raskin’s views on climate are “politicize[d].”

    Manchin has offered few other concrete reasons for his opposition to Raskin. But notably, the lawmaker makes millions of dollars off of coal companies that he founded in the 1980s, and has received many times more money from the oil and gas industry in this election cycle than any other member of Congress, despite not being up for reelection until 2024.

    Raskin, who is nominated to be the Fed’s top banking regulator, is a progressive favorite. She has been hailed as a climate champion for her stances that the Fed should be tough on the fossil fuel industry and that the agency should take the risks that the climate crisis poses to the country’s finances seriously; early in the pandemic, the former deputy secretary of the Treasury Department warned the Fed that it shouldn’t give subsidies to the fossil fuel industry, which was already volatile even before the pandemic.

    “The coronavirus pandemic has laid bare just how vulnerable the United States is to sudden, catastrophic shocks,” Raskin wrote in an op-ed for The New York Times in May of 2020. “Climate change poses the next big threat. Ignoring it, particularly to the benefit of fossil fuel interests, is a risk we can’t afford.”

    Because Republicans are staunchly opposed to Raskin, it’s possible that her nomination is doomed. Sen. Susan Collins (R-Maine), who is also cozy with the oil and gas industry, told reporters on Monday that there isn’t a path forward for Raskin’s nomination.

    Like Manchin, Republicans have claimed that Raskin’s views are too politicized for the Fed. In fact, the party is so opposed to her that the 12 Republicans on the Senate Banking Committee boycotted the vote to advance her nomination, rather than simply voting ‘no.’ Experts described the move to lengthen the amount of time that the Fed board would be vacant as “an enormous dereliction of duty,” especially given the magnitude of the country’s current economic crises, economist Joseph Stiglitz told The New Yorker.

    The fossil fuel industry has poured lobbying money into opposing Raskin’s nomination. GOP lawmakers have no objections to the renomination of Republican Fed Chair Jerome Powell, who has largely not taken climate risks into account in decision-making despite the huge risks in ignoring its impacts on the economy.

    The real politicization of Raskin’s nomination seems to be coming from climate denying conservatives like Manchin, who are vehemently opposed to taking action to combat the climate crisis. Experts say that Raskin’s views are far from extreme or partisan — in fact, many financial institutions are already taking climate into consideration.

    “Her views are in the mainstream,” Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, told HuffPost. “There are over 100 central banks around the world that are part of the Network for Greening the Financial System. They’re all saying climate is a risk. Our current chair of the Federal Reserve says climate is a risk.”

    This post was originally published on Latest – Truthout.

  • GOP’s Tax Plan Would Raise Taxes by Over $1,000 Annually for Poorest Americans

    Sen. Rick Scott does a TV news interview in the Hart Senate Office Building on March 8, 2022.

    Sen. Rick Scott’s (R-Florida) plan to force every American to owe income tax in his recently released platform for the Republican Party would raise taxes by over $1,000 for the bottom 40 percent of income earners, a new analysis found.

    In a report released on Monday, the Institute on Taxation and Economic Policy (ITEP) estimated that the poorest Americans would be the most affected by Scott’s plan — meaning that the GOP’s tax plan would essentially be to tax the poor.

    The poorest 20 percent of Americans, who make $12,300 a year on average, would owe about $1,050 more in federal taxes, or about 9 percent of their income. The next 20 percent, who make $34,700 on average, would owe $1,390 more, or 4 percent of their income, ITEP found. The middle 20 percent of Americans would owe about $500 more on average. The top 5 percent would essentially owe $0 more.

    Scott’s outline says that he wants to make sure all Americans pay some income tax in order “to have skin in the game.”

    “Currently over half of Americans pay no income tax,” Scott wrote. Indeed, a large portion of Americans don’t owe federal income taxes. Many don’t owe taxes because they simply don’t make enough income to qualify. People with disabilities, retirees and other Social Security beneficiaries don’t owe taxes because much of the program is tax-exempt.

    Some people don’t owe federal income taxes because they receive tax credits; because of programs like the Earned Income Tax Credit and the Child Tax Credit, many Americans have a negative tax burden.

    ITEP calculated these estimates by assuming that Scott’s plan would make it so that all Americans owed at least $1 in taxes, taking credits into account. So, if a household had an income tax liability of $1,000, and would normally have received a credit of $1,500 from the Internal Revenue Service (IRS), they would not receive their expected $500 tax refund under Scott’s plan, ITEP wrote.

    The poorest states would be most affected by this plan, the report found. Over 50 percent of Mississippi residents would see a tax increase, with other Southern states like West Virginia, Arkansas, Louisiana and Alabama trailing closely behind.

    If Scott’s plan were passed, and carried out in the way that ITEP interpreted, it would have a devastating impact on the people in the country who are most in need.

    According to the Federal Reserve, about 36 percent of Americans said in 2020 that they would have difficulty paying for an emergency expense of $400, with 12 percent saying that they wouldn’t be able to. This statistic is similar to that of previous years, despite the fact that COVID relief packages, extra unemployment insurance and expanded child tax credits helped lower financial worries for the public, even if they were laid off during the pandemic.

    A recent survey showed that a large portion of Americans would have difficulty paying an emergency $1,000 bill. About 56 percent of survey respondents said that they would have to take steps like charging a credit card and paying it over time, cutting other expenses or borrowing the money in order to pay the bill.

    Scott’s tax plan reflects Republicans’ stubborn opposition to raising taxes on the wealthy and corporations. Some of the world’s richest people, like Jeff Bezos and Elon Musk, regularly owe $0 or an otherwise miniscule amount in taxes. But GOP lawmakers have worked to maintain low tax rates for the richest Americans and slash funding for the IRS so that they can keep dodging taxes.

    This post was originally published on Latest – Truthout.

  • Rather Than Sink Main Street by Raising Interest Rates, the Fed Could Save It: Here’s How

    Inflation is plaguing consumer markets, putting pressure on the Federal Reserve to raise interest rates to tighten the money supply. But as Rex Nutting writes in a MarketWatch column titled “Why Interest Rates Aren’t Really the Right Tool to Control Inflation”:

    It may be heresy to those who think the Fed is all-powerful, but the honest answer is that raising interest rates wouldn’t put out the fire. Short of throwing millions of people out of work in a recession, higher rates wouldn’t bring supply and demand back into balance, a necessary condition for price stability.

    The Fed (and those who are clamoring for the Fed to raise rates immediately) have misdiagnosed the problem with the economy and are demanding the wrong kind of medicine. …

    Prices are going up because crucial inputs—labor, electronics, energy, housing, transportation—are in short supply. Normally, the way to solve this imbalance would be to give workers and businesses incentives to increase their supply. …

    The Fed has been assigned the job of fixing this. Unfortunately, the Fed doesn’t have the tools to do it. Monetary policy works (in theory) by tweaking demand, but it has no direct impact on supply.

    The Dire Effects of the “Wrong Kind of Medicine”

    Not only will raising interest rates not fix the supply crisis, but according to Alasdair Macleod, head of research at GoldMoney in London, U.K., that wrong medicine is likely to trigger the next financial crisis. He thinks it is imminent and will start in Europe, where negative interest rates brought the cost of doing repo trades to zero. As a result, the European repo market is now over €10 trillion ($11.4 trillion), far more than the capital available to unwind it (to reverse or close the trades). Rising interest rates will trigger that unwinding, says MacLeod, and the ECB lacks the tools to avoid the resulting crisis. Meanwhile, oil prices have risen over 50% and natural gas over 60% in Europe in the past year, “due to a supply crisis of its governments’ own making,” writes Macleod. Member governments are heavily in debt, yet European Central Bank president Christine Lagarde wants to borrow more to finance the transition to carbon neutral. Macleod writes darkly:

    As for the euro’s future, it seems unlikely that the ECB has the capability of dealing with the crisis that will unfold.… The deconstruction of this shabby arrangement should prove the end of the euro and possibly of the European Union itself.

    German journalist Ernst Wolff paints an even darker scenario. He contends that the globalist European leaders heading the World Economic Forum (WEF) are crashing the global economy intentionally, in order to clear the chessboard for the WEF’s “Great Reset.” They’re doing this, he says, because they have to. The global bankers’ boom-and-bust financial system is now so top-heavy and debt-laden that it cannot be sustained. Problem/reaction/solution: desperate people will welcome the WEF’s Great Reset, in which they will own nothing but will be offered a marginally adequate Universal Basic Income with onerous strings attached. This subsistence income will be doled out through a central bank digital currency (CBDC) controlled nationally by the country’s central bank and globally by the IMF as issuer of the reserve currency and, ultimately, of a single global currency.

    There are indications, however, that the U.S. Fed is not going along with this Eurocentric globalist push. Financial blogger Tom Luongo points to Jerome Powell’s clash with Christine Lagarde in May last year over her insistence that central banks require private banks to monitor the business of their clients, and to the Fed’s raising its repo rate to 0.25% in June, attracting investors earning zero interest in the European repo market into the U.S. dollar and away from the euro. Luongo suggests that the Fed’s resistance to the globalist plan comes from the Wall Street banks that own the New York Fed, which are not willing to give up the U.S. dollar’s status as global reserve currency and could be driven out of business by a CBDC distributed directly through individual central bank accounts.

    Preserving the current Wall Street-dominated system, however, hardly helps Main Street. The pandemic added $5 trillion to the fortunes of the billionaire class; but government-instituted lockdowns permanently shuttered more than 100,000 U.S. businesses and left vast portions of the population living on the edge. According to a recent study from Johns Hopkins University, the detrimental impact of global lockdowns substantially outweighed their public health benefits.

    Is It Time to Amend the Federal Reserve Act?

    The U.S. dollar is backed by the full faith and credit of the United States: it retains its value because the American public is willing to take it in exchange for their goods and services. But the public has not been allowed access to the bottomless pool of central bank liquidity that backstops this public credit.

    According to Cornell Law School Prof. Robert Hockett, however, the framers of the Federal Reserve Act intended for Main Street businesses to be able to tap this liquidity pool. He argues that the Fed already has the monetary tools it needs to rescue the real, productive economy. They just haven’t been used – for over a century. The Fed can stay in its own lane and stimulate local production using monetary policy baked into the Federal Reserve Act itself.

    Cornell Law School’s Prof. Robert Hockett wrote in Forbes in March last year that the Federal Reserve System was originally designed to be “something akin to a network of regional development finance institutions. … Each of the twelve regional Federal Reserve Banks was to provide short-term funding directly or indirectly (through local banks) to developing businesses that needed it. This they did by ‘discounting’ – in effect, purchasing – commercial paper from those businesses.” Investopedia explains:

    Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities…. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.

    In determining what kinds of commercial paper to discount, wrote Hockett, “the Federal Reserve Act both was – and ironically remains – quite explicit about this: Fed discount lending is solely for ‘productive,’ not ‘speculative’ purposes.”

