Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Guest Blogger
This past week the main stream media made a big deal about the unemployment rate declining to the five-year low of 7%. While it was good news that over 200,000 jobs were added to the economy and that the unemployment rate decreased, the economy and main street are still lagging behind Wall Street. The Federal Reserve has been attempting monetary easing strategies in an effort to stimulate the economy. It may have worked for Wall Street, but the rest of us are still catching up.
“The Federal Reserve is the only central bank with a dual mandate. It is charged not only with maintaining low, stable inflation but with promoting maximum sustainable employment. Yet unemployment remains stubbornly high, despite four years of radical tinkering with interest rates and quantitative easing (creating money on the Fed’s books). After pushing interest rates as low as they can go, the Fed has admitted that it has run out of tools.” Ellen Brown
Now that we have had years of low-interest rates, created by the Fed’s policies what is the next great idea from economists? One economist, Lawrence Summers, who was a candidate to replace Ben Bernanke as Chairman of the Federal Reserve, came up with the big idea that since low-interest rates weren’t enough to bring the economy back and to spur job creation, he thought that negative interest rates would get the job done.
“At an IMF conference on November 8, 2013, former Treasury Secretary Larry Summers suggested that since near-zero interest rates were not adequately promoting people to borrow and spend, it might now be necessary to set interest at below zero. This idea was lauded and expanded upon by other ivory-tower inside-the-box thinkers, including Paul Krugman.
Negative interest would mean that banks would charge the depositor for holding his deposits rather than paying interest on them. Runs on the banks would no doubt follow, but the pundits have a solution for that: move to a cashless society, in which all money would be electronic. “This would make it impossible to hoard cash outside the bank,” wrote Danny Vinik in Business Insider, “allowing the Fed to cut interest rates to below zero, spurring people to spend more.” ‘ Ellen Brown
Yes, you read that right. The big idea that a former Treasury Secretary and Fed Chairman candidate came up with would be to create negative interest which would cost depositors money, and protect the solvency of big banks! That idea must have involved some serious scholastic research on Mr. Summer’s behalf. I am guessing that Wall Street was involved in that idea because it would do little or nothing to help individual citizen depositors or to induce employers to create more jobs.
How would charging depositors for putting their money in the bank spur anyone to spend more? It appears to be nothing more than an attempt to protect large banks from the ups and downs of the economy, while costing individual depositors even more money to have their funds in the bank. And can anyone tell me how this negative interest idea would help spur hiring?
Don’t get me wrong. I agree that we have to think outside of the box to find a way to help Main Street recover fully from the Great Recession. But charging customers money to keep their money in the bank seems ludicrous. The Federal Reserve used to have the authority to loan funds directly to businesses and it seemed to work. Of course, if it works for Main Street, Wall Street and the big banks get nervous. Just what could we do to increase the Fed’s tools in order to actually benefit individuals and increase hiring?
“Bernanke delivered the money to the creditors because that was all the Federal Reserve Act allowed. If the Fed is to fulfill its mandate, it clearly needs more tools; and that means amending the Act. Harvard professor Ken Rogoff, who spoke at the November 2013 IMF conference before Larry Summers, suggested several possibilities; and one was to broaden access to the central bank, allowing anyone to have an ATM at the Fed.
Rajiv Sethi, Barnard/Columbia Professor of Economics, expanded on this idea in a blog titled “The Payments System and Monetary Transmission.” He suggested making the Federal Reserve the repository for all deposit banking. This would make deposit insurance unnecessary; it would eliminate the need to impose higher capital requirements; and it would allow the Fed to implement monetary policy by targeting debtor rather than creditor balance sheets. Instead of returning its profits to the Treasury, the Fed could do a helicopter drop directly into consumer bank accounts, stimulating demand in the consumer economy.” Ellen Brown
As I mentioned above, the Federal Reserve used to have the statutory authority to loan directly to businesses in their respective Districts, but the recent Dodd-Frank reform bill seems to have weakened that authority.
