Sunday, September 15, 2013

America is Rich So Why Do We Feel So Poor

America is rich. We are fabulously wealthy. We talk about America's wealth here. But there is a problem. We don't really feel wealthy. Politicians are always telling us we are going to run out of money- and this is absurd- we deal with this absurdity here, but We really do feel poor.

Not enough jobs. The jobs being created are low pay, high stress jobs. Today's youth compete with grown adults for jobs in fast food restaurants- which in another age, were introductory jobs- jobs you took where you learned responsibility and where you had every incentive to move on to another better paying job. In 2013 these low paying service jobs are what people are trying to build a future around.

The very things that have made us richer have reduced our need for human labor. In past decades, humans, sorted widgets, did repetitive labor in factories. big burly guys wrestled pig iron and hot ingots in foundries. 10s of thousands of people worked at power looms to create fabrics. Productivity has multiplied many times over and many fewer Americans do these kinds of jobs.

All these advances are good for America. Here is one for you. Working on the exterior of buildings used to require elaborate scaffolding. Today, modern systems are much safer and they pretty much put themselves up. This is great. Makes us more productive as a culture.

But what do we do with the people no longer needed in these repetitive jobs?

Once upon a time, businesses had typists and stenographers, and human hands to do all the things that computers and technology do now. This means we are much richer as a nation. It means we are challenged what to do with people.  There is ever growing crescendo of progress linking technology with digital software. We see an accelerating pace of labor saving tools, devices, industrial processes...

What do we do with the people put out of work by labor saving processes?

And then we have to talk about robotics.  Robotics make us much more productive and prosperous as a nation. It leaves people without jobs, without income and stressed out.

So what do we do about the gathering of wealth in fewer and fewer hands and the gradually weaning of working class people of opportunity?

How many jobs in America have been shipped overseas in the last decades? Well we talk about that here. but in we need to address it in the context here.  Outsourcing of jobs has made America more productive. We learned that we could produce goods for less overseas.

Was there a more enlightened way to improve productivity in America without sending all these jobs overseas? That is a huge story and discussion to have later. Those jobs have flowed under that bridge and so what can we do from here? What do we do with people?

What do we do with the people out of work and the communities they live in?

We have to reconcile this issue, and the answer is not- and this is an emphatic NOT- because people are lazy, and people just want to sit on their couch and eat on their SNAP largesse.

We have to Toss out the BS about People Being Lazy and Come to Grips with How to Create Opportunity for People- How to come to grips with people working less because there is less for them to do. 

We have to get real- deal with reality and understand that the usual BS about people being lazy does not work- the usual BS about big corporations being the "job creators" - big corporations are shedding employees in America faster than a dandelion shedding seed pods in a wind storm.

We have a huge problem with political influence by the rich and power. Too many politicians are rich and greedy. These traits are what the existing political system select for. Those not rich and greedy are often supported by special interests nonprofits doing the bidding of billionaire donors. Our American Interests do not match up well with the interests of Billionaires- with the Interests of Fossil Fuel Companies. Billions of dollars go to selecting for the right politicians in the early primaries- to influence politicians in office. There is this really ugly dance between politicians looking for campaign money and the rich and powerful looking for political favors. The results of this dance leave no time for wrangling with big intractable issues in America, but serve to distract over hyperbole and slight of hand to keep people distracted from the key issues outlined above. We move on to political change right in our own communities later- change depends on you and me being sheepdogs and helping the sheep understand what is actually in their own interests. LINK

But here we need to finish up the point. America is hugely rich. We only feel poor, and when we figure out what is happening, and get ready to do something about it, well we can and we will. We have to put aside the usual BS and understand key issues. We have see politicians for what they are and the nonsense they spout.  We are rich. We have so much untapped talent. We have room for it all. We are not in a zero sum game here. We can invest, we can invest and we can innovate solutions to really serious problems. We just have to understand what really stands in our way.

We are rich here in America but we are out of shape. We have a huge problem with income inequality and it is only getting worse. It is not healthy for the 1% to hold so much wealth in America. It is not even good for the 1%. Inequality is inherently unstable. It is dangerous ground for America to be on.  We discuss inequality separately but for now we have to understand the fundamental.

We can change this. We have many options. All of which the 1% will oppose. But what we do is good for us as Americans wanting opportunity, good for our kids and the youth of America and good for the future of America. It is even good for the 1% if they actually knew what was good for them. They have a serious problem. They are corrupted by having too much money.