    In a follow-up article, Hockett explained that the drafters of the Federal Reserve Act, notably Carter Glass and Paul Warburg, were essentially following the Real Bills Doctrine (RBD). Previously known as the “commercial loan theory of banking,” it held that banks could create credit-money deposits on their balance sheets without triggering inflation if the money were issued against loans backed by commercial paper. When the borrowing companies repaid their loans from their sales receipts, the newly created money would just void out the debt and be extinguished. Their intent was that banks could sell their commercial loans at a discount at the Fed’s Discount Window, freeing up their balance sheets for more loans. Hockett wrote:

    The RBD in its crude formulation held that so long as the lending of endogenous [bank-created] credit-money was kept productive, not speculative, inflation and deflation would be not only less likely, but effectively impossible. And the experience of German banks during Germany’s late 19th century Hamiltonian ‘growth miracle,’ with which the German immigrant Warburg, himself a banker, was intimately familiar, appeared to verify this. So did Glass’s experience with agricultural lending in the American South.

    According to Prof. Carl Walsh, writing in The Federal Reserve Bank of San Francisco Newsletter in 1991:

    The preamble sets out very clearly that one purpose of the Federal Reserve Act was to afford the means of discounting commercial loans. In its report on the proposed bill, the House Banking and Currency Committee viewed a fundamental objective of the bill to be the “creation of a joint mechanism for the extension of credit to banks which possess sound assets and which desire to liquidate them for the purpose of meeting legitimate commercial, agricultural, and industrial demands on the part of their clientele.”

    “Liquidating” loans backed by “real bills” basically meant turning a company’s receivables into bank-issued credit that could be spent on the workers and materials needed to produce its goods and services, bringing supply in balance with demand. That “monetization” of debt might not drive up prices, but external factors obviously could. Today those factors include supply chain problems, worker shortages, and resource shortages. In the 1920s, the trigger was speculation in the stock market.

    The real bills policy was discredited after the stock market crash of 1929, due to overly-strict application by the Fed. As the tale is told in Wikipedia:

    Fed Board member Adolph C. Miller in 1929 launched his Direct Pressure initiative. It required all member banks seeking Federal Reserve discount window assistance to affirm that they had never made speculative loans, especially of the stock-market variety. No self-respecting banker seeking to borrow emergency reserves from the Fed was willing to undergo such interrogation, especially given that a “hard-boiled” Fed was unlikely to grant such aid. Instead, the banks chose to fail (and the Fed let them), which they did in large numbers, almost 9000 of them.

    But the policy’s original objective remains sound: “creation of a joint mechanism for the extension of credit to banks which possess sound assets and which desire to liquidate them for the purpose of meeting legitimate commercial, agricultural, and industrial demands on the part of their clientele.”

    Walsh noted that discount window borrowing is currently available only for easing very short-term reserve shortages. When the Fed wants to expand bank lending, it purchases government securities from the banking sector, allowing bank reserves to expand. But he observed that this maneuver does not necessarily increase bank lending, and that some commentators argued that the Fed should be allowed to purchase existing loans from banks that could then use the funds to back new loans on the “real bills” theory.

    Compare North Dakota’s “Mini-Fed”

    How might that work today? For some idea, we can look to the highly successful state-owned Bank of North Dakota, which has been described as a “mini-Fed” for the local banks of that state. Again quoting Wikipedia:

    The BND serves as a wholesale bank for the state’s community banks and credit unions. It participates in loans created by the local banks by expanding their size, providing loan guarantees, and “buying down” interest rates. Additionally, it buys loans from bank portfolios as well as community bank stocks. The bank provides other banking services to local banks, such as clearing checks, acting as depository for their reserves, and providing federal funds.

    According to a May 2020 article in The Washington Post titled “North Dakota Businesses Dominated the PPP”:

    Small businesses there secured more PPP [Paycheck Protection Plan] funds, relative to the state’s workforce, than their competitors in any other state ….

    What’s their secret? Much credit goes to the century-old Bank of North Dakota …. According to Eric Hardmeyer, BND’s president and chief executive, BND connected the state’s small bankers with politicians and U.S. Small Business Administration officials and even bought some of their PPP loans to help spread out the cost and risk.

    … BND offers few retail services or direct loans, with the notable exception of student loans. Instead it partners with local banks, multiplying their lending power and guiding them through the ever-evolving global financial system….

    BND has already rolled out two local successor programs to the PPP, intended to help businesses restart and rebuild. It has also offered deferments on its $1.1 billion portfolio of student loans.

    Updating the Federal Reserve Act

    The Paycheck Protection Plan was one of many relief programs established in March 2020 that were funded with Fed credit and capitalized with money from the Treasury. But Treasury backing would not actually be necessary to restore the Fed’s Discount Window to its original function. The Federal Reserve Act would just need a bit of tweaking to bring it into the 21st century.

    To start, Hockett says we need many more Federal Reserve branches than the original twelve, which are not distributed proportionately to today’s populations. The three-month limit on commercial loans and six-month limit on municipal government loans in Federal Reserve Act §10b also need to be extended; and we need a national funding agency for infrastructure, similar to the Reconstruction Finance Corporation that restored the depression-ridden U.S. economy in the 1930s. Hockett has drafted a bill for implementing his proposals, found here.

    That could work for long-term production, but families faced with rising food and energy bills need help right now. Until production catches up with demand, the innovative Cornell professor suggests that the Fed can counteract the speculation that is driving up those prices with “Open Market Operations,” using its new Chicago Fed trading desk to short them in the market. Direct market intervention is highly controversial and could obviously be misused; but the tool exists, and, if properly directed, it could help satisfy the Fed’s mandate to maintain consumer price stability. For more on that rather complicated subject, see here and here.

    To sum up: today’s price inflation was triggered not so much by “too much money” as by “too little supply,” due to lockdowns and mandates. The Fed can help restock consumer supplies using tools already in its toolbox. They include Open Market Operations to counteract speculation, and the Discount Window to purchase loans from local banks that would be willing to fund Main Street businesses if they had some help from the national Lender of Last Resort. We need the sort of Discount Window envisioned by the drafters of the Federal Reserve Act, one providing the liquidity to backstop bank advances against the future productivity of local businesses.

    •  This article was first posted on ScheerPost.

    The post Rather Than Sink Main Street by Raising Interest Rates, the Fed Could Save It: Here’s How first appeared on Dissident Voice.

    This post was originally published on Dissident Voice.

  • GOP Suggests Biden’s Fed Pick Shouldn’t Be Confirmed Due to Climate Views

    GOP Grill Fed Nominee Sarah Bloom Raskin over Climate Views

    We speak with Rep. Jamie Raskin about his wife Sarah Bloom Raskin’s grilling by a Senate panel Thursday over her qualifications to be President Biden’s nominee for the top bank regulator, the Federal Reserve Board of Governors. Republicans argue her past comments on climate change show she could use her position to discourage banks from lending to fossil fuel companies. Raskin said if she was confirmed, she would not be able to take such actions. “What they’re attacking is the idea there can be citizens who are fully aware of climate change and take it seriously, who can serve honorably and lawfully in other capacities,” says Rep. Raskin. “It is just an outrageous attack on her qualifications.” We’re also joined by “Love & the Constitution” director Madeleine Carter, whose film premieres Sunday.

    TRANSCRIPT

    This is a rush transcript. Copy may not be in its final form.

    AMY GOODMAN: Finally, Congressmember Raskin, could you comment on the hearing yesterday around your wife being confirmed to the Federal Reserve? The Washington Post described, “Sarah Bloom Raskin is championed by Democrats eager to install a bank regulator with a focus on climate change, and criticized by Republicans who don’t believe climate change belongs in conversations about the financial system or economic stability.” It was a serious grilling in the Senate Banking Committee.

    REP. JAMIE RASKIN: Right. And, well, let’s just say this. I wasn’t there, and I had some hearings of my own, so I only caught parts of it. But Sarah has been unanimously or near unanimously confirmed by the U.S. Senate in bipartisan fashion twice, as a governor of the Federal Reserve Board and also as deputy secretary of the United States Treasury. So none of this is about her qualifications to serve, obviously, because the Senate itself has approved and confirmed her two times before.

    All of this is about things that she has said or written about climate change. She has said, of course, that she will follow the law and act completely within the dual mandate of the Fed. But what they’re attacking is the idea that there can be citizens who are fully aware of climate change, who take it seriously, who can serve honorably and lawfully in other capacities. It’s just an outrageous attack on her qualifications, of course. But she’s tough. But on just the idea that you can even be cognizant of climate change and serve in different governmental functions, it’s an amazing thing.

    AMY GOODMAN: Well, Democratic Representative Jamie Raskin of Maryland, husband of Sarah Bloom Raskin, member of the House select committee investigating the January 6th Capitol insurrection, lead impeachment manager in President Trump’s second impeachment trial. Jamie Raskin’s new book is Unthinkable: Trauma, Truth, and the Trials of American Democracy. I also want to end by asking Madeleine Carter, the director of the new MSNBC documentary Love & the Constitution, which is premiering Sunday night, what you want people to take away from and why you named the film Love & the Constitution.

    MADELEINE CARTER: Well, what I want people to take away is that one person can make a difference. I mean, Jamie is making a huge difference in democracy and in saving constitutional democracy, but one person can make a difference just by driving a neighbor to the polls. So, there’s plenty of work to be done by all of us. So, that’s my main message.

    And then, in terms of naming it Love & the Constitution, I actually thought of that title at about 2 a.m. one morning in October, because that really describes what the film is about. The film is about Jamie’s love for his son, obviously, but Jamie’s love for the Constitution and for American democracy is really what’s helping him get through this terrible, life-changing loss of Tommy.

    AMY GOODMAN: I want to thank you so much for being with us, Madeleine Carter, and congratulations on this film. Again, it will appear on MSNBC 10:00 Eastern time on Sunday night and then move on to Peacock.

    This is Democracy Now! Next up, we go to Chicago, where protests erupted Thursday over the early release of the ex-police officer Jason Van Dyke, who murdered 17-year-old Laquan McDonald in 2014, shooting him to death 16 times. Stay with us.

    [break]

    AMY GOODMAN: “American Skin (41 Shots)” by Bruce Springsteen, the song inspired by the New York police shooting death of Amadou Diallo. On this day in 1999, February 4th, Amadou Diallo was killed in a hail of police bullets after cops mistook his wallet for a gun. Four officers fired 41 times, fatally hitting the 23-year-old Ghanaian immigrant 19 times.

    This post was originally published on Latest – Truthout.

  • The Federal Reserve Has Fueled Wall Street at the Expense of the Rest of Us

    How the Federal Reserve Enriched Wall Street and Broke the U.S. Economy

    As the Federal Reserve signals it will raise interest rates in March, we talk to Christopher Leonard, author of the new book The Lords of Easy Money, about how the Federal Reserve broke the American economy. He details the issues with quantitative easing, a radical intervention instituted by the federal government in 2010 to encourage banks and investors to lend more risky debt to combat the recession. “The Fed’s policies over the last decades have stoked the world of Wall Street,” says Leonard. “It has pumped trillions of dollars into the banking system and thereby inflated these markets for stocks, for bonds. And that drives income inequality.”

    TRANSCRIPT

    This is a rush transcript. Copy may not be in its final form.

