I live in the UK now. The reaction here and in the EU to what Trump is doing to Ukraine from what I’m reading, is intense. That is putting it mildly. Suddenly the US is a hostile client-state of Russia? Wow!
And the reaction is Canada to American threats of annexation is also intense!
Not Just Tesla
Tesla has been an obvious target. Sales are way down. Maybe “over” is a better way to put it. People are throwing things at Tesla dealerships, throwing things at Teslas.
But it’s not just Tesla. People – and governments – are talking about the need to stop using ANY American technology as fast as possible. If America can turn it off if you don’t give in to extortionate demands, you had best protect yourself by finding alternatives.
Will Trump make Apple turn off your iPhone if France doesn’t hand over enough cheese? Will Google turn off the search engine if the UK doesn’t send enough period dramas?
The long-term consequences of this will be felt for a long, long time. US tech dominance is over.
Of all people, David Brooks, in a confession, does a good job or explaining Trumpism in Voters to Elites: Do You See Me Now? Read it all, but this about moving manufacturing out of the country,
We embraced a free trade policy that moved industrial jobs to low-cost countries overseas so that we could focus our energies on knowledge economy enterprises run by people with advanced degrees. The financial and consulting sector mushroomed while manufacturing employment shriveled.
In a word, “NAFTA,” which is the shorthand codeword for “markets over democracy” neoliberal policies that drove everything upward to the wealthy. Jobs went away, social services dried up and people were left on their own, infrastructure crumbled, entire regions were devastated.
As you drive from town to town in Michigan and Ohio you see one after another a ring of the “big box” stores and national chain stores around each city. You also see the “brownfields” of rusted-out, closed factories, empty, falling-down buildings. Then you go to the downtown and you see boarded up houses, empty storefronts, deteriorating and deteriorated communities, idle people standing on corners. As you drive into these towns you can just see what is happening in a nutshell.
You used to hear about how Wal-Mart was predatory, how it would show up in an area and after a while the downtowns would dry up, local business-owners would go broke, local business employees would be laid off, and the local people would have to work for low wages at Wal-Mart, while the region’s spending money would go off to the wealthy few who run these things.
Well a juicy story of devastation like that one gets around, and there are those who hear it and say, “Hey, that’s a great idea, I wanna get me some of that.” So the Wal-Mart business model has taken off and now there are any number of these vultures, ringing the cities and towns around the country, so often private-equity owned. They are draining away the lifeblood of the downtowns, fighting off the unions to keep wages down, even demanding tax breaks to move in and “create jobs.” You see all the same stores circling every town now, running all of the local and regional businesses unto the ground.
Here are some pictures from the inner Lorain area but you see it all around: (click for large)
The UK has ended an experiment in “conservative” governance. Backed by private investors, the government withdrew support for public services, public investment, public everything. They pretended “private” investment would pick up the slack. Instead and of course the wealthy staged a “bust-out” of the country. “A fraud tactic, commonly used in the organized crime world, wherein a business’ assets and lines of credit are exploited and exhausted to the point of insolvency.”
The privatized water companies are a good example of how the country was managed under conservative governance. Public assets were turned over the private “investors.” The “investors” borrowed heavily with those assets and their income stream as collateral. They paid themselves handsomely with minimal investment in maintenance and capacity. Eventually there was insufficient water supply to support increasing housing stock and raw sewage was being dumped into the country’s rivers. Of course there was no government enforcement of rules that would have prevented this – or prevented the resulting pollution. That would be labeled “interference” in the private sector.
Private investment does not provide public returns. The only interests of private investors is private return.
The Only Way Forward For UK Governance Is Public Investment
The way forward for UK governance is public investment in infrastructure, education, healthcare, services, law enforcement, addressing inequality. Investment.
Over time public investment will result in a booming economy and a prosperous public. It always does, everywhere. Look at the countries that follow this formula. The infrastructure is maintained and modern; education and healthcare are first-class, the economies prosper. The people are more equal, happier and prosperous.