Why do we feel so poor in America when we have never been richer as a nation? Well, we have to come to grips with  really intractable and difficult issues? But we are rich. We have huge talent. We just need to adjust our thinking and elect a whole crop of new legislators.

Feel free to add your thoughts below.

Monday, September 9, 2013

How Much Small Government Can Texas Stand

Everyone stand up who likes big government? I don't see very many hands. But there is a problem. Small government means leaving politicians at every level of government in charge acting at their own discretion with little transparency.

Is the a problem?

Too often, This leads to cushy little fiefdoms of power and privilege where these government officials have the power to defend the privileges they have created.  They don't have to act illegally to do this. They just exercise the privileges provided by small government and leave the citizens with few means to hold them accountable.

What example illustrates this problem really well? The Fort Worth Weekly's Jeff Prince tells a heart wrenching tale of a feisty 80 year old abused by the Probate system in Texas. This is such critical information, I will quote Jeff Prince

Texas, unlike most states, allows its judges to initiate guardianship cases. If a defendant in a civil lawsuit refuses to settle, a Texas probate judge can say, “I think you’re mentally incapacitated.” Then that same judge can remove the defendant’s right to hire an independent attorney and use court-appointed attorneys to settle the case in a closed hearing without the defendant’s input.

Dorothy Luck has, in effect, become trapped in a probate system where a pack of lawyers and trustees feed on her wealth ostensibly watching out for her interests.  It is a sordid story you  don't want to miss it, the article is called  Grabbing the Purse.

This situation is no single occurrence either. The Fort Worth Weekly has covered similar disturbing cases over the years. State representative Stephanie Klick, a Republican from Fort Worth,  introduced legislation to tighten up the laxness in the probate laws to protect citizens.

Ms. Klick said,
“The process for initiating guardianship needs to be tightened up,” she said. “Someone who files something with the court needs a more formal affidavit rather than an informational letter that’s not sworn.”

The process should also be sped up to prevent excessive legal fees from piling up, and the courts should put people under guardianship only as a last resort, Klick said.

“The law says they are supposed to use the least restrictive means in handling these matters, and I’m not sure that’s the approach that is always utilized,”

The law requests that the least restrictive means be used. Legislators once upon a time, were trying to keep the law simple- low regulation. Let competent people use their discretion. But the result is this gives space and allows powerful parties to act in their own interests. Maybe no malice is involved, but the results closely resemble outright theft and thuggery.

Representative Klick's reform legislation failed this session. Jeff Prince quotes a Michael Easton, a Houston-based advocate for reform, who attended a hearing on April 15 at the Texas capitol on Klick’s bill. Several judges testified against proposed reforms.
“Klick introduced a wonderful piece of legislation that would add transparency to the process,” he said. “[The judges] said it would clog up the system and cause more problems — all vague and ambiguous reasons — and that everything is wonderful the way it is.

“Do you think they want to repair the system? They are happy with the way it is,” Easton said. “Right now there is no oversight, and they can do whatever they want.”

Maybe, we need to think about and resolve the contradiction in terms between what we like as political ideas and appealing phraseology- and parse the impact of those words on laws and how they impact Texas citizens. More transparency in government is considered more regulation- but lack of transparency hinders the citizens ability to watch and understand what is in the interests of Texans.

We must reconcile the notion that adding protections for citizens  is called 'clogging up the system with needless over regulation" when in fact, we need more insight to protect citizens.

Well, can we think of any more examples of government being unresponsive, acting willfully from the interests of the citizens in a manner hostile to transparency?

Tell me a state that has more powerful  eminent domain powers or uses them more often against citizens of Texas. In the local North Texas area, we have seen home taken for commercial malls, homes raised to build a national league ball park in Arlington, and to build a new flood control system in Fort Worth.

Lets look closer at  the noisome example of the Tarrant Regional Water District. Citizens have been complaining about transparency problems for years.  The TRWD uses citizens money to litigate against having to comply with open meeting laws. There lack of accountability to the public- allowed them to foolishly waste millions of dollars to push around Oklahoma citizens over water rights. Any public entity attuned to public input could nor would have ever gone there. It was a closely held thing between politicians not held to account and their too close relationship with lawyers happy to take money for a fools errand.

The TRWD is a fiefdom all to themselves, and only recently with the election of Mary Kelleher has there been any real attempt to open the doors and air the place out.