    AMY GOODMAN: This is Democracy Now! I’m Amy Goodman, with Nermeen Shaikh.

    Amidst growing concerns about inflation in the U.S., the Federal Reserve announced Tuesday it will start hiking interest rates in March. To look at what this will mean for working people and everyone beyond the 1%, we’re joined by Christopher Leonard, longtime business reporter. His new book is out this week, The Lords of Easy Money: How the Federal Reserve Broke the American Economy.

    Welcome to Democracy Now! It’s great to have you with us, Christopher. If you can start off with a Federal Reserve 101: What does it mean to lift interest rates? And why do you say it’s broken, the American economy?

    CHRISTOPHER LEONARD: Yes. Thank you. Great question. And, you know, the Federal Reserve can seem like this very kind of obscure and highly technical institution that only matters to Wall Street, but I really think that’s not the case. It is critical to understand what this central bank does and how it has affected our economy. You know, one of my central preoccupations as a business reporter is trying to understand growing income inequality in the United States and why we live in this sort of funhouse-type economy where we can see stock markets breaking records, corporate debt markets breaking records, while the middle class is really treading water with stagnant wages and falling further behind. What the Federal Reserve has done over the last decade helps explain why this is happening.

    So, you know, at the root level, we created the Federal Reserve as the central bank to do one key thing: It creates our currency. The Federal Reserve literally creates and manages our currency. That thing we call a U.S. dollar is in reality a Federal Reserve note. So, the central bank’s job is to make sure that the dollar retains its value. So that’s why you always hear this talk about, you know, the Federal Reserve hiked interest rates today, or it cut interest rates today. What they’re doing is expanding or contracting the supply of money.

    So, why does that matter? Well, here’s why. Over the last decade, the Fed has really moved itself to the center of American economic life. The Fed has engaged in an unprecedented series of experiments in printing new money. Let me put it this way: In the first century of its existence, the Fed expanded the pool of base money — you know, what the economists called the monetary base. The Fed expanded that pool of money to about $900 billion. So, that’s a trillion dollars in printing money over a century. But then, after the crash of ’08, between 2008, 2014, the Fed prints $3.5 trillion. So that’s three-and-a-half centuries’ worth of money printing in a few short years.

    Now, that money is not a neutral force. When the Fed creates new dollars, it doesn’t create them in the checking account of normal people, right? It creates new dollars — specifically and by design, it creates new dollars on Wall Street in the bank accounts of 24 select institutions. And they’re the folks you’d suspect: you know, JPMorgan, Goldman Sachs, Wells Fargo. That’s where the Fed is creating these new dollars. So the Fed’s policies over the last decades have stoked the world of Wall Street. It has pumped trillions of dollars into the banking system, and thereby it’s inflated these markets for stocks, for bonds. And that drives income inequality, because, you know, just the tiny 1% at the top of our wealth ladder controls 40% of all the assets, whereas the bottom half of Americans, you know, those of us who earn a living by getting a paycheck rather than by owning assets — the bottom half of Americans only own about 5% of all the assets. So the Fed’s policies have enriched the very rich, the biggest of the big banks, while leaving the middle class behind.

    And now we find ourself in this position, that’s really actually quite a dangerous moment, in 2022, where we’re seeing price inflation start to increase dramatically. So, the Fed is being forced to tighten the money supply and to try to back off these stimulus programs it’s created. The real risk here, I think, for everybody in America is that as the Fed does this, as it hikes rates and pulls back on the stimulus, it’s going to cause those asset markets to fall. And, you know, to put that in common parlance, it’s risking creating a financial market crash as the Fed is forced to hike interest rates. And again, to me, one of the key problems with this is that over the decade of these easy money policies, the middle class has really been left out. And once again, it will be the middle class that’s going to have to pay the bill if we see another financial market crash.

    NERMEEN SHAIKH: Well, Chris, could you respond to what we see everywhere in the media, namely that inflation rates now are almost at 7%, higher than they’ve been since the 1980s? I mean, that level of inflation also impacts the vast majority of Americans adversely. What other steps could be taken to reduce inflation?

    CHRISTOPHER LEONARD: So, it’s just fascinating. And one key thing I would really like to point out, that I learned while reporting this book, is that we should, I think, think about two kinds of inflation. There’s inflation of prices, which is what we’re talking about right now, that really sharp increase in the price of food, fuel, television sets, cars. That’s price inflation. But then you’ve got inflation of assets, which is what the Fed has been pushing so hard for decades. So, that’s a rise in the value of homes and stocks and corporate bonds. So we’ve actually had runaway asset inflation for a decade, but we haven’t seen price inflation. And we’re starting to see it now.

    And as you point out, price inflation can just, frankly, be devastating for the middle class, if wages don’t keep up with the increase in prices — which, unfortunately, is exactly what we’re seeing now. So, wages are kind of creeping up a little bit, but we’re seeing this runaway increase in prices, which presents us with a terrible dilemma. And to be blunt, the Federal Reserve is responsible for the price inflation, at least to a certain degree, by pumping all of this money into the economy.

    So, you know, your question is: How can you fight it, and what can you do?

    AMY GOODMAN: We have 30 seconds.

    CHRISTOPHER LEONARD: Quite unfortunately, one of the few ways to do this is to hike interest rates, which is going to create damage to our economy. Many other important measures will take a lot of time, such as improving the supply chain or cracking down on monopolies. So, we’re going to see interest rates hiked, and it’s going to be a bumpy ride.

    AMY GOODMAN: Well, we clearly have to come back to this conversation, Christopher Leonard, business reporter and author. New book out this week, it’s called The Lords of Easy Money: How the Federal Reserve Broke the American Economy.

    And that does it for our show. I’m Amy Goodman, with Nermeen Shaikh. Remember, wearing a mask is an act of love.

    This post was originally published on Latest – Truthout.

  • Fed Chair Jerome Powell Says Corporations “Are Raising Prices Because They Can”

    Federal Reserve Board Chairman Jerome Powell speaks during his re-nominations hearing on Capitol Hill on January 11, 2022, in Washington, D.C.

    In a hearing before the Senate Banking Committee on Tuesday, Federal Reserve Chair Jerome Powell said that corporations may be raising prices arbitrarily to pad their profits while the public suffers under high inflation rates.

    Powell said that higher prices for commodities like groceries could be chalked up to corporate greed, at least partially. This statement echoes recent research that shows that businesses are seeing some of their highest profit increases since 1950, using inflation as an excuse to reach further into consumers’ pockets.

    The statement came as the result of prodding from Sen. Elizabeth Warren (D-Massachusetts). During a confirmation hearing for Powell’s renomination to lead the most powerful financial institution in the country, Warren questioned whether or not the Fed chair believed that corporations were fleecing customers as corporate concentration is on the rise.

    “Does that increase in profit margins combined with greater market concentration in industry after industry suggest to you that some corporations may be passing along increased costs and, at the same time, charging more on top of that to fatten their profit margins?” Warren asked.

    “That could be right. It could also just be, though, that demand is incredibly strong and that they’re raising prices because they can,” Powell said.

    “Well, that’s the point. They’re raising prices because they can and not being competed down,” Warren responded. Consumers aren’t just offsetting inflation for raw materials for corporations, she pointed out – they’re also paying more out of pocket.

    This isn’t the first time Warren has brought attention to the issue. In December, the Massachusetts lawmaker sent a letter to large grocers that have been raising prices, expressing similar concerns regarding inflation. Kroger, Publix and Albertsons have been reporting high profits as grocery bills have increased by over 6 percent on average over the past year, Warren wrote.

    Reporters have pointed out that fears about inflation may be overstated, however. As Hadas Thier wrote for Truthout, wages are currently rising at a similar rate to inflation – meaning that worries about inflation, as sensationalized by conservative lawmakers and the media, could be a tool for corporations to create conditions for price gouging.

    During the hearing, Powell sounded the alarm on inflation, saying that it could throw a wrench into the country’s economic recovery from the pandemic and potentially hamper jobs recovery. This hearing comes ahead of January’s inflation report, which the Financial Times reports is expected to show the consumer price index rising annually by 7 percent.

    Powell also claimed during the hearing that the country no longer needs policies that were put into place as protection against the financial impact of the pandemic. During his tenure, Powell rolled back measures that were intended to protect the economy after the Great Recession, which has led economists to question whether he intends to protect consumers or whether he would rather throw favor to Wall Street through deregulation.

    Lawmakers, including Warren, have repeatedly criticized decisions that the Donald Trump nominee made during his tenure. But President Joe Biden renominated the Fed chair despite warnings that Powell hasn’t been doing enough to address the climate crisis and that he has a poor record on financial regulation.

    This post was originally published on Latest – Truthout.

  • Elizabeth Warren Demands Information on Fed Official’s Questionable Stock Trades

    Sen. Elizabeth Warren speaks during a hearing at Dirksen Senate Office Building on August 3, 2021, on Capitol Hill in Washington, D.C.

    Sen. Elizabeth Warren (D-Massachusetts) recently sent a letter to Jerome Powell demanding more information on stock trades by Federal Reserve Vice Chair Richard Clarida after a New York Times report revealed that Clarida failed to disclose the extent of his trades just before the stock market crashed in 2020.

    Last year, Clarida reported moving between $1 million and $5 million into an investment fund, buying shares on February 27th, 2020 – the day before Chair Powell made a major announcement about rule changes at the Fed in preparation for the pandemic.

    However, Clarida recently amended that financial disclosure to reflect another potentially significant trade he made around the same time. The vice chair sold shares of the investment fund on February 24, just as stocks were plunging. Clarida defended himself when news of the February 27 trade came out, saying that the trade had been planned in advance, but the February 24 sale makes this statement look dubious, The New York Times reported.

    Though Clarida is departing the agency, Warren believes that this new information raises concerns about stock trades at the Fed in general. In her letter, she gave Powell a deadline of January 17 to provide all available information about Fed officials’ trades.

    “The Fed has failed to respond to two of my previous inquiries,” Warren wrote. “This refusal to provide information to Congress became even more troubling after a report last week in the New York Times revealed that one Fed official’s trades ‘went further than first disclosed,’ raising fresh questions about the actions and intent of Fed Vice Chair Richard Clarida.”

    Warren went on to say that she is “deeply concerned” with the Fed’s refusal to be transparent about stock trades, “rais[ing] suspicions that the Fed may be failing to disclose the full scope of the scandal to the public.” She then cited a March 2020 email in which ethics officials warned Fed officials to refrain from trading stocks as the pandemic was rocking the market, for fear of such trades looking suspicious to the public.

    The Massachusetts lawmaker has previously requested that the Securities and Exchange Commission (SEC) look into potential insider trading at the Fed. Clarida’s trade is just one of multiple scandals that have emerged from the Fed over past months, including one involving Powell himself, whose confirmation hearing before the Senate Banking Committee is scheduled for Tuesday.

    Shortly after news of Clarida’s trades emerged, The American Prospect revealed that Powell sold between $1 million and $5 million in stock just before the stock market crashed in October of 2020 – at the time, the largest drop since the March 2020 crash. Powell had communicated with Treasury Secretary Steve Mnuchin four times on the day of the sale, and days after, encouraged Congress to pass the stimulus package in order to help the economy recover.

