Our nation needs many expensive remedies, including jobs, education, health, infrastructure, protection for our environment and climate, etc.
Politicians keep saying we can’t afford them. They are WRONG because they are trapped in the conventional misunderstandings about economics, the federal budget, etc. They assume that taxes are the starting point, and we can’t increase taxes.
Actually, the starting point is CREDIT. Banks create money out of thin air by issuing loans with promises that the loans will be repaid later. The federal government already has the authority to increase spending through a method that is more bold than mere Keynesianism. It is called “Modern Monetary Theory (MMT).”
Below is a summary of the thinking. The June 2018 episode of “Glen’s Parallax Perspectives TV program will feature my guest Randy Mandell, an expert on MMT explaining it clearly so laypeople will clearly understand. In mid-to-late May 2018 I’ll post the program to the “TV Programs” part and the “Economics” part and of this blog, www.parallaxperspectives.org It will air 12 times throughout June 2018 on TCTV cable channel 22 in Thurston County WA: every Monday at 1:30 pm, every Wednesday at 5:00 pm, and every Thursday at 9:00 pm.
I’m posting a summary of MMT here now. Look for more information later, along with links to articles and videos with more information.
Modern Monetary Theory (MMT) would allow us to rapidly create jobs, rapidly convert to a green economy, and rapidly accomplish other good things. The speed and thoroughness could be similar to the way the U.S. quickly ramped up military weapons production for World War II. But we could do this for good purposes instead of violence. Here is a summary of how MMT could do this:
MMT would create full employment with living wage jobs, green housing, and many other benefits.
350 ppm CO2 is the upper limit when serious danger kicks in, and we have already reached 400 ppm. Politics-as-usual and economics-as-usual have failed to protect our climate from serious disruptions.
Conventional thinking says we can’t afford to do what is necessary for the climate or the various social needs, but the Modern Monetary Theory approach shows how to do it without causing economic problems.
We need a bold, creative way to change our economy rapidly . MMT provides that remedy. We need a great, broad coalition to push together because it would accomplish so many benefits.
In the term Modern Monetary Theory, the term “Modern” pertains to our monetary system after the U.S. got off the gold standard in 1971. The cost of the Korean War and Vietnam War put pressure on the U.S. dollar, leading to Nixon’s 1971 decision to stop having the U.S. dollar backed by gold. The most commonly used textbooks about economics were written before 1971 and do not examine current realities adequately. A great exception are the books written by L. Randall Wray, such as Understanding Modern Money.
Furthermore, nowadays most money is simply electronic numbers in computers, not currency or coins. When a bank makes a loan, it is simply creating new money out of thin air.
Politicians are lying when they say the government does not have the money to fund the social safety net or infrastructure or conversion to green energy projects. If the government wanted money for those purposes, the banks could easily create that money for the government to buy what the public needs.
So the conventional thinking’s demand for “austerity” is a lie!
Actually, the government could create the necessary money itself – and the government does this to serve the 1%.
When a bank creates money it’s in the form of a loan that must be paid back with interest. But the government could simply create the money itself (and, for example, spend it on solar panels) without having to pay it back to a bank with interest. In fact, when the government creates money, it is not a debt and so it does not need to be “paid back” to anyone else. The government’s newly created money spent for a green economy or housing or health care is essentially free – not needing to be paid back – and the benefits from what this new money buys improve our society through those services and by having created all those jobs.
The actual rates of unemployment and underemployment are much higher than the official rates. Also, the American economy has a lot of unused productive capacity (empty factories and other idle resources). Therefore, the federal government could create money without the inflation that would occur if we were already at full employment or if all productive resources were already being used. The American economy is underperforming so badly that we could do this without inflation.
This would be “democratic socialism,” so capitalism does not want that.
The guest for my June 2018 TV program, Randy Mandell, lays out the information I’ve summarized above in the first 18 minutes of the video of a recent speaking engagement at this link: https://www.youtube.com/watch?v=7ccvE2be0d8
The speaker says that MMT’s proposal would not make the deficit worse because it is not borrowing. It prints money, puts people to work, and creates various kinds of values that serve the economy and the society overall. It bypasses the banks and the debt system. It does not increase the deficit or taxes. It simply creates jobs, uses productive capacity that’s not being used now, and creates benefits for our society. The workers would spend their earnings, and this — in addition to the government’s spending — would stimulate the economy in addition to providing the immediate practical benefits for building housing, providing education and health, protecting the environment and climate, etc.
For several decades, productivity has increased sharply, but wages were held down. As a result, workers cannot afford to buy the products they are creating. Business’s solution is to urge people to go into debt to continue buying things they can no longer afford, and accumulate more debt. This is not sustainable, but business is making money from this injustice. Remember a decade ago when lenders were urging people to take out “home equity loans” that basically would use your house as an ATM? You take out another mortgage on your home so you can spend money that you don’t have. This ended up crashing the economy with millions of foreclosures.
Much of the debt that led to the 2007-2008 crash was fraudulently or unethically imposed upon people. When the economy crashed, our government should have let that debt go, and our government hsould have let the unethical banks suffer.
Instead of the government’s grossly unjust and corrupt response to the 2007-2008 crash, we should have used MMT to rebuild the economy.
The bailout of $13 TRILLION was a sleazy, inefficient way to subsidize unethical banks while failing to solve the real problems. The banks threatened to cut off the money supply and totally crash the economy.
But supporters of MMT said the government could simply create money out of thin air without creating debt, so we could have — and should have — let the banks go. We can rebuild a good, green economy instead of knuckling under to their threats. But what the government did – by using the Federal Reserve to give banks money then – was basically use MMT unjustly to bail out the banks. The government should do that to help people, the climate, the infrastructure, etc.
And the government missed a great opportunity to break up the banks that were “too big to fail” and missed the opportunity to seriously regulate the banks again, and did not even use the government’s bailout leverage to make the banks “write down” the crooked and abusive loans they had given through mortgages, credit cards and student debt. By leaving in place debts by local and state and federal governments, this caused budget crises for these public entities, which led to severe budget cuts, privatization, etc. One consequence was poisoning the children of Flint, Michigan.
Other nations are organizing a different economic network that would be an alternative to the U.S.-dominated one, so they could avoid “austerity” and other abuses. Five major emerging national economies (Brazil, Russia, India, China and South Africa) created this association called BRICS.
The U.S. is trying hard to lock other nations into the U.S.-dominated model. Hence the “free trade” schemes such as the TPP, TTIP, etc., which would radically deregulate giant corporations and – in order to protect giant fossil fuel companies – would prevent countries from converting to green economies. TPP would actually PREVENT nations from getting off from fossil fuels.
Bernie Sanders sought out and received much good economic advice from the best MMT economists, including Dr. Stephanie Kelton. She has written about MMT and spoken on several informative, insightful videos. I urge people to search the web for her videos about MMT.
A new non-profit organization is promoting MMT. The Binzagr Institute for Sustainable Prosperity (www.binzagr-institute.org) will popularize it so more people will understand it.
The MMT’s approach would have broad public appeal if we could help the public – and politicians and mainstream media – understand it. This is our positive alternative to “free trade” schemes such as NAFTA, the TPP, the TTIP, etc. This would create many more jobs, help our climate, and create many other public benefits. This is a great opportunity to connect the climate movement with many other movements – and create the urgent mobilization that we need in order to save planet earth.
The guest for my June 2018 TV program, Randy Mandell, lays out the information I’ve summarized above in the video of a speaking engagement in the fall of 2016 in Seattle. Watch it at this link: https://www.youtube.com/watch?v=7ccvE2be0d8