The TRWD board have no sense of propriety. Nepotism runs rampant but there is no answering to the people. The path to fixing all this is arduous because the laws in place provide the space and "freedom" for local power brokers to build fiefdoms to the detriment of citizens and it is all built on the founding ideas of small government, and keeping government out of your business...

You probably know the key phrases used to manipulate the hearts of freedom loving hearts of Texans. We just have to figure out better with our head as to what the end result might be when we do that.

We probably need to be more discerning . maybe not reject so quickly ideas when they are smeared with the label- over regulation- big government- taking away freedom- maybe we need to look a little deeper- not automatically reject ideas when they are presented as burdensome big guv'ment.

Texans are smart and creative. If we can look beyond the power of words to numb our thinking we can come up with solutions that do not burden but provide protection. A useful synergism that works better all around.

Feel free to express yourself below.

Sunday, September 8, 2013

What Do We Do about the Jobs Shipped Overseas

We have lost millions of jobs in America by companies shipping the jobs overseas for lower prices labor. Free market economists say this makes sense. A case can be made.

But just how does it affect American Worker and American cities? The results are not pretty for hard working Americans who have lost their jobs, or live in cities dependent on the buying power of hard working Americans who are now out of a job.

The academic world of economies sees this whole disruption of lives will just go through the free market process of reallocaton of poorly allocated resources.

People out of work pretty much feel this as devastating. What have we done in the past, and what can we do better. People are not commodities. Children need to be well nurtured and supported as the mature. How does this happen in families stressed out by job loss- income loss and the tetoring of trying to make house payments pay property taxes and get buy all the while trying to create a future opportunity for the children.

Too many politicians have a problem empathizing with working people out of work. Big farmers can sit in Congress and feel completely at ease with getting millions in agriculture supports for their farming interests but bridle at people out of work getting food aid through SNAP. This is a serious issue because we need a broader vision that just keeping hungry people fed- we have to free up the imagination and figure out how to create an outbreak of new opportunity in this country. People want good paying jobs not SNAP. They settle for SNAP so the kids don't go hungry.

So what do we do to create a profound transformation in this country. What will it look like. Who do we want to elect with the free thinking brain big enough to see beyond their own selfish interests. We have to get rid of politicians whose thinking fits into the narrow groove of figuring out how to get the funds from the right and powerful to get reelected. This might be good for them, but it is not good for your and for me and the 98% of Americans who are looking for an opportunity to do well in America. To again have an American dream of- if you are willing to work hard you can be a success in America.

This is not something to be left to status quo thinking. It takes a whole new level of thinging- of realization that we need to do something significantly different moving forward. More of the same, is not sustainable and will not really change things for the better.

Feel free to add your thoughts below.


Lessons to Learn from Republicans

Someone tell me, just how often, when you hear a republican on a national stage speaking-how long it is before he or she refers to Ronald Reagan. It is not long and it happens often. But how many of them are actually remembering Ronnie Reagan and what he did- instead, just fitting Mr. Reagan into their own political framework.

Case in point- who remembers what Mr. Reagan had to say about the national debt when he was running for president? He talked about balanced budgets and returning to the gold standard.


Anybody remember Mr. Reagan's soliloquy on how much is a trillion dollars? He was making a point about out of control government spending. What did Mr. Reagan learn in office? Well, we can understand what he learned from what he did in office.

Mr. Reagan cut taxes by $749 billion. This was supposed to stimulate supply-side growth and it did provide massive annual budget deficits. Mr. Reagan also initiated a rapid rise in defense spending. Remember the battleships back in fighting trim and STAR WARS? These were just the exotic portion of defense growth.

Ronald Reagan and his administration more than equaled the entire debt burden produced by the previous 200 years of American history.  Mr. Dick Cheney, said it best in Nov. 15, 2002

"Reagan proved deficits don't matter."
And then, of course, who remembers what President George W. Bush said on Jan. 29, 2004. Now George W is emphasizing his belief that giving individuals more money to spend i.e. lowering taxes is better than the government spending the money. Of course, George W. did great at government spending also.

Mr. Reagan and Mr. Bush have taught lessons on deficit spending when they actually had their hands on the office of the presidency.

So what should we learn from this.

The government certainly has no issues with running out of money. Money proved to be unlimited when Republicans are president.