    At the time, Warren advocated for her legislation to bar top politicians, including financial regulators, from being able to trade stocks. After news of the scandal broke, the Fed did take steps to ban its officials from buying individual securities, but trades like Powell’s are still permitted under the new rules.

    In her letter, Warren said that it is crucial not only for the SEC to investigate the agency, but also for the agency to release details of Clarida’s trades, among others, in order for officials to be held accountable by Congress. This demand is especially timely in relation to Powell’s potential confirmation by the Senate, to which Warren is vehemently opposed.

    “[T]imely release of this requested information is also critical so that Congress and the public can evaluate the full extent of trading in individual stocks by Fed officials, the extent to which Fed officials were warned of the risks from their trading, and whether the plans you announced to change the Fed’s ethics practices are sufficient to prevent future financial conflicts of interest,” Warren wrote.

    The agency’s “continued refusal to release this information severely compounds concerns about the Fed’s lack of transparency and your commitment to fully and honestly addressing the Fed’s broken ethics culture,” she went on.

    This post was originally published on Latest – Truthout.

  • Is There an Alternative? The Macroeconomics of the Biden Administration

    The response to COVID-19 proved that the federal government is far more capable of managing the economy than many people thought. What happens now that Bidenomics faces rising headwinds?

    This post was originally published on Dissent MagazineDissent Magazine.

  • Businesses Have Manufactured Inflation Fear to Protect Profits Amid Rising Wages

    People line up to check out at a grocery store in New York City, on November 14, 2021.

    For weeks, a high-pitched panic about inflation has infused the mainstream media, most absurdly in CNN’s clip of a family struggling to keep up with the price of buying 12 gallons of milk per week (yes, 12).

    Up until recently, Federal Reserve Chair Jerome Powell pushed back against this kind of narrative, arguing that rising prices were a short-term and transitory problem due to supply chain shocks from the pandemic that will eventually return to normal. But now the Fed has shifted course and is preparing to institute policies to “cool off the economy” — a euphemism for shrinking the money supply in order to drive down business investment and thus scale back job growth.

    The definition of inflation is simple enough: an increase in the prices of goods and services. If prices rise quickly, and outpace wage growth, this can cause problems for working families — even those who don’t drink 12 gallons of milk per week. But the media narrative about rising inflation has conveniently left out several important points.

    First, the prices of some of our biggest expenses — health care, housing, higher education to name a few — have been rising (often explosively so) for decades with little discussion or concern from the punditry. Health care costs are in fact the leading cause of bankruptcy in the country. Global food prices, too, have been rising because of the impact of climate change on crop yields. Easing these kinds of costs — through a nationalized health care system, investment in affordable housing, student debt relief and decarbonization — would go a much longer way toward improving working people’s finances than monetary policies to tighten economic growth.

    Second, although it’s true that there has been a noticeable uptick in prices (measured by the annual change on the consumer price index) by 6.8 percent over the last year, this is still not very high by historical standards. The last time the United States experienced a serious inflationary crisis in the 1970s, the rate of inflation regularly hit between 11-13 percent. It’s also the case that measures of current price increases are skewed by a few sectors of the economy, most notably the energy sector.

    A more useful measure to look at is a comparison of the rise of prices to the state of wages. If prices are going up faster than wages, then our relative purchasing power declines. But if wages keep pace with inflation, or even outpace inflation, then our purchasing power stays the same, or is strengthened. The reverse is also true. Thus, even though inflation rates have remained relatively low for much of the last few decades, wages have grown even less, meaning that purchasing power for working people declined despite low inflation rates.

    Today, wages are finally rising. The New York Times recently reported that about 13 percent of workers have not seen pay increases this year and many retirees receive pensions that are constant. But it has been “middle- and high-income earners whose pay gains were least likely to have kept up with inflation. Over the 12 months that ended in September, those in the top quarter of earners experienced 2.7 percent gains in hourly earnings, compared with 4.8 percent for the lowest quarter of earners.” The combination of wage increases and COVID-19 relief checks have put more money in the pockets of the bottom half of earners than they had at the start of the pandemic.

    Most importantly, the media spin has left out the elephant in the room. It is business owners who are the ones raising prices. They are currently setting record profits, so do they have to raise prices? The answer to this question ultimately reveals that inflation is a question of class politics — which class gains at whose expense — rather than technical monetary policies.

    What Exactly Is Inflation, and Where Does It Come From?

    Inflation is an increase in prices, generalized across the economy, i.e., not just the rise of one particular good but goods across wide swaths of the economy.

    How does this happen? The classic explanation is that inflation occurs when too many dollars chase too few goods. That is, if demand for goods and services exceeds the world’s capacity to supply those goods and services, this creates an upward pressure on prices. Business owners can get away with charging more from consumers, who essentially bid against each other for limited supply.

    Today, the rapid reopening of economies following lockdowns has created heightened demand for goods and services, far outpacing the rate at which supply chains have come online. The free market allows producers of items in short supply to “pick their price,” as anyone looking to buy a used car right now knows.

    This can also lead to good old-fashioned price gouging. The oil industry, for instance, curtailed production at the height of the pandemic due to cratering demand for fuel. Now that demand is back up, Bloomberg News reports, “oil companies are keeping production flat while using profits to reward shareholders.” And although wholesale prices of oil have fallen somewhat, retail gas stations are still selling gas at high prices. “When wholesale prices decline rapidly, it provides a window for retail operators to sell at high prices for a few weeks before lowering prices,” oil storage broker Tank Tiger CEO Ernie Barsamian told Bloomberg. He noted that eventually gas prices will come down, but for now, many refiners and gas stations are enjoying the higher profits.

    The other half of the inflationary equation is the role of increased workers’ wages. In a situation like today, where wages have begun to rise, this will feed an increased demand for goods, as working people have more money to spend. At the same time, higher wages also raise the cost of production for employers. If businesses pay higher wages to workers, the argument goes, this cuts into profit margins, leading capitalists to pass on their added costs to consumers.

    Most mainstream economists assume that even if an external factor (a spike in oil prices due to geopolitical shifts, or supply chain chokeholds due to pandemic lockdowns) triggers the rise in prices, ultimately higher wages are the primary culprit of any sustained inflationary trends. Finally, mainstream economics draws a line between higher wages and low unemployment rates. A tight labor market, where workers are not easily replaced, gives workers more bargaining power to demand higher wages.

    This line of argument was first championed by economist Milton Friedman, who stated that a ”natural rate of unemployment” exists below which inflation begins to take off. Friedman’s “monetarist” ideas took hold after the inflationary crisis of the 1970s, and ever since have been used as a battering ram against policies in which governments actively promote full employment or better jobs for workers.

    In one sense, conservatives have a point. Karl Marx himself similarly argued that capitalism depends on unemployment — a “reserve army of labor” — to keep workers desperate enough to agree to whatever terms of work they can get. Unemployment, in other words, is a means to prevent wages from growing so far that they threaten profitability.

    Class Conflict

    The question that economic pundits conspicuously avoid is: What if instead of raising prices, businesses just made do with smaller profit margins? After all, U.S. corporations are currently making record profits, posting their fattest margins since 1950. Even at John Deere, the site of the highest-profile strike this year, Bloomberg News reports, “workers held out to get a 10% raise, yet the company is still expected to earn even more next year than the record profit it posted [in November].”

    Workers don’t set prices, the bosses do. And they do so on the basis of maintaining the greatest possible profit margins. If workers’ wages go up but prices stay the same, this would simply mean that a greater share of profits went to workers rather than capitalists. System-wide, workers’ share of the economic pie (i.e., the “national income”) would increase. Falling unemployment, rising wages and increased social spending does not have to automatically translate into inflation of prices if we allow bosses’ profit margins and their share of the national income to decrease.

    Even the dire rates of inflation in the 1970s, in the context of a strong labor movement “hurt capital more than it did workers, while neoliberal repression of workers’ power has kept inflation low from the 1980s onward,” sociologists Ho-fung Hung and Daniel Thompson have argued. The question of inflation is therefore a matter of class conflict over who gains at whose expense.

    This is not to say that inflationary pulls aren’t a problem; if prices of common goods rise much faster than wages, or if the spikes in inflation are so high that businesses aren’t able to operate smoothly and fall into bankruptcy, laying off workers, this could have dire consequences. But the cures that are typically on hand are worse than the disease. Thus, in response to the crisis in the 1970s, the U.S. ruling class, led by President Ronald Reagan and Fed Chair Paul Volcker (though begun by President Jimmy Carter), was willing to induce a severe recession in order to stop inflation. The ensuing decades of neoliberalism created astronomical levels of class inequality.

    But there are other tools to stop inflation, which do so in favor of workers. Price controls have been used in wartime throughout U.S. history, most significantly by President Franklin Delano Roosevelt’s administration. As political scientist Todd Tucker recently pointed out, FDR employed 160,000 federal employees in the Office of Price Administration to control prices “on goods from scrap steel to shoes to milk.” Even President Richard Nixon briefly implemented price controls.

    Immediate reforms in the form of rent control, expanding Medicare, and allowing the government to negotiate lower drug prices are a good start to such policies, along with capping CEO pay and taxing the rich. Other reforms like investment into public housing and public education also indirectly cap prices.

    Ultimately, a left economic agenda must push back against the inflation panic to maintain demands for higher wages and increased social spending, while guarding against real inflation through price controls and policies that protect working people’s pockets.

    This post was originally published on Latest – Truthout.

  • The Real Antidote To Inflation

    The Federal Reserve is caught between a rock and a hard place. Inflation grew by 6.8% in November, the fastest in 40 years, a trend the Fed has now acknowledged is not “transitory.” The conventional theory is that inflation is due to too much money chasing too few goods, so the Fed is under heavy pressure to “tighten” or shrink the money supply. Its conventional tools for this purpose are to reduce asset purchases and raise interest rates. But corporate debt has risen by $1.3 trillion just since early 2020; so if the Fed raises rates, a massive wave of defaults is likely to result. According to financial advisor Graham Summers in an article titled “The Fed Is About to Start Playing with Matches Next to a $30 Trillion Debt Bomb,” the stock market could collapse by as much as 50%. 

    The post The Real Antidote To Inflation appeared first on PopularResistance.Org.

    This post was originally published on PopularResistance.Org.

  • The Real Antidote to Inflation: Stoking the Fire Without Burning Down the Barn

    The Fed has options for countering the record inflation the U.S. is facing that are more productive and less risky than raising interest rates.

    The Federal Reserve is caught between a rock and a hard place. Inflation grew by 6.8% in November, the fastest in 40 years, a trend the Fed has now acknowledged is not “transitory.” The conventional theory is that inflation is due to too much money chasing too few goods, so the Fed is under heavy pressure to “tighten” or shrink the money supply. Its conventional tools for this purpose are to reduce asset purchases and raise interest rates. But corporate debt has risen by $1.3 trillion just since early 2020; so if the Fed raises rates, a massive wave of defaults is likely to result. According to financial advisor Graham Summers in an article titled “The Fed Is About to Start Playing with Matches Next to a $30 Trillion Debt Bomb,” the stock market could collapse by as much as 50%.