Take all the propaganda labels (socialism, capitalism, neoliberalism, etc) out of this equation and look at it for what it is. PUBLIC investment pays off for the PUBLIC. Private investment only pays the already-wealthy private investors.
For The Many, Not The Few
Investment pays dividends down the road. Let the public collect those dividends.
We dropped the Gold Standard some time ago and don’t have to round up gold to pay for things anymore. Hence the “Modern” in Modern Monetary Theory. MMT just explains how money works in a modern economy. Government “spends” money into the economy and taxes it back out. The amount not taxed back out (“deficit”) is the amount left circulating in the economy. The total over the years (“debt”) is a measure of the money in the economy. “Balancing” the budget means not putting new money into circulation. “Paying off the debt” means removing all the money from the economy.
Also, selling government bonds is a choice, not “borrowing.” There are good reasons to do it, but it is not “borrowing.” There are good reasons to tax – balance distribution, address inequality, fight the influence of accumulated fortunes, behavior incentives – but it is not “raising revenue.”
Application of MMT: Look at what the US govt did when Covid hit. It kept businesses from going under, kept the economy from the worst crash ever, dramatically cut child poverty, etc, followed by the fastest recovery ever. Compare that to what happened after the 2008 crash when Summers kept the “stimulus” low. It was almost 10 YEARS before things recovered completely – leading to Trump.
Simplest way to understand modern money: learn where banks get the money from to give out loans. (Hint: They “create” it.)
Unfortunately certain well-to-do influential interests benefit greatly from the old ways of understanding money and will do anything to keep it that way.
One More Thing
One more thing about MMT – it meets stiff ideological resistance from certain vested interests because the “gold standard” “kitchen table budgeting” thinking keeps the system working for the wealthy. If government could just spend money without “borrowing” from the wealthy to solve problems, then what do we need the wealthy for?
The conservative game since Reagan/Thatcher has been to cut taxes at the top in order to create deficits, and then demand budget cuts and privatization to get rid of the deficits they created. This is a strategy for gutting government – democracy – and moving wealth upwards. Get pesky government out of the way of the oligarchs and their corporations.
Remember the resistance to solving the 2023 debt ceiling “crisis” by “minting the coin”? Minting the coin was completely legal, and made the problem disappear. The problem was, if people could just mint a coin to pay off wealthy bondholders then why can’t government mint a coin to … you name it.
Minting platinum coins with a face value of $1 trillion and depositing them with the Federal
Reserve is Constitutional and solves the problem. But it brings up questions that shake the foundations of neoliberalism. If we can “mint coins” to pay bondholders, why can’t we mint coins to do things that people want and need? Instead of just relying on private capital (the rich) to make investment decisions and get things done in our economy?
So Biden can do the right thing and just … pay our bills. But then the neoliberal order breaks down. If We (through Congress) can decide to … you name it, then why are we depending on “the investor class” (capital) and “market solutions” etc to decide where to invest, allocate resources, do the planning and everything else?
Watch this video. The “gold standard” ended a long time ago. Since then economies work in a more “modern” way. Hence “Modern Monetary Theory” – MMT.
Countries no longer round up gold to “pay for” things. They decide on priorities and issue currency – “spend” – as an exchange medium. They impose taxes to both soak up excess currency and rebalance the distribution of wealth.
The currency that is “spent” into the economy and not taxed back out is still unfortunately called a “deficit” and the total over the years is unfortunately called “debt.” This is the legacy of ancient times and the use of gold. (This should be called “National Money” instead of National Debt.)
If a country offers bonds (T-Bills in the US) that is a place for wealthy people to store excess cash. Countries can choose to pay interest on them. This is not “borrowing.”
I propose renaming the “National Debt” as the “National Money.” Here is why.
Once upon a time, governments had to round up gold to “pay for” things. Kings would gather gold to finance armies and pay mercenaries for their wars. If they collected it from the population through taxes, fees etc it was called “revenue.” If they borrowed it, they would have to pay it back. That was actual debt. Later, nations used gold as a means of exchange and had to actually collect or borrow as much gold as they would spend.