So many republicans should learn these lessons from Mr. Reagan.

1. Shut up about the deficit and quit throwing around weapons of mass financial destruction called the debt ceiling debate.

2. Understand how the US financial system works.

Money is a means of exchange. We are not going to run out of it. We markl it up in spreadsheets just like the remainder of the worlds democracies.

It is essential that American's understand fundamental economic rules. They will determine our prosperity in the future. They will determine how effectively we manage to deal with the great challenges of the 21st century.

Feel free to add your considered thoughts below.


Thursday, September 5, 2013

Thank Heaven for Feisty Women Like Ms.Stephens

I hope you read about the feisty mom who fought Pantego city hall and her tickets tossed out of city court. It was in the Fort Worth Star-Telegram.

I have had my experiences here, too. I beat them on a speeding ticket- on a technicality; but I did not have to do the homework Ms. Kathleen Stephens did- 50 hours of research, worked with an attorney, and subpoena a city traffic engineer. In the end, the ticket given to Ms. Stephens was unlawful because the signage involved did not meet code.

I like to see people fighting injustice and, even better, winning. It would be great to hear how Ms. Stephens pursued the key information she needed.

A side note here- I hope you find it interesting. Have you ever wondered at the level of inattention by politicians to real problems of joblessness, and underemployment in this lagging economy?

I remain convinced there is a general political lack of interest in jobs and opportunity in this country because many with power and money, do not like the idea of a well off middle class- feeling empowered and fighting for America and the middle class.

People who are struggling with underemployment and worse- unemployment- trying to feed the kids and stressed out- just do not have as much energy to pay attention to issues- pay attention to injustice.

I certainly look forward to hard working Americans, and Americans who want to be hard working- to focus in on the core issues and elect leaders who have empathy for people wanting opportunity and who are ready to fight against the bias towards billionaires and big finance.

I can imagine a reversal of fortune for the wealthy wielders of power in the halls of congress and in the white house. I see a new trend where people- even though still weighed down with the strain and struggle- find a little margin of time and energy to fight for justice, fight for opportunity in America, and take back power from the politicians who cater to wealth and power.

This great story about Ms. Stephens fighting for justice, made me smile. I like feistiness. I would like to see a lot more it. Like the army of women who trekked to Austin taking exception to politicians interfering in women's lives. Like the courageous and indomitable strength of Wendy Davis leading a filibuster for hours.

I think these great examples are giving people hope, and giving them great examples of acting up for justice. I think I feel a trend coming on in Texas. More feistiness. More justice.

Feel free to add your thoughts below. That was a rather long aside.

Thank you, Ms. Stephens.  You were fighting for all of us when you went through the extra a effort to fight for your rights in Pantego court.

Wednesday, September 4, 2013

Lessons from Understanding the Business Cycle

As you are well aware, the economy has been doing poorly since late 2007- and the unemployment rate has gone from 4.4% in May 2007 to 10% in October 2009 and it has tapered down slowly since.  7.6 in April, 2013- 7.6 in May and June, and then 7.4 in July. This is not robust growth. And so it is a critical time to understand the business cycle and the role that aggregate demand plays in growing the economy.

Lets start our look at the business cycle with the conditions for the economy to grow because that is what we would like to see happening.

The economy grows and people are hired because consumers demand more products and services. No business owner hires another employee until they have to- when they need another employee to help deliver products or services.

Now,  it is necessary to address a few myths that are still floating around after the last presidential election; you hear a lot of talk about job creators- and that if we would just get off their back with burdensome regulations and cut ruinous taxes on them, well, they would get busy producing jobs..

Well, this is simply not true. Reduce taxes, and give them free rein to cut their costs for protecting the environment, would make them more profits and make them wealthier- and this is good for them and the elected officials that depend on their support to get reelected- but it doesn't get anyone else hired- because new employees are expensive, and no one is going to hire anybody until new employees are needed to provide services or produce new products.

In fact, any smart businessman is always trying to reduce his overhead and keep his labor costs down. This makes good business sense, but leaves large holes in the job creation theory.

So back to our conversation on the business cycle and generating business growth. It takes increased consumption of goods and services- this is often all lumped together under the phrase "aggregate demand"-
and so what can we do to create more aggregate demand?

It takes money. Who has money to spend? Consumers are generally about 70% of the nations economy, but consumers are strapped. They are laid off, scared, saving more money and being trifty. It does not look like consumers are a good bet for more spending.