    Even more at risk are the small and medium-sized enterprises (SMEs) that are the backbone of the productive economy, companies that need bank credit to survive. In 2020, 200,000 more U.S. businesses closed than in normal pre-pandemic years. SMEs targeted as “nonessential” were restricted in their ability to conduct business, while the large international corporations remained open. Raising interest rates on the surviving SMEs could be the final blow.

    Cut Demand or Increase Supply?

    The argument for raising interest rates is that it will reduce the demand for bank credit, which is now acknowledged to be the source of most of the new money in the money supply. In 2014, the Bank of England wrote in its first-quarter report that 97% of the UK money supply was created by banks when they made loans. In the U.S. the figure is not quite so high, but well over 90% of the U.S. money supply is also created by bank lending.

    Left unanswered is whether raising interest rates will lower prices in an economy beset with supply problems. Oil and natural gas shortages, food shortages, and supply chain disruptions are major contributors to today’s high prices. Raising interest rates will hurt, not help, the producers and distributors of those products, by raising their borrowing costs. As observed by Canadian senator and economist Diane Bellemare:

    Raising interest rates may cool off demand, but today’s high prices are tightly tied to supply issues – goods not coming through to manufacturers or retailers in a predictable way, and global markets not able to react quickly enough to changing tastes of consumers.

    … A singular focus on inflation could lead to a ratcheting up of interest rates at a time when Canada [and the U.S.] should be increasing its ability to produce more goods, and supplying retailers and consumers alike with what they need.

    Rather than a reduction in demand, we need more supply available locally; and to fund its production, credit-money needs to increase. When supply and demand increase together, prices remain stable, while GDP and incomes go up.

    So argues UK Prof. Richard Werner, a German-born economist who invented the term “quantitative easing” (QE) when he was working in Japan in the 1990s. Japanese banks had pumped up demand for housing, driving up prices to unsustainable levels, until the market inevitably crashed and took the economy down with it. The QE that Werner prescribed was not the asset-inflating money creation we see today. Rather, he recommended increasing GDP by driving money into the real, productive economy; and that is what he recommends for today’s economic crisis.

    How to Fund Local Production

    SMES make up around 97-99% of the private sector of almost every economy globally. Despite massive losses from the pandemic lockdowns, in the U.S. there were still 30.7 million small businesses reported in December 2020. Small companies account for 64 percent of new U.S. jobs; yet in most U.S. manufacturing sectors, productivity growth is substantially below the standards set by Germany, and many U.S. SMEs are not productive enough to compete with the cost advantages of Chinese and other low-wage competitors. Why?

    Werner observes that Germany exports nearly as much as China does, although the German population is a mere 6% of China’s. The Chinese also have low-wage advantages. How can German small firms compete when U.S. firms cannot? Werner credits Germany’s 1,500 not-for-profit/community banks, the largest number in the world. Seventy percent of German deposits are with these local banks – 26.6% with cooperative banks and 42.9% with publicly-owned savings banks called Sparkassen, which are legally limited to lending in their own communities. Together these local banks do over 90% of SME lending. Germany has more than ten times as many banks engaged in SME lending as the UK, and German SMEs are world market leaders in many industries.

    Small banks lend to small companies, while large banks lend to large companies – and to large-scale financial speculators. German community banks were not affected by the 2008 crisis, says Werner, so they were able to increase SME lending after 2008; and as a result, there was no German recession and no increase in unemployment.

    China’s success, too, Werner attributes to its large network of community banks. Under Mao, China had a single centralized national banking system. In 1982, guided by Deng Xiaoping, China reformed its money system and introduced thousands of commercial banks, including hundreds of cooperative banks. Decades of double-digit growth followed. “Window guidance” was also used: harmful bank credit creation for asset transactions and consumption were suppressed, while productive credit was encouraged.

    Werner’s recommendations for today’s economic conditions are to reform the money system by: banning bank credit for transactions that don’t contribute to GDP; creating a network of many small community banks lending for productive purposes, returning all gains to the community; and making bank behavior transparent, accountable and sustainable. He is chairman of the board of Hampshire Community Bank, launched just this year, which lays out the model. It includes no bonus payments to staff, only ordinary modest salaries; credit advanced mainly to SMEs and for housing construction (buy-to-build mortgages); and ownership by a local charity for the benefit of the people in the county, with half the votes in the hands of the local authorities and universities that are its investors.

    Public Banking in the United States: North Dakota’s Success

    That model – cut out the middlemen and operationalize community banks to create credit for local production – also underlies the success of the century-old Bank of North Dakota (BND), the only state-owned U.S. bank in existence. North Dakota is also the only state to have escaped the 2008-09 recession, having a state budget that never dropped into the red. The state has nearly six times as many local banks per capita as the country overall. The BND does not compete with these community banks but partners with them, a very productive arrangement for all parties.

    In 2014, the Wall Street Journal published an article stating that the BND was more profitable even than JPMorgan Chase and Goldman Sachs. The author credited North Dakota’s oil boom, but the boom turned into a bust that very year, yet the BND continued to report record profits. It has averaged a 20% return on equity over the last 19 years, far exceeding the ROI of JPMorgan Chase and Wells Fargo, where state governments typically place their deposits.  According to its 2020 annual report, in 2019 the BND had completed 16 years of record-breaking profits.

    Its 2020 ROI of 15%, while not quite as good, was still stellar considering the economic crisis hitting the nation that year. The BND had the largest percentage of Payroll Protection Plan recipients per capita of any state; it tripled its loans for the commercial and agricultural sectors in 2020; and it lowered its fixed interest rate on student loans by 1%, saving borrowers an average of $6,400 over the life of the loan. The BND closed 2020 with $7.7 billion in assets.

    Why is the BND so profitable, then, if not due to oil? Its business model allows it to have much lower costs than other banks. It has no private investors skimming off short-term profits, no high paid executives, no need to advertise, and, until recently, it had only one branch, now expanded to two. By law, all of the state’s revenues are deposited in the BND. It partners with local banks on loans, helping with capitalization, liquidity and regulations. The BND’s savings are returned to the state or passed on to local borrowers in the form of lower interest rates.

    What the Fed Could Do Now

    The BND and Sparkassen banks are great public banking models, but implementing them takes time, and the Fed is under pressure to deal with an inflation crisis right now. Prof. Werner worries about centralization and thinks we don’t need central banks at all; but as long as we have them, we might as well put them to use serving the Main Street economy.

    In September 2020, Saqib Bhatti and Brittany Alston of the Action Center on Race and the Economy proposed a plan for stimulating local production that could be implemented by the Fed immediately. It could make interest-free loans directly to state and local governments for productive purposes. To better fit with prevailing Fed policies, perhaps it could make 0.25% loans, as it now makes to private banks through its discount window and to repo market investors through its standing repo facility.

    They noted that interest payments on municipal debt transfer more than $160 billion every year from taxpayers to wealthy investors and banks on Wall Street. These funds could be put to more productive public use if the Federal Reserve were to make long-term zero-cost loans available to all U.S. state and local governments and government agencies. With that money, they could refinance old debts and take out loans for new long-term capital infrastructure projects, while canceling nearly all of their existing interest payments. Interest and fees typically make up 50% of the cost of infrastructure. Dropping the interest rate nearly to zero could stimulate a boom in those desperately needed projects. The American Society of Civil Engineers (ASCE) estimates in its 2021 report that $6.1 trillion is needed just to repair our nation’s infrastructure.

    As for the risk that state and local governments might not pay back their debts, Bhatti and Alston contend that it is virtually nonexistent. States are not legally allowed to default, and about half the states do not permit their cities to file for bankruptcy. The authors write:

    According to Moody’s Investors Service, the cumulative ten-year default rate for municipal bonds between 1970 and 2019 was just 0.16%, compared with 10.17% for corporate bonds, meaning corporate bonds were a whopping 63 times more likely to default. …[M]unicipal bonds as a whole were safer investment than the safest 3% of corporate bonds. … US municipal bonds are extremely safe investments, and the interest rates that most state and local government borrowers are forced to pay are unjustifiably high.

    … The major rating agencies have a long history of using credit ratings to push an austerity agenda and demand cuts to public services …. Moreover, they discriminate against municipal borrowers by giving them lower credit ratings than corporations that are significantly more likely to default.

    … [T]he same banks that are major bond underwriters also have a record of collusion and bid-rigging in the municipal bond market. … Several banks, including JPMorgan Chase and Citigroup, have pleaded guilty to criminal charges and paid billions in fines to financial regulators.

    … There is no reason for banks and bondholders to be able to profit from this basic piece of infrastructure if the Federal Reserve could do it for free. [Citations omitted.]

    To ensure repayment and discourage over-borrowing, say Bhatti and Alston, the Fed could adopt regulations such as requiring any borrower that misses a payment to levy an automatic tax on residents above a certain income threshold. Borrowing limits could also be put in place. Politicization of loans could be avoided by making loans available indiscriminately to all public borrowers within their borrowing limits. Another possibility might be to mediate the loans through a National Infrastructure Bank, as proposed in HR 3339.

    All of this could be done without new legislation. The Federal Reserve has statutory authority under the Federal Reserve Act to lend to municipal borrowers for a period of up to six months. It could just agree to roll over these loans for a fixed period of years. Bhatti and Alston observe that under the 2020 CARES Act, the Fed was given permission to make up to $500 billion in indefinite, long-term loans to municipal borrowers, but it failed to act on that authority to the extent allowed. Loans were limited to no more than three years, and the interest rate charged was so high that most municipal borrowers could get lower rates on the open municipal bond market.

    Private corporations, which the authors show are 63 times more likely to default, were offered much more generous terms on corporate debt; and 330 corporations took the offer, versus only two municipal takers through the Municipal Liquidity Facility. The federal government also made $10.4 trillion in bailouts and backstops available to the financial sector after the 2008 financial crisis, a sum that is 2.5 times the size of the entire U.S. municipal bond market.

    Stoking the Fire with Credit for Local Production

    Playing with matches that could trigger a $30 trillion debt bomb is obviously something the Fed should try to avoid. Prof. Werner would probably argue that its policy mistake, like Japan’s in the 1980s, has been to inject credit so that it has gone into speculative assets, inflating asset prices. The Fed’s liquidity fire hose needs to be directed at local production. This can be done through local community or public banks, or by making near-zero interest loans to state and local governments, perhaps mediated through a National Infrastructure Bank.

    • This article was first posted on ScheerPos

    The post The Real Antidote to Inflation: Stoking the Fire Without Burning Down the Barn first appeared on Dissident Voice.

    This post was originally published on Dissident Voice.

  • Biden Picks Jerome Powell to Lead Federal Reserve Despite Progressive Warnings

    On Monday, the White House announced that President Joe Biden is planning to nominate Republican Jerome Powell for his second term as chair of the Federal Reserve, one of the most influential positions in Washington.