“In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill:
Only Broad-Based Facilities Permitted. Section 13(3) is modified to remove the authority to extend credit to specific individuals, partnerships and corporations. Instead, the Board may authorize credit under section 13(3) only under a program or facility with “broad-based eligibility.”
What programs have “broad-based eligibility” is not clear from a reading of the Section, but it isn’t individuals or local businesses. It also isn’t state and local governments.” Nation of Change
If the Federal Reserve had the authority before Dodd-Frank to bail out individual businesses like AIG with over 1 Trillion dollars in loans, the Fed could have also loaned money directly to businesses and even to State and local governments. Is it more valuable to the economy and to individual citizens to bail out AIG with Fed help, but not bail out Detroit or other cities that are still struggling with austerity programs created by Congress and policies that aided the shipping of jobs overseas?
I highly recommend that you read the entire Ellen Brown article that I have linked above. By allowing the Fed to have the power that it used to have, we might be able to aid individual businesses and maybe even individual taxpayers. I would suggest that giving the Fed revised powers, including some that they had in the past, might allow us to even the playing field between Wall Street and Main Street. Of course, we would also need to stop making it profitable for corporations to steal more jobs from American workers. What ideas do you have?
Do you think returning the power to the Fed to aid businesses and individuals directly would spur the economy? I have my doubts whether Congress would go along with the idea of strengthening the Fed’s tool box knowing their Wall Street owners might not get as much taxpayer money, but I believe it is a fight worth having. What do you think?
Additional Resources: Could the Banksters Grab Your Deposits?
Maybe you’re talking about govts faking stats that harm others?
This case is out of the UK, but difference here in the USA, like with NYC,NY & Chicago hauling dead bodies out of their (Gun free zone) cities to lower their crime rates.
http://www.maxkeiser.com/2013/12/wake-up-we-must-take-a-stand-against-lies-damned-lies-and-fiddled-statistical-data/
You mean like this in the below video Tony C?
Bron says: What I really value is my freedom. I want to be free to fail based on my own judgments.
We are all for you failing as much as you like, Bron, we just aren’t going to let you fail in ways that bring others down with you.
Which is the issue you studiously ignore; that the “freedom” you really want is the freedom to harm others.
RWL:
investment, not to live or raise a family. Detroit will come back and those properties will be worth $50k plus in 10-15 years.
Unless of course we continue merrily on our way down the road to serfdom which we are on and refuse to leave.
Bron,
Please visit Detroit, and those ‘interesting investment areas’. You will probably need a police escort. I am guessing that you plan to live nearby to conduct periodic inspections of your property/investment? If you purchase a property-in these areas-for $5k, you will probably need about $20k-$35k to make it livable, and then, who is going to purchase or rent in those areas, especially when half the neighborhood needs to be revitalized? Have you checked the property values in those areas? Do you actually think that you will be receiving or making a profit?
Please do your homework on urban/white flight of the 1960s, and investing in ‘these areas.’ There is a book, “Dark Ghetto” by Dr. Kenneth Clark (1965), explaining these ‘investment areas”. These areas are not ‘coming back.’ Almost every major American city has experienced (or is experiencing) this phenomena. For the first time in decades, the city of Chicago is experiencing ‘white flight.’
Detroit is only the beginning for the rest of America………..
Nal,
I don’t mean to scare anyone! 🙂
Gene,
Well said! Exactly why I wanted Bron, and those who want to do away with the Federal Reserve, to come up with a replacement (realistic) economic/monetary theory or policies for the US.
Currently, our econonmy will fall off the cliff if the Feds stop QE. Watch FBN or CNBC, and you will see that investors (aka: stock market disciples) become so ‘afraid’ if Bernake or the Feds have a meeting just to have discussion of when to end QE.
I meant to say vacant land, not properties.
Oky,
The whole wealth redistribution argument is based on a specious premise. Taxing and spending is perfectly in line with the Constitution. However, unequal treatment by the tax codes, unequal enforcement against corporations and corporate skewed spending priorities are a real problem. None of which relates to the primary problem with the Fed which is lack of a public duty to the average citizen by merit of it being both private and in bed with the financial services industry which further exacerbates collusion to concentrate wealth.