Maybe we can turn to business investment? This is pretty much back to talking about job creators again. No business is going to nvest, unless they see the possibility of potential growth in sales. Now some smart business people do invest when things are slow- often buy up bargains, or figure out ways to build market share for when growth returns, but in the aggregate, business by nature does not lead the way out of a recession but wait to invest when the signs point to recovery.

So who has money to spend? The US government has money to spend. What on? Well that is a political decision that the politicians need to think deeply about. We will talk more specifics later.

We talked about how rich we are in America. Wealth is measured in potential goods and services produced, not just adding up money and measuring GDP. Money is just the means of exchange, not the real wealth. We talked about money not being a commodity nor is there any chance we are going to run out of money.

The Federal government creates money on spreadsheets. In fact, all countries in the world now are on fiat economies and spend money by spreadsheet. They can spend money wisely or irresponsibly, but money is there if you are a currency issuer. This is as compared to a currency user. We talked about that here. This condition makes a critical difference about how money can be used. This is a critical point of confusion in people's thinking and a powerful deterrent to finding solutions to a slow economy.

The government spending money increases demand. If the government adds new employees, those new employees have more money and start spending. The companies that they buy from see increased demand and start hiring again. The business cycle is in growth.

If the government gives money to states or cities, states and cities can spend money, write contracts for projects, hire more teachers, more fireman, more support personnel at whatever level, aggregate demand increases,

No one speaks more eloquently on the subject of the business cycle and creating economic growth than John T Harvey, professor of economics at TCU. Make sure you take a look at his article in Forbes magazine-  The Real Job Creators: Consumers, .

More aggregate demand stimulates more growth. The economy is not naturally stable, it is either growing or shrinking and it is build in automatic stabilizers that don't let economic changes gather speed and destructive power. These automatic stabilizers have been created by our elected representatives over the decades from the Great Depression.

Unemployment insurance is good for the unemployed, but also just about the most effective way to replace spending in the economy otherwise lost.

SNAP helps keep kids eating but also supports the food industry and jobs providing food.

When the economy grows, progressive taxes put more money in government coffers but also puts a damper on growth that might become inflationary.

For government to spend in a down economy- well it does take deficit spending. It is therefore essential that you understand the true implications of government spending. 

So then arguments about government spending should revolve around how we spend, not whether we are printing money and not balancing a Federal budget. Make sure you explore the page on understanding deficit spending. We must use the tools we have, to deal with the crises we find ourselves.

We have great challenges around which we need to invest. It makes sense. Rebuild America. Invest in research to solve Carbon pollution problems. We need new fossil fuel free transportation fuels. We need reliable and steady sources of carbon free energy. We have water issues to deal with- and air and water pollution we cannot afford to live with. LINK  All this research,  all the infrastructure investments needed in transportation, in energy efficiency, in all the things congress says we cannot afford, need to be done and people need jobs. Lets get it done.

Now, this is not a conversation most politicians are even willing to have. At the present time, budget deficits can stoke up primal fear- much like an accusation of being soft on communism could create in the 50s and 60s.

No politician can talk about government investment unless they make the obligatory gesture to balanced budgets in the future. Politicians right now are happy to keep the economy depressed- and millions of people unemployed- millions more underemployed, and live with impeding challenges that should be considered national security issues, just because of the power mythology about government spending.

Please look over this site. Please look at some of the other references provided and think for yourself.

What is good for people? Is austerity working anywhere. Austerity is the opposite of what I advocate here. Has austherity anywhere helped balance budgets or did it just put people into the streets of Europe demanding change? Well, I am always ready to jump into another topic....

but please think about the subjects raised here. If you have a question or comment please add it below.

Bottom line: We need sensible growth that is sustainable and that addresses serious energy and environmental issues. Investment puts people to work. Simple facts. Why are these critical investments not happening?
More References

You need to know a guy named Warren Mosler. Multimillionaire who understands how the economy works. In fact, it made him super wealthy.  He has a great resource called the Seven Deadly Innocent Frauds of Economic Policy

And you might have already seen me reference Fort Worth.s own brilliant economist, John T Harvey. He is a professor at TCU. He has an excellent article in Forbes magazine that touches on these same issues. Why the Private Sector NEEDS the Government to Spend Money

Monday, September 2, 2013

Inflation - Lets Skip the Myth Making and Deal with Hard Facts

Inflation is a very serious issue, but not for any of the reasons you hear from financial pundits.  Neither printing money nor our deficit spending are a serious source of inflation at this time in this country. When we have millions and millions of underemployed and unemployed workers- well- we are operating well below full employment. This means consumer demand is way down. How can we create demand pull inflation with the present level of deficit spending? Make sure you see the notes on what money really is,  the implications of our fiat currency and the discussion on deficit spending.