    Alongside Powell, Biden will nominate Lael Brainard as vice chair. Brainard is the only Democrat on the seven-person Fed board and was previously being considered by the White House as a leading candidate to replace Powell.

    The two appointments will then go to the Senate, where progressive lawmakers will likely put up a fight against Powell’s nomination — particularly Sen. Elizabeth Warren (D-Massachusetts), who has called Powell a “dangerous man” due to his record over his first four-year tenure.

    Since Powell’s original nomination by Donald Trump, he has been panned by progressive advocates and lawmakers for not being strict enough when it comes to regulating banks and Wall Street. He has also been criticized for his ignorance on climate issues.

    If confirmed, Powell will hold great influence over the economy during a time of rising housing prices, high inflation and instability in the labor market.

    In a statement announcing the nomination, the White House noted the administration’s belief that it is important to have steady leadership at the Fed as the pandemic continues.

    “Fundamentally, if we want to continue to build on the economic success of this year we need stability and independence at the Federal Reserve — and I have full confidence after their trial by fire over the last 20 months that Chair Powell and Dr. Brainard will provide the strong leadership our country needs,” said Biden. There are three remaining nominations to the Fed board that the president has yet to announce.

    Progressive advocates were rooting for Brainard’s nomination as chair of the agency, citing her voting record on the Fed board, her stances supporting tougher Wall Street regulation, and her understanding that the climate crisis should be factored into the Fed’s decisions.

    A handful of senators have come out against Powell’s renomination, including Senators Sheldon Whitehouse (D-Rhode Island), Jeff Merkeley (D-Oregon) and Warren. However, he will still likely be confirmed by the Senate, where he enjoys the support of conservative lawmakers like Sen. Joe Manchin (D-West Virginia).

    Biden bucked progressive recommendations in nominating Powell for a second term, perhaps as an attempt to appeal to bipartisanship. That appeal may have serious consequences, as economics experts have warned that Powell’s record is alarming during an unstable time for the U.S. economy.

    “[A] Powell renomination raises serious concerns simply based on his record,” Gerald Epstein wrote for Truthout in September. While Powell has rightly earned praise for his support of maximum employment and his handling of economic turmoil during the early months of the pandemic, Epstein wrote, “supporters who focus only on these areas are ignoring another crucial component of the Fed’s job — financial regulation and financial stability — where Powell has a much more problematic record.”

    As Fed chair, Powell rolled back financial regulations that were put in place after the Great Recession, including Dodd-Frank, legislation that was implemented to prevent predatory mortgage lending and to curb the excessive risk-taking that led to the crisis. Many of the moves Powell made early in the pandemic were only necessary because of existing weaknesses in the financial system, Epstein noted.

    The Fed has been embroiled in several scandals during Powell’s tenure — one including Powell himself. Last year, just before the stock market crashed in October, Powell sold between $1 million and $5 million in stock. Vice Chair Richard Clarida made a similar stock transaction in February of 2020, just before new pandemic policy changes were announced.

    This post was originally published on Latest – Truthout.

  • Mainstream Economists Reject Economic Science

    The “invisible hand” gives rise to a situation where it becomes natural and normal to conclude that no one knows how things work or what to expect. It renders the future unpredictable and unmanageable. Uncertainty and unpredictability become the norm because the economy as a whole is not under conscious human control. Different sectors and components of the economy do not work in harmony, free of crisis, because they are divided amongst competing owners of capital obsessed with their own narrow private interests. This inter-capitalist rivalry does not lend itself to the healthy balanced extended reproduction of society. It mainly damages the natural and social environment more. Everyone living in such a set-up is subject to constant chaos, anarchy, and violence in the economy and society. Stability, security, and peace are transient under such conditions. Thus, even in the 21st century with all the accumulated knowledge and experience of humanity, so-called “advanced” societies can turn upside down in no time at all; economic and social crises can hit at any time and leave society, the economy, and the people as a whole highly destabilized and damaged for months, years, even decades. On top of all this we are repeatedly told that there is no alternative to this outdated system. Apparently, this is the best humanity can do and no one should strive to replace existing arrangements with something better.

    Last week, Jerome Powell, head of the U.S. Federal Reserve, which is not really part of the U.S. government, delivered his latest views and predictions on the economy and outlined what actions the Federal Reserve will be taking in the coming weeks and months. “Tapering” of fiat currency printing is expected to begin this month and continue for six more months, while interest rates will remain untouched for the foreseeable future. In reality, the Federal Reserve ran out of ammunition long ago and is trapped in the world of bad policy versus bad policy; there are no good options and no good endings here. Is it even possible to “taper” a Ponzi scheme? To be sure, the Federal Reserve has dug a deep hole. The system’s internal contradictions are too severe to “rescue” anything at this point.

    One statement in particular by Powell speaks volumes about the state of economic science and human cognition in the final and highest stage of capitalism:

    It’s difficult enough to just forecast the economy in normal times. When you’re talking about global supply chains in turmoil, it’s a whole different thing. And you’re talking about a pandemic that’s holding people out of the labor force for reasons that we can sample, but we don’t have a lot of experience with this, so it’s very difficult to forecast and not easy to set policy. (emphasis added,)

    Powell casually and publicly admits that he and those who share his old world outlook reject economic science even “in normal times;” they do not believe in planning, control, science, human cognition, and predictability. “Forecasting” economic conditions and activities  even “in normal times” is far from precise and useful from the perspective of capitalist ideologues. The economy apparently cannot be controlled, known, or directed to serve the people and society. Powell openly creates the impression that fixing the economy is some sort of crapshoot, a mystery. Maybe things will work out, maybe not. Apparently, no one really knows how things are going to unfold or what impact neoliberal fiscal and monetary policies will have on the economy. Confusion and ignorance about the economy are so normal that the subtitle of a November 4, 2021 ABC News article reads: “If you find the current economy a bit confusing, don’t worry: So does the nation’s top economic official, Federal Reserve Chair Jerome Powell”. This is hardly a good way to inspire confidence in the people. It is a scandalous thing to admit. People need leaders who know what they are doing and can reliably deliver meaningful pro-social results and solutions. Why is meeting people’s basic needs such a mystery?

    Most Americans already know that the economy is in bad shape. On November 7, 2021, the New York Times reported that, “In a Gallup poll in October, 68 percent of respondents said they thought economic conditions were getting worse”. The overwhelming majority are simply not hopeful about the future of the economy and it does not help that President Joe Biden’s poor approval rating keeps steadily falling. People from all walks of life feel overwhelmed and exhausted with the way the rich and their cartel political parties (Democrats and Republicans) are wrecking the entire fabric of society.

    There is a growing need for a real alternative to existing arrangements. The current situation is untenable at all levels. More and more people are rejecting the rich and their cartel political parties and demanding real solutions to the problems confronting the economy and society. Acting in the old way simply won’t work and doesn’t work anymore. People are disgusted with irresponsible and unaccountable leaders who can’t solve any problems. People are also tired of being reduced to vote banks for the parties of the rich. Constantly begging politicians to do the most basic simple things is humiliating, exhausting, and a massive drain on social energy that could be harnessed to expedite human-centered arrangements.

    As the massive divide between the rich and everyone else keeps growing, contradictions and problems in society will get sharper and more severe, giving rise to new dynamics and new realities to confront. In this situation working people must mobilize themselves and others to leverage openings to advance arrangements that favor the people. There is a need for fresh independent thinking and a new outlook of the world and the future. There is an alternative to the ruling class wrecking all known arrangements in its quest to maximize profits at all costs.

    The post Mainstream Economists Reject Economic Science first appeared on Dissident Voice.

    This post was originally published on Dissident Voice.

  • How Tom Became a Real Progressive

    My purpose in Real Progressives is to show my fellow workers that their suffering is unnecessary and not mathematical certainty.

    This post was originally published on Real Progressives.

  • Federal Reserve Officials Banned From Owning Individual Stock After Scandal

    Chair of the Federal Reserve Jerome Powell appears before a Senate committee on September 28, 2021 in Washington, D.C.

    After revelations of several scandals involving potential insider trading within the Federal Reserve have emerged over the past weeks, the agency has banned its officials from trading individual stocks as it scrambles to mitigate a legitimacy crisis and distrust of the public.

    Policymakers and senior staff within the Fed are now barred from buying individual securities and will have to adhere to shorter reporting guidelines, according to a press release by the agency. Senior Fed officials will only be allowed to trade diversified assets like mutual funds.

    However, the kind of scandal that likely sparked the new rules would still be likely to take place. Last week, The American Prospect revealed that Fed Chair Jerome Powell sold between $1 million and $5 million from an index fund — a mutual fund that mirrors the performance of the market — just before a large market crash in October of last year. And with rules still allowing top officials to trade mutual funds, the type of trade that precipitated the rule change would still be legal.

    Progressive lawmakers and economists have called for Powell to be ousted from the Fed, saying that he’s weak on climate issues and regulation of the financial sector. Economist Gerald Epstein wrote for Truthout that Powell’s financial regime and de-regulation moves have likely exacerbated financial inequality and weakened economic growth that would support the working class.

    Criticizing the Fed’s pandemic policies that gave preference to bailing out markets over small governments and businesses, Epstein wrote: “In the absence of a strong commitment to financial regulation and the will to enforce it, this destructive cycle of speculative excesses, financial crises and bailouts is simply going to continue.”

    “These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,” Powell said in a statement last week.

    The Fed has also been embroiled in several other scandals. Last month, two regional Fed presidents were found to have traded significant amounts of stocks in 2020 as the markets were roiled by the pandemic. Dallas Fed President Robert S. Kaplan had made nearly two dozen stock trades worth $1 million or more. Boston Fed President Eric S. Rosengren bought and sold real-estate related securities, which are related to Fed policy. Both officials have since resigned.

    Then, earlier this month, reports showed that the Fed’s vice chair, Richard Clarida, had moved between $1 million and $5 million in stocks in February of 2020, the day before Powell announced potential policy overhauls for the pandemic. Clarida is still in his position.

    These scandals happened despite a warning circulated to Fed officials in late March of last year warning officials that active trading during the financial crisis would reflect poorly on the agency. Indeed, the New York Times has reported that most regional presidents and Fed governors didn’t trade in April.

    The latest Federal Reserve data has shown, meanwhile, that stock trading is a financial tool that is increasingly available only to the richest individuals in the U.S. Data last week showed that the wealthiest 10 percent of Americans own a record 89 percent of all individual stocks. This has aided the accumulation of wealth at the top during the pandemic, during which the top 1 percent gained more than $6.5 trillion in corporate equities and mutual fund assets.

    The Fed’s top officials, who have huge sway over financial markets in the country, are representative of some of these top wealthiest individuals in the country. The five appointed members of the Fed, including Powell and Clarida, are all millionaires. Powell, worth between $20 million and $55 million, is the richest Fed chair in history.

    After Clarida’s trade was reported, Sen. Elizabeth Warren (D-Massachusetts) called for an insider trading probe at the Fed, saying that it shows “atrocious judgment” and erodes confidence in the Fed. She has been extremely critical of Powell as President Joe Biden considers reappointing the Fed president, calling him a “failed” leader and a “dangerous man” to lead the agency.