Bron,
Well then if greed is not your motivator, why do you buy into an ideology that caters to greed? I know you recognize that no man is the law unto himself yet you adopt an absolute stance on individual choice as the fulcrum of determining those rights instead of recognizing the principles of democratic rule. You also have an ideology that caters to oligarchy which by its very nature is a classest system. Equal protection is about the law applying equally and fairly to everyone. The inevitable economic tyranny that results from von Mises and the political tyranny that results from Rand – who I remind you openly said some people were lesser valued than others – indicates that either 1) you are not really an Objectivist or a big “L” Libertarian no matter how much you like to think you are, 2) you are operating under false pretenses or 3) you are grossly misinformed/mal-informed/under informed about the logical consequences of your stated positions; all of which indicate you need to do some self-examination to determine whether or not your views comport with a desire for true liberty and freedom or if you have bought into a lie because it used pretty words but delivers something else altogether. Like Goebbels and the Nazis did to the German people. Do you want to be a “good German”, a “bad German” or would you rather understand you are being deceived and make up your mind on based upon critical examination and a sophisticated understanding of the political and economic realities instead of spoon fed propaganda catering to desire over rationality?
A pig in a poke.
It’s what you’ve got.
What you claim to want – maximized individual choice, freedom and liberty – is an entirely different proposal that will require you to step away from both Rand and von Mises to accomplish. History shows time and again industry cannot self-regulate. History shows that not everyone is a good actor. Left to their own devices, an amoral profit motive encourages all kinds of abuses. Objectivism and the Austrian School inevitably lead to oligarchy and – depending upon how much you buy into the fantasy of laissez-faire capitalism as infallible – fascism, be it Italian, corporatist or other flavored. Human nature keeps laissez-faire capitalism from being a viable option in reality just as much as it kept Communism from being a viable option in reality. Both are extreme views on economics – one says let the market will be done and the other says command economy. Neither work. Logic dictates that either 1) we do away with economics and find a better way to discuss distribution and use of resources (not going to happen) or 2) find a happy medium that is viable between the two extremes. Democratic market socialism is that viable median solution or close to it. It leaves intact enough free market to allow for individual wealth accumulation based on skill or uniqueness and to determine pricing while preventing the abuses to socially critical systems like health care insurance (and other critical infrastructure like roads, sanitation, etc.) by removing them from the profit motive game altogether. It’s literally the best of both worlds; free markets and a maximally strong public infrastructure on areas critical to society.
The needs of the many outweigh the needs of the few or the one.
Any social construct like government that does not realize this fact will have a limited life as to not acknowledge that fact about society is a form of built in obsolescence. As Buddha noted, everything that has a beginning has an end. Should we not engineer societies to last as long as possible instead of building known fail points into those complex systems? Isn’t that in the best interests of not just a given culture, but in the best interests of the species to make sure societies are as stable (which I’ll stipulate means just, free and equitable) and long lived as possible?
I think so.
I hear ya Bron.
Well my cheap Whore DC polecat is still far better then SwM’s cheap Whore DC polecat any day of the week. lol
Oky1:
the big boys are buying Detroit up at fire sale prices, that is what is going on.
But every American with a spare $5k can buy a home in Detroit.
I wish I was 35, I would pack my bags and head there and start a construction business.
Bron said: “But every American with a spare $5k can buy a home in Detroit.
I wish I was 35, I would pack my bags and head there and start a construction business.”
Really? When was the last time that you visit some of those areas ($5k homes)? Do you really want to start a family in ‘those areas’? 45-50 minute wait for police and/or fire fighters to arrive? No street lights? Failing public school districts? High criminal activity? Not to mention poor city and state mismanagement of Detroit?
Young families are not lining up to live in the City of Detroit (or those $5k priced homes areas)? Instead, they are working in downtown Detroit, and living in the nearby wealthy suburb of Oakland County. You probably need to do your homework. If do, then, you will find that the Owner of Quicken Loans is buying most of those areas. For some reason, he is not in a hurry to snatch up all of those properties: there are at least 78k vacant homes in Detroit, not including vacant properties.