John Harvey, an economics professor at TCU and an overall fairly sane guy, has written a great article in Forbes magazine about inflation. Inflation is a serious issue but not in the way we hear about it. In fact, the specious arguments you hear on inflation only exacerbate the real issues we must come to grips with. Check out John's article here. It is essential that you understand the real causes of inflation, because we have serious challenges to overcome, and the prevailing wisdom at this time is part of the problem not part of the solution.

There are classic horror stories about hyper inflation with the implication that we are on the fast track there when we are printing too much money and deficit spending. Monetary Theory says that hyperinflation is caused by printing too much money.

 Hyperinflation is more complex than that oversimplified explanation, yet all cases of hyperinflation have similar causes.  We discuss hyperinflation here. Both the Weimar republic and Zimbabwe are discussed. Check out the photo of a 100 trillion dollar Zimbabwe note... These two tragic occurrences- millions of people were hurt by hyperinflation- but hyperinflation should not be concern for standing around with so many people out of work or underemployed in America.

It bears repeating. When we have millions of idle Americans looking for opportunity- our demand for products and services is way down because so many cannot afford to spend as they would wish. There are millions of things Americans might buy if they were working or working in a better paying job. Aggregate demand is missing. People cannot afford stuff they want. Aggregate demand is needed to push businesses to hire new people because they have to to meet consumer demand. And the economy grows, and then business gets excited and boosts investment, and the government collects more in taxes...  So instead of doing smart things to fire up aggregate demand, there is an overwrought worry about inflation. It makes no sense. People will not be going back to work in the numbers needed for a robust recovery until we figure this out. Incidentally, John Harvey also has a great article on aggregate demand and job creation.  WE DEMAND AGGREGATE DEMAND!

But the threat of inflation does hang over our head. This is cost push inflation.

There are big challenges that we face that will be inflationary if we don't deal with them. Inflation is a serious issue- to important to let idle bloviators corner the subject with myth-making for their own purposes. We need facts and perspective, not fear mongering. We have serious challenges with sith peak cheap oil, and sustainability and climate change which will be highly inflationary if we do not as a nation grapple with these national security issues.

Sustainability is another huge national security issue. You don't hear as much about this unless you are looking for it.  But the earth is on an unsustainable course, where, if we do not look forward to diversity loss-  if we do not stop pollution of the oceans- we will endanger the lives of our children- at least doom them to a battle of survival much tougher than our own. We will address diversity and environmental issues here. LINK CATEGORY

The future will see a crisis with fresh clean water that will be even more destabilizing than high oil prices and more disruptive to the status quo that oil embargos.

Climate Change and Ocean Rise  are key factors that will impact America's ability to create a robust economy and provide the basics for opportunity for our children. Yet, the powers that be- have the vision of  a politician who needs to be elected in two years, a power broker who is looking to make his own nut- and not worry about anyone else- or a corporation where profit and loss is the guiding light and a path forward for economic growth unimpeded by outside unrelated interests- our national interests in reducing CO2 emissions  and clean water and clean air. We really do need a clear vision as to how much our national interests are not aligned with big oil, and big banks. We discuss this here. LINK

Feel free to add your thoughts below.

More References

John Harvey, I sing his praises often, also has a cogent article on fallacies about the government deficit. You might find it entertaining but I hope it helps you grasp the numbskull thinking that debilitates our very best tool against economic recession and a critical to deal with the challenges of the 21st century- the real challenges not the faux crises over money and deficits and debt ceilings. We have real serious issues.

Learning the Right Lessons from Hyperinflation History

America needs to invest in fundamental solutions to key challenges.  The investments needed must be carefully considered. We have limited resources. We live in a finite world. We need our thinking caps on. We discuss the challenges here. LINK

But as soon as you start talking about what we can do- there is an outcry of fear mongers, special interests and naysayers who raise their voice to say why we cannot do this.