    Last week, after the new rules were announced, Warren said that the overhaul was merely the bare minimum. “Of course Fed officials shouldn’t trade individual stocks — it should be illegal,” she wrote. “But Fed officials must avoid actual and perceived financial conflicts, period. We need full transparency on the behavior that’s led us here [and] assurances these new policies will fix what’s broken.”

    “There can be no reform without accountability. That means disclosure of all trades to this point by Fed officials,” Warren continued. She called on the Inspector General and the Securities and Exchange Commission to investigate the stock trades.

    Warren also called on the agency to release the warning handed to Fed officials last year “so that Congress and the public can evaluate the extent to which Fed officials may have known of the risks from their trading, and if they ignored calls by ethics officials to avoid this scandalous behavior,” she said.

    The scandals at the Fed have also prompted lawmakers to advocate for barring Congress and other top officials and lawmakers from being able to trade stocks. In response to the rules barring Fed officials from trading stocks, Rep. Pramila Jayapal (D-Washington) wrote, “Now let’s do members of Congress.”

    Earlier this year, Warren introduced legislation that would bar top officials from trading stocks, seeking to root out corruption within the federal government. The chances of passing such legislation through Congress, however, are slim to none as members from both sides of the aisle profit greatly from stock trading.

    This post was originally published on Latest – Truthout.

  • Fed Chair Jerome Powell Sold Over $1 Million in Stocks Right Before Crash

    Jerome Powell

    Federal Reserve Chair Jerome Powell sold between $1 million and $5 million worth of stock just before a large stock market crash last year, according to new disclosure filings reviewed by The American Prospect.

    Powell’s massive sale came on October 1, 2020. As the month went on, the Dow Jones Industrial average dropped nearly 6 percent, or by 1,600 points — the largest drop since March of 2020. COVID was beginning to spike in October after a short lull in cases in the summer and early fall.

    Powell had communicated with Treasury Secretary Steve Mnuchin four times on the day of the sale, The American Prospect found. Five days later, he said in a speech that, if the second stimulus bill being considered by Congress at the time were to fail, the consequent exacerbation of inequality “would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.”

    The same day as Powell’s speech, Donald Trump tweeted that he told Republicans to stop negotiating the stimulus package, saying that they should delay its passage until after he won the election — which, of course, never happened. The Dow, which was up at the time, fell 376 points after Trump’s tweet.

    The day after the tweet, on October 7, the minutes of a crucial Fed policy meeting that was held in mid-September were released. The meeting addressed uncertainty around the financial markets and discussed issues that could threaten the markets.

    The embattled Fed chair is worth between $20 million and $55 million, according to his financial disclosure from last year. Though it’s unclear if his October stock trade broke any laws, Powell’s trade is only one of many Fed scandals over the past few months. Lawmakers and legal experts have said that such sales can erode the public’s trust in the government, regardless of the legality.

    As Fed chair, Powell not only has an enormous amount of insider knowledge about the financial markets in the U.S. but also has sway over the laws governing those markets. He has faced scrutiny from lawmakers like Sen. Elizabeth Warren (D-Massachusetts), who has called him a “dangerous man” because of his record with being soft on banks.

    The Fed has faced an onslaught of criticism in the wake of other scandals involving stock trades by important Fed officials. In September, local Fed presidents of two major cities were revealed to have traded significant amounts of stocks and real estate-related assets last year, as the markets were being riled by the pandemic. The Dallas Fed President Robert S. Kaplan made nearly two dozen stock trades worth $1 million or more during that time, including in companies directly affected by the pandemic like Johnson and Johnson and oil and gas companies.

    This month, another scandal rocked the Fed: on February 27, 2020, the agency’s vice chair, Richard Clarida, moved between $1 million and $5 million in stocks. The day after, Powell made a statement about policy changes that the agency was planning to put in place for the pandemic.

    Though the Fed said it was launching an internal review of Clarida’s trades, Warren called for more, writing in a letter to the head of the Securities and Exchange Commission that all top Fed officials should be investigated for potential insider trading. She has previously introduced legislation to ban members of Congress, judges and top government officials, including Fed officials, from being able to trade stocks at all.

    Warren and progressive lawmakers have criticized Powell and recommended against his reappointment, which is being considered by the Biden administration. Earlier this month, Warren slammed Powell over the Fed scandals that emerged in September and early October. “Setting the right culture at the Fed and making sure safeguards are in place to prevent self-dealing and to protect the public’s confidence should be the minimum standard any Federal Reserve chair should meet,” she said, adding that Powell has “failed” at preventing a “culture of corruption.”

    In August, Representatives Alexandria Ocasio-Cortez (D-New York) and Rashida Tlaib (D-Michigan) urged Biden to find a new Fed chair, saying that Powell hasn’t taken enough steps to address the climate crisis and the risk that it poses to the financial sector. “At a time when the Intergovernmental Panel on Climate Change is warning of the potential catastrophic and irreversible damage inflicted by a changing climate, we need a leader at the helm that will take bold and decisive action to eliminate climate risk,” they wrote.

    This post was originally published on Latest – Truthout.

  • Warren Calls for Insider Trading Investigation at Fed After Scandal Emerges

    Sen. Elizabeth Warren speaks during a press conference with fellow lawmakers at the U.S. Capitol on September 23, 2021, in Washington, D.C.

    In wake of a stock trading scandal at the Federal Reserve, Sen. Elizabeth Warren (D-Massachusetts) has called for an investigation into the agency’s officials to probe whether or not they were involved in insider trading.

    Warren called on the Securities and Exchange Commission (SEC) to look into reports that the Fed’s Vice Chair Richard Clarida moved between $1 million and $5 million in stocks on February 27, 2020, the day before Fed Chair Jerome Powell made a statement about potential policy change in response to the pandemic. Though the Fed is launching an internal review of Clarida’s actions, Warren said that the SEC should also be involved.

    “The reports of this financial activity by Fed officials raise serious questions about possible conflicts of interest and reveal a disregard for the public trust,” Warren said in a scathing letter to the head of the SEC. “They also reflect atrocious judgement by these officials, and an attitude that personal profiteering is more important than the American people’s confidence in the Fed.”

    She went on to say that the SEC, which regulates the stock market and securities industry, should have a special interest in the trade. “Most importantly from the perspective of the SEC, if these trades were based on Fed officials’ knowledge of non-public, market moving information, they may have represented potentially illegal activity,” Warren wrote.

    The lawmaker asked SEC Chair Gary Gensler to investigate stock trading by all top Fed officials — not just Clarida — in order to discern whether insider trading took place.

    “It is not clear why Chair Powell did not stop these activities, which corrode the trust and effectiveness of the Fed,” she wrote.

    The past few months, Warren has advocated for a ban on officials trading stocks, a move she believes will combat corruption. Last month, she called on local Fed leaders to ban their staff from trading stocks — and earlier this year, she unveiled legislation that would ban federal officials and lawmakers, including members of Congress, from trading stocks altogether.

    “It is a no-brainer,” she said at the time, adding that barring stock trades would help increase public confidence in federal institutions.

    To Warren, the scandal is further evidence of the need for major changes in leadership at the Fed. On Tuesday, the Massachusetts lawmaker delivered a speech on the Senate floor criticizing the “culture of corruption” among Fed officials.

    “The responsibility to safeguard the integrity of the Federal Reserve rests squarely with [Powell],” Warren said. “Setting the right culture at the Fed and making sure safeguards are in place to prevent self-dealing and to protect the public’s confidence should be the minimum standard any Federal Reserve chair should meet. And once there is a problem, a quick and aggressive response is critical. Chair Powell has failed at both tasks.”

    Though Powell is up for potential renomination by the Biden administration, Warren is one of his staunchest opponents in Congress and has been campaigning against his renomination. On Tuesday, she described him as a “go along to get along leader who doesn’t know or doesn’t care when, on his watch, people with great responsibility advance their own interests over the interests of our nation,” adding that he has amassed “failures” as a leader.

    Warren and progressives like Rep. Alexandria Ocasio-Cortez (D-New York) have pointed out Powell’s previous regulation failures in the past. The Trump-era appointee has been weak on climate and has watered down post-recession bank regulation policies, they said, which poses risks to the financial stability of the country’s working class.

    This post was originally published on Latest – Truthout.

  • The Fear Pandemic and the Crisis of Capitalism

    In October 2019, in a speech at an International Monetary Fund conference, former Bank of England governor Mervyn King warned that the world was sleepwalking towards a fresh economic and financial crisis that would have devastating consequences for what he called the “democratic market system”.

    According to King, the global economy was stuck in a low growth trap and recovery from the crisis of 2008 was weaker than that after the Great Depression. He concluded that it was time for the Federal Reserve and other central banks to begin talks behind closed doors with politicians.

    In the repurchase agreement (repo) market, interest rates soared on 16 September. The Federal Reserve stepped in by intervening to the tune of $75 billion per day over four days, a sum not seen since the 2008 crisis.

    At that time, according to Fabio Vighi, professor of critical theory at Cardiff University, the Fed began an emergency monetary programme that saw hundreds of billions of dollars per week pumped into Wall Street.

    Over the last 18 months or so, under the guise of a ‘pandemic’, we have seen economies closed down, small businesses being crushed, workers being made unemployed and people’s rights being destroyed. Lockdowns and restrictions have facilitated this process. The purpose of these so-called ‘public health measures’ has little to do with public health and much to do with managing a crisis of capitalism and ultimately the restructuring of the economy.

    Neoliberalism has squeezed workers income and benefits, offshored key sectors of economies and has used every tool at its disposal to maintain demand and create financial Ponzi schemes in which the rich can still invest in and profit from. The bailouts to the banking sector following the 2008 crash provided only temporary respite. The crash returned with a much bigger bang pre-Covid along with multi-billion-dollar bailouts.

    The dystopian ‘great reset’ that we are currently witnessing is a response to this crisis. This reset envisages a transformation of capitalism.

    Fabio Vighi sheds light on the role of the ‘pandemic’ in all of this:

    … some may have started wondering why the usually unscrupulous ruling elites decided to freeze the global profit-making machine in the face of a pathogen that targets almost exclusively the unproductive (over 80s).

    Vighi describes how, in pre-Covid times, the world economy was on the verge of another colossal meltdown and chronicles how the Swiss Bank of International Settlements, BlackRock (the world’s most powerful investment fund), G7 central bankers and others worked to avert a massive impending financial meltdown.

    The world economy was suffocating under an unsustainable mountain of debt. Many companies could not generate enough profit to cover interest payments on their own debts and were staying afloat only by taking on new loans. Falling turnover, squeezed margins, limited cash flows and highly leveraged balance sheets were rising everywhere.

    Lockdowns and the global suspension of economic transactions were intended to allow the Fed to flood the ailing financial markets (under the guise of COVID) with freshly printed money while shutting down the real economy to avoid hyperinflation.