Below is one of the main reasons we as Americans must Get Rid of the Federal Reserve System & the current Income Tax System!
Just Who is it you “Trust” to Re-Distribute Wealth, from Whom to Whom, Gene H, Bron, Me, Professor, etc….
“Trust, but Verify”
Here we see in this video report “Sen Rand Paul” is said to be getting ready to hand out ice cream & cookies/ aka Govt Welfare to “The Special People”
Like JT & others have mentioned before here at Animal Farm USA some animals are far more “Special’ then the rest of us.
“Special Enterprise Zones”, “Enterprise Zones on Steroids”
What, the rest of us in the USA are not good enough or have the “Insider Connections” to be declared our own “Personal Enterprise Zone on Steroids”?
Should we all change our names to Mitt Romney, Nazi Bush Family, Ross Perot, Koch Brothers, Warren Buffet, Jamie Dimon to “Deserve” special treatment.
As was said in those hearings last week, if the govt is not going to follow the Law how much longer before the citizens decide not to follow the Law?
Hey Senator Rand Paul, Why don’t give Every American the Same Special Deal?
The only special deal the govt should be engaged in is that this nation doesn’t abandon the children, the sick or the elderly.
Every citizen should be getting the same deal as the next when it comes to taxes/regs.
And Corporations, Banks/Insur Co’s should be paying homage/Rent for the privilege of operating in our territory.
All monopolies, (Wallst Banks/Insur), should be split into as many ways possible, independently monitored, govt regulated & only allowed to retain enough profit for administrative cost, 7-8%.
(Meet the new boss, same as the old boss. jeeezzes)
http://www.prisonplanet.com/ron-paul-rand-will-probably-run-in-2016.html
JT 101/Popehat 76
Come on, we should be 4 times that many at least.
Internet people amaze me. They’re afraid to give a dollar to help a website they like out of fear of identity theft I guess.
Yet this aba poll is “Free” & they can use their internet handle with it’s junk mailbox address & they still are reluctant to do so.
Just 5-10 minutes of your time to defend Yourself/Family/Friends/America…. Get your/friend’s butts over there if you haven’t already!
http://www.abajournal.com/blawg100#
http://online.wsj.com/community/groups/hard-times-investing-1390/topics/federal-reserves-cult-secrecy-unmasked
**Could it be the love of money.
The root of all evil is the love of money according to one book. *
Deitist/God:
I could/would say God works in mysterious ways.
Like with words, God gave me just enough money to live well, but not so much of either to hurt myself very bad. 🙂
**Gene H. 1, December 10, 2013 at 1:54 pm
Oky,
Bron, despite his at this point seeming willful ignorance about different political and economic forms, knows that I’m not a fan of the Fed but that I do see the need for a central bank in a large economy in controlling inflation. **
My best financial adviser, a former fed insider, & friend, he doesn’t like much of what that FRS has been up to in recent decades.
He actively writes against their policies.
We all can witness from Iceland, their govt & what outsiders did to their currency to understand why a nation has to understand & defend whatever they choose for a currency & how to best manage it.
Regardless of whether I like it or not my friend believes the FRS will survive.
The question remains in what form will the FRS survive & what will be the scope of it’s authority.
When it comes to Ron Paul, he has stated policy positions. They are write & video recorded policies that anyone can review/argue.
But most don’t argue his positions, they just call him a racist & adhominum attacks.
As I recall, somewhere among those RP policy positions are comments explaining that it would be a disaster to just throw this current system out the window this afternoon.
That in order to correct this current economic mess we have to consider it took decades to put these current systems in place & that to unwind them it will take years if not decades to make the repairs.
His suggestion was to start by unwinding the CMIC & withdrawing from the 750+ military bases around the world.
Propaganda:
Obama, Ron Paul, Rand Paul, Libertarian ideology, Ann Rand, Goebbels, Nazis, Use Car Salesmen.