One of these loud screams centers around the theme of  "you are on the road to hyperinflation!" Stories of the Weimar Republic are told. Zimbabwe is brought up and a damning description of how we are on the same road to ruin- makes people shudder and nod that we cannot go there.

Well, there are lessons to learn from periods of hyperinflation. We need to separate the truth from the fiction. We have really serious challenges in this country and we need a firm grasp of the challenges and the tools we can muster for solutions. We need government investment, and so therefore we need everyone to better understand the true ramifications of using money. We have to separate the faux issues from the real challenges, LINK if we want to progress to a prosperous future. We stand in our own way otherwise.

Talking about hyperinflation gets rather complicated when you go into the details. It is much easier to show pictures of 100 trillion dollar Zimbabwe notes than to go into the myriad of details that took Zimbabwe down this path of ruin.

When issues get complex,  it is essential to find sources that are as simple and coherent as possible without being too simple. Many others tell this story better than I. Therefore, I will keep my notes brief and rely on others. I also admonish you to dig down a bit because the simplified canards about hyperinflation tie our hands to deal with unemployment and future opportunity, environmental pollution and energy issues, and all the other challenges we face.

We are the equivalent of being at war but without a well defined enemy. We are living on a finite earth in an unsustainable manner which is the equivalent of being in a war you are losing. If we cannot bend the trajectory we are on, more millions will die every year as nature takes its course. We travek this philosophical path here. LINK but right now we are trying to create clarity around the concept of hyperinflation.

So lets briefly discuss the Weimar republic first.  I am going to paraphrase information provided by economist L. Randel Wray. He wrote 3 articles- they are erudite but not your usual light read.. at least for me... You can find the series here. 

Germany had lost WWI and was suffering under the burden of large reparations payments— payable in gold.

[caption id="attachment_185" align="aligncenter" width="300"]I inherited a coin collection as a kid with a lot of Weimar money in it. I learned about hyperinflation at an early age. I inherited a coin collection as a kid with a lot of Weimar money in it. I learned about hyperinflation at an early age.[/caption]

Weimar Germany's productive capacity had been ravaged by war, and by removal of industrial equipment by France as war reparations. Weimar had few gold reserves but was expected to export goods to raise more gold to make the payments demanded by the victors.

Germany’s productive capacity could not satisfy domestic demand, much less goods for export to pay reparations. The Weimar Government knew that it was not only economically impossible but also politically impossible to impose taxes at a sufficient level to move resources to the public sector for exports to make the reparations payments.

Instead Weimar relied on spending. This meant government competed with domestic demand for a limited supply of output. This drove prices up. At the same time, Germany’s domestic producers had to borrow abroad (in foreign currency) to buy needed imports. Rising prices plus foreign borrowing caused depreciation of the domestic currency, which then spiraled out of control, as imports increased in costs, increasing borrowing costs, but then increasing the cost of reparations in the Weimar currency.

We will address the common causes after we talk about Zimbabwe.

[caption id="attachment_182" align="aligncenter" width="300"]I wonder what it really is worth I wonder what it really is worth[/caption]

Zimbabwe was going through tremendous social and political upheaval after civil war with unemployment reaching 80% of the workforce. Domestic GDP had fallen by 40%. Domestic food production had collapsed after controversial land reform subdivided farms. Government had to rely on food imports and IMF lending— here, again- a case of external debts. With food scarcity and government and the private sector competing for greatly reduced supply, prices were pushed up. Here was another situation where the government could not raise taxes for both political and economic reasons.

Both Weimar and Zimbabwe are tragic cases and millions of people were injured in the process, but to simply label this a simple case of government spending run amok and printing fiat money not backed by gold as the cause- does not really shed light nor explain the problems in either Weimar or Zimbabwe and certainly conclusions drawn on our own situation in America are far fetched. (my technical term)

There are commonalities which we can draw from cases of hyperinflations in the 20th century. First, most of them occurred during a civil war, with a regime change. A majority also occurred with large debt denominated in foreign currency (this included Austria, Hungary, Weimar Germany, Argentina, and Zimbabwe).

The conclusion I (Stu) want you to draw from this- we must not let naysayers tell us what we cannot do using unsupported hyperbole not backed up by real evidence and careful study. We have millions of Americans longing for a way to be productive and add products and services for Americans to buy. We have a serious problem of a lack of aggregate demand, even with a level of deficit spending by government now. So tell me again how we need to fear hyperinflation? In America?