    Vighi says:

    … the stock market did not collapse (in March 2020) because lockdowns had to be imposed; rather, lockdowns had to be imposed because financial markets were collapsing. With lockdowns came the suspension of business transactions, which drained the demand for credit and stopped the contagion. In other words, restructuring the financial architecture through extraordinary monetary policy was contingent on the economy’s engine being turned off.

    It all amounted to a multi-trillion bailout for Wall Street under the guise of COVID ‘relief’ followed by an ongoing plan to fundamentally restructure capitalism that involves smaller enterprises being driven to bankruptcy or bought up by monopolies and global chains, thereby ensuring continued viable profits for these predatory corporations, and the eradication of millions of jobs resulting from lockdowns and accelerated automation.

    Author and journalist Matt Taibbi noted in 2020:

    It retains all the cruelties of the free market for those who live and work in the real world, but turns the paper economy into a state protectorate, surrounded by a kind of Trumpian Money Wall that is designed to keep the investor class safe from fear of loss. This financial economy is a fantasy casino, where the winnings are real but free chips cover the losses. For a rarefied segment of society, failure is being written out of the capitalist bargain.

    The World Economic Forum says that by 2030 the public will ‘rent’ everything they require. This means undermining the right of ownership (or possibly seizing personal assets) and restricting consumer choice underpinned by the rhetoric of reducing public debt or ‘sustainable consumption’, which will be used to legitimise impending austerity as a result of the economic meltdown. Ordinary people will foot the bill for the ‘COVID relief’ packages.

    If the financial bailouts do not go according to plan, we could see further lockdowns imposed, perhaps justified under the pretext of  ‘the virus’ but also ‘climate emergency’.

    It is not only Big Finance that has been saved. A previously ailing pharmaceuticals industry has also received a massive bailout (public funds to develop and purchase the vaccines) and lifeline thanks to the money-making COVID jabs.

    The lockdowns and restrictions we have seen since March 2020 have helped boost the bottom line of global chains and the e-commerce giants as well and have cemented their dominance. At the same time, fundamental rights have been eradicated under COVID government measures.

    Capitalism and labour

    Essential to this ‘new normal’ is the compulsion to remove individual liberties and personal freedoms. A significant part of the working class has long been deemed ‘surplus to requirements’ – such people were sacrificed on the altar of neo-liberalism. They lost their jobs due to automation and offshoring. Since then, this section of the population has had to rely on meagre state welfare and run-down public services or, if ‘lucky’, insecure low-paid service sector jobs.

    What we saw following the 2008 crash was ordinary people being pushed further to the edge. After a decade of ‘austerity’ in the UK – a neoliberal assault on the living conditions of ordinary people carried out under the guise of reining in public debt following the bank bail outs – a leading UN poverty expert compared Conservative welfare policies to the creation of 19th-century workhouses and warned that, unless austerity is ended, the UK’s poorest people face lives that are “solitary, poor, nasty, brutish, and short”.

    Philip Alston, the UN rapporteur on extreme poverty, accused ministers of being in a state of denial about the impact of policies. He accused them of the “systematic immiseration of a significant part of the British population”.

    In another 2019 report, the Institute for Public Policy Research think tank laid the blame for more than 130,000 deaths in the UK since 2012 at the door of government policies. It claimed that these deaths could have been prevented if improvements in public health policy had not stalled as a direct result of austerity cuts.

    Over the past 10 years in the UK, according to the Trussell Group, there has been rising food poverty and increasing reliance on food banks.

    And in a damning report on poverty in the UK by Professor David Gordon of the University of Bristol, it was found that almost 18 million cannot afford adequate housing conditions, 12 million are too poor to engage in common social activities, one in three cannot afford to heat their homes adequately in winter and four million children and adults are not properly fed (Britain’s population is estimated at around 66 million).

    Moreover, a 2015 report by the New Policy Institute noted that the total number of people in poverty in the UK had increased by 800,000, from 13.2 to 14.0 million in just two to three years.

    Meanwhile, The Equality Trust in 2018 reported that the ‘austerity’ years were anything but austere for the richest 1,000 people in the UK. They had increased their wealth by £66 billion in one year alone (2017-2018), by £274 billion in five years (2013-2018) and had increased their total wealth to £724 billion – significantly more than the poorest 40% of households combined (£567 billion).

    Just some of the cruelties of the ‘free market’ for those who live and work in the real world. And all of this hardship prior to lockdowns that have subsequently devastated lives, livelihoods and health, with cancer diagnoses and treatments and other conditions having been neglected due to the shutdown of health services.

    During the current economic crisis, what we are seeing is many millions around the world being robbed of their livelihoods. With AI and advanced automation of production, distribution and service provision on the immediate horizon, a mass labour force will no longer be required.

    It raises fundamental questions about the need for and the future of mass education, welfare and healthcare provision and systems that have traditionally served to reproduce and maintain labour that capitalist economic activity has required.

    As the economy is restructured, labour’s relationship to capital is being transformed. If work is a condition of the existence of the labouring classes, then, in the eyes of capitalists, why maintain a pool of (surplus) labour that is no longer needed?

    A concentration of wealth power and ownership is taking place as a result of COVID-related policies: according to research by Oxfam, the world’s billionaires gained $3.9 trillion while working people lost $3.7 trillion in 2020. At the same time, as large sections of the population head into a state of permanent unemployment, the rulers are weary of mass dissent and resistance. We are witnessing an emerging biosecurity surveillance state designed to curtail liberties ranging from freedom of movement and assembly to political protest and free speech.

    The global implications are immense too. Barely a month into the COVID agenda, the IMF and World Bank were already facing a deluge of aid requests from developing countries that were asking for bailouts and loans. Ideal cover for rebooting the global economy via a massive debt crisis and the subsequent privatisation of national assets.

    In 2020, World Bank Group President David Malpass stated that poorer countries will be ‘helped’ to get back on their feet after the various lockdowns but such ‘help’ would be on condition that neoliberal reforms become further embedded. In other words, the de facto privatisation of states (affecting all nations, rich and poor alike), the (complete) erosion of national sovereignty and dollar-denominated debt leading to a further strengthening of US leverage and power.

    In a system of top-down surveillance capitalism with an increasing section of the population deemed ‘unproductive’ and ‘useless eaters’, notions of individualism, liberal democracy and the ideology of free choice and consumerism are regarded by the elite as ‘unnecessary luxuries’ along with political and civil rights and freedoms.

    We need only look at the ongoing tyranny in Australia to see where other countries could be heading. How quickly Australia was transformed from a ‘liberal democracy’ to a brutal totalitarian police state of endless lockdowns where gathering and protests are not to be tolerated.

    Being beaten and thrown to the ground and fired at with rubber bullets in the name of protecting health makes as much sense as devastating entire societies through socially and economically destructive lockdowns to ‘save lives’.

    It makes as much sense as mask-wearing and social-distancing mandates unsupported by science, misused and flawed PCR tests, perfectly healthy people being labelled as ‘cases’, deliberately inflated COVID death figures, pushing dangerous experimental vaccines in the name of health, ramping up fear, relying on Neil Ferguson’s bogus modelling, censoring debate about any of this and the WHO declaring a worldwide ‘pandemic’ based on a very low number of global ‘cases’ back in early 2020 (44,279 ‘cases’ and 1,440 supposed COVID deaths outside China out of a population of 6.4 billion).

    There is little if any logic to this. But of course, If we view what is happening in terms of a crisis of capitalism, it might begin to make a lot more sense.

    The austerity measures that followed the 2008 crash were bad enough for ordinary people who were still reeling from the impacts when the first lockdown was imposed.

    The authorities are aware that deeper, harsher impacts as well as much more wide-ranging changes will be experienced this time around and seem adamant that the masses must become more tightly controlled and conditioned to their coming servitude.

    The post The Fear Pandemic and the Crisis of Capitalism first appeared on Dissident Voice.

    This post was originally published on Dissident Voice.

  • Warren Introduces Bill to Protect Bank Customers, Small Banks From Consolidation

    Sen. Elizabeth Warren speaks during a Senate Armed Services Committee hearing on Capitol Hill in Washington, D.C., on September 28, 2021.

    On Thursday, Sen. Elizabeth Warren (D-Massachusetts) introduced a bill that would reform the way the government authorizes bank mergers. The proposal is an effort to stop the endless “rubber stamping” of bank consolidation, which Warren argues comes at the expense of customers and small banks.

    The Bank Merger Review Modernization Act, introduced with Rep. Jesús “Chuy” García (D-Illinois), would strengthen rules for the authorization process for bank mergers, in hopes of ensuring that future mergers serve the public. The act creates protections to make the process more transparent and to evaluate the financial risks that may emerge from a merger.

    “In recent years, our banking sector has become more and more dominated by the largest banks. Community banks are being gobbled up by larger competitors or forced to shut down because they can’t compete on a level playing field,” Warren explained in a statement. “This results in more concentration, higher costs for consumers, and increased systemic risk to our financial system.”

    The bill “would ensure that regulators do their jobs by stopping mergers that deprive communities of the banking services they need and help prevent another financial crisis,” Warren continued.

    As the lawmakers point out, between 2006 and 2017, the Federal Reserve approved 3,819 bank mergers, not rejecting a single application. The last time the Department of Justice challenged a bank merger was 1985, and regulators haven’t formally denied a merger in 15 years. Because of Fed’s and other federal regulators’ lax enforcement of merger guidelines, the number of banks has declined rapidly over the past few decades, going from over 18,000 banks in the mid-to-late 20th century to less than 5,000 now.

    The bill, which García and Warren previously introduced in 2019, is part of a larger Democratic effort to crack down on big banks and anticompetitive business practices across the country. Indeed, the bill would require federal regulators to examine the potential anticompetitive effects of a bank merger on banking services like mortgage and business lending.

    At a hearing in August, Warren pointed out that Federal Deposit Insurance Corporation (FDIC) regulators aren’t required to reject a merger if it would create a bank that’s larger than the government can regulate. Regulators also aren’t required to reject mergers if they would reduce competitiveness and result in higher costs for consumers, or if the banks attempting to merge haven’t received high scores on their service to the community.

    “Merger review has become the definition of a rubber stamp,” she said. “Regulators have no credibility on mergers.”

    She and García are especially concerned with how bank mergers affect the public. Research suggests that bank mergers often increase costs for consumers while simultaneously reducing the availability of bank services. Mergers can also lead to financial instability for the country at large, and the lawmakers say that the current era of deregulation hearkens back to the “Too Big to Fail” mentality that led to the 2008 Great Recession.

    The bill aims to ensure that future bank mergers would have positive effects for the communities they serve. It would only allow mergers between banks with high rankings via the Community Reinvestment Act, which was enacted in the 1970s to score how banks are serving low- and middle-income communities.

    “This bill is a long overdue step to ensure that bank mergers are good for the public,” said Jesse Van Tol, president of the National Community Reinvestment Coalition. “For decades, federal bank merger law has recognized that there must be a public benefit in terms of increased access to affordable credit. This bill finally spells out what banks must do to meet that requirement. Mergers should not be approved by regulators if the only benefit is a bigger and more profitable bank.”

    This post was originally published on Latest – Truthout.