I’m supposed to treat them as a matter of my own policy, like in biz, all the same.
I wasn’t at all a big fan of Reagan’s actions, but he did say something I’ve always tried to stick with:
“Trust, but Verify”
Besides Ron Paul’s state views that I agree with most/many of, one can also see many/most of my views by visiting the Wiki’s page on Professor Turley’s position.
Odd thing, most of Turley’s positions I learned of & accepted them while attend a public school. (Before polecats destroyed them the last 30 years.)
(Ot: Did everyone see the news yesterday, Obama has taken the USA into another unauthorized War in Africa! Impeachment, hell Ya!)
raff,
You write the scariest posts.
We need to be scared, Janet Yellen supports negative interest rates.
Gene H:
Good response.
I know I dont love money because it is low on my list of priorities. I need just enough to pay the bills and have a little left over for a couple of books and a couple of good cigars.
What I really value is my freedom. I want to be free to fail based on my own judgments.
Oky,
Bron, despite his at this point seeming willful ignorance about different political and economic forms, knows that I’m not a fan of the Fed but that I do see the need for a central bank in a large economy in controlling inflation. My primary criticism of the Fed is that it is a private institution. Any central bank should be a public institution with a duty to the general public. This is evidenced by the many times over the years the Fed has taken actions that benefit a super wealthy and corporate minority over serving the best interests of the public in servicing their role in the general economy.
Bron,
“Socialism is the doctrine of liberation for the working class.”
You say that as if it is a bad thing simply because a Nazi said it. Nazis, again, sold socialism and delivered fascism. See Night of the Long Knives, Hitler’s express modeling of the German economy on that of Fascist Italy, debate among the Nazis about the “Non-German-ness” of Italian Fascism, et al. Just because Goebbels was a fascist, don’t discount that what he said was in many ways simply true. He was, after all, Reich Minister of Propaganda. His day job was selling the Reich including selling the very wrong notion they were working in the best interests of working class Germans. That his lies were embedded in bits of truth only demonstrates how effective he was at propaganda, but it does not change the nature of the truths used.
Consider the antithetical proposition.
“Socialism is the doctrine of subjugation for the working class.”
Could it be that your Libertarian ideology and Randian dogma embrace the idea that some animals are more equal than others and that subjugating others is not only desirable but something that you should be allowed to do but especially if maximizing profit is the motive?
That’s the thinking of a sociopath, Bron.
Why do you hate liberty, Bron?
Why do you love oligarchy, Bron?
Why do you support a philosophical and political view that inevitably leads to oligarchy and fascism by servicing the wants of the few over the needs of the many?
Of course, I know the answer to these questions. Your spiritual mother (and that of the Libertarian movement, not to be confused with small “L” libertarianism as a concept) was a sociopath and her economic and political ideologies reflect that mental illness. That despite having this demonstrated to you many times by several people has not lessened your Ardor of Ayn only raises one key question.
Why do you persist in putting individual gain above the necessities of maintaining and furthering civilization?
Could it be the love of money.
The root of all evil is the love of money according to one book.
Putting the profits of the one or the few above the needs of the many certainly sounds both evil and sociopathic. I know you mean well. You just don’t fully grasp the implications of your ideology. I’m going to throw another German at you. Goethe said in The Sorrows of Young Werther (1774), “[M]isunderstandings and neglect create more confusion in this world than trickery and malice. At any rate, the last two are certainly much less frequent.” In your misunderstandings of where Rand and von Mises propositions lead by necessity of their function and your willingness to neglect society and your fellow humans if a profit is to be had, you illustrate that despite your espoused best intentions, they are pavers on the road to a fascist Hell of tyranny of oppression being sold under the guise of liberty and freedom.
Your heart may be in the right place, but you’ve bought a pig in a poke every bit as disingenuous as Goebbels selling socialism.
Please spread this to the 4 winds!
Oops typo:
Unless SwM comes up with a Democratic candidate that’s a blond haired, blued eyed baby Jesus with a bull whip for the banks, packing a copy of the Bill of Rights & some extra large clips. lol