We do have issues with potential inflation. The are cost push resources issues. Every time there is a new story that the economy is getting better, the price of oil goes up. We need government investment to solve energy issues. We need to concentrate our wits on real challenges and put the silly made up problems behind us.

">Here are more resources to better decide about hyperinflation and how much of a potential problem we have with it.

Again L. Randall Wray - Zimbabwe! Weimar Republic! How Modern Money Theory Replies to Hyperinflation 

Sunday, September 1, 2013

Just How Rich is the United States

We here a lot of talk about how poor America has become. Members of Congress are always talking about what we cannot afford to do. It might give someone the feeling that America has become quite poor. Has America already seen its better days? An emphatic NO- but there is  something dreadfully wrong and it has nothing to do with how wealthy America is. The problem lies in who has the megaphone and who is badmouthing the United States and what we have the power to accomplish as Americans.

Our national wealth has nothing to do with dollars, or deficit spending, or unemployment rate. These concerns are all either bogus or a result of stilted mental thinking.

Our national wealth is the  measure of all the goods and services we produce in any year. Our potential national wealth is made up of all the goods and services which we could produce if all hands were on deck and adding value. Right now we have 11 million Americans unemployed. We have another 15 million who are underemployed. What if we had as many of these people working as wished to- producing goods or services? This is what we call full employment. Full employment is a worthy and achievable goal. We talk about the implications of full employment here. LINK

We do need to bring up inflation here. Not that we have a problem with inflation but a mythical fear of inflation is one of the big bugaboos that rich members of Congress worry about and billionaires worry about. Why do so many politicians and billionaires believe silliness about inflation? Well, the are either misinformed or have ulterior motives. There are a lot of ulterior motives here helping push myths about inflation and we discuss those here. Inflation is a serious issue, and we have potential problems with inflation, but not what gets talked about. We have serious challenges which can spark cost push inflation and they get ignored because we are caught up with distractions with myth-making. More on inflation here. LINK

What you and I are much more interested in is economic growth, expanded opportunities for jobs and new businesses, and a rich variety of opportunities for our youth. Nothing stands in the way of growth, but either misinformed or malevolent thinking.

But before we expand our discussion on how rich America is, we need to address the "problem of the deficit" You have seen the debt clock running and we owe 15 trillion dollars... what exactly does that mean and what are the ramifications? We really do need perspective on the national debt and the debt ceiling.  Is it a serious problem or a power tool for economic growth poorly understood?  Do you want to see America grow? Do you want to see expanding opportunities for you, for your children, for all Americans? Well, this is a critical question to answer.  LINK

How wealthy is America?

Lets stop and consider the great wealth created by robots and technology. Remember we measure wealth by what we can produce in goods and services as a nation.

So then why do we feel so poor?

How Wealthy can it be? There is nothing that stops our economic growth if we understand investment for the future. We need to grapple with these big issues, and these are not just our issues, but issues on every continent. And when America does focus on theses national issues, and focuses on economic growth that does not create more sustainability problems, does not exacerbate our issues with clean air and clean water, and focuses on reducing the CO2 pollution; well, we will be wealthier, and we will have earned the right to be the world's leader throughout the 21st century.

We will go into much greater detail on these issues later, but right now, we need to understand that Our National Wealth can be enhanced by government investment  in research and development of new energy sources, investment in infrastructure that enhances our ability to keep and source more clean water, and  protect us from rising oceans and more turbulent weather. We need to empower our youth and enhance higher education in all aspects. We need to invest in creativity, in creating new leaders and in helping enhance our human talent- all of it- in America. And it is not only a problem in America, because today the national security challenges reach well beyond our borders in the natural world.

All these national security issues require government investment.  That is why we must do battle with all the myths and myth making about government spending. That is the reason why I have created Stu's economic rules. That is why you must have your own set of rules based on clear thinking about what is good for Americans, not billionaires or politicians. What is good for America, for America's children and America's future.

America, showing vision, showing the determination to grapple with real issues and avoid phoney BS, can lead from vision and conviction. What is stopping us. Fuzzy thinking. Fearful thinking. Short term greedy thinking. How can change this? Not politicians. Most of our politicians today lack understanding, lack empathy, and have all together to much deference  for wealth and power.  We will get into this later, but a future prosperous America needs you involved. Lets build a better America. Lets build a richer America. Lets build on and build bigger dreams for the future.

Feel free to comment below.