But things have changed. Gold is out of the picture. (So are shells, gems and other historical means of exchange.) Governments allocate resources toward priorities and issue currency as a means of exchange. This is commonly called “spending.” They do not “collect revenue” nor do they “borrow.” They appropriate and issue currency. They tax the currency back to balance and regulate the amount of currency in circulation, and to address inequalities and raise or lower public priorities (like taxing cigarettes.)
Many of the terms used have not kept up with the changes. People still think governments “borrow” when they sell bonds. But bonds are for other purposes than raising money (rounding up gold.)
The budget “deficit” is the amount of currency spent into the economy but not taxed back. What today is generally called the National Debt is the accumulated yearly budget deficits minus any yearly surpluses. (Surpluses happened in the Clinton years.) It is a measure of the currency spent into the economy and not taxed back out.
The legacy use of the word “debt” misleads people into thinking it is “debt.” It is not. Governments that issue their own currencies have no need to collect gold or other “revenue” to “pay for” the goods and services the government decides to direct toward priorities. (Of course governments should not direct more resources than are available, this creates inflation.)
I propose renaming the “National Debt” as the “National Money.”
Society wants cars/antibiotics/furniture/houses/etc but doesn’t want to make them ourselves through our government.
In order to accomplish functions like these that government wants accomplished but doesn’t want to do itself, government “contracts out” those functions. Corporations are those contracts. Corporations facilitate aggregation and manage of resources (huge sums, labor, etc) that are beyond the scope of individuals. We “contract out” through corporate charters to get these things done for us.
When You Look At It This Way
When you look at it this way — that government is the way all of society’s functions are managed(of course it is) and that corporations & the “private sector” are just “contracting out” some government functions — it gives people a way to take back the power in their own thinking. Who is the boss of who? How should corporations be regulated? Who should be regulating them? Etc.
Where Things Went Wrong
Here is where we went wrong. Executives at corporations are allowed to use corporate funds to influence society and pay politicians to allow things that enrich those executives personally.
We live in a society, and getting things done for society is what government is for. Government is society’s way to make decisions about society’s resources, economy and future. Period. Anyone who tells you you don’t need government, or that government shouldn’t do this or that, is actually just trying to BE the government, for their own benefit.
EVERY decision about society’s resources, econony and future is made by government, one way or another. Period. Every. Single. One. Socialism, capitalism, communism, dictatorship, aristocracy, oligarchy, democracy, etc are just descriptions of how that decision-making is divided up. It’s about who makes the decisions and who gets the benefits. All the “ideological” battles are really just all about keeping the public from understanding that.
In the US, supposedly a democracy where the decisions are ultimately made by “We the People,” we hear about the “public sector” and the “private sector” of our economy. What we call “the private sector” is really just the government “contracting out” the functions of managing society. Corporations are those contracts. From the recent post about corporations, Understanding What a Corporation Actually Is Can Help Restore Democracy,
We the People want to have factories to build cars or toasters. We the People could do this – build the factory, hire the managers, organize supply chains, provide insurance. etc. – ourselves but instead we have come up with corporations as a way to “contract it out” to private investors to accomplish these jobs for us.
Corporations are the contracts government makes when it “contracts out” its functions. Period. Government charters corporations to do things government doesn’t want to do itself. Those charters come with conditions and rules.
Except our currently captured government doesn’t enforce the agreements.
A Currently ‘Hot’ Example
Government contracts out money creation. We charter banking corporations to do that function of government for us. The Post Office could do that as well, but we, for various reasons, choose to let a few “capital” holders – wealthy people – do that and reap the returns.
I really think the upcoming Debt Ceiling fight is going to be a turning point of some kind. The right intends to let the country default to stop “government spending.” They mean it.
Biden’s choice is to let that happen, cave like Obama did, or enforce the Constitution, which says the govt has to pay its bills.
Gimmicks
For those insisting that “Mint the Coin” as a solution to this is a “gimmick” – (as if the debt ceiling wasn’t just a gimmick) – compare that to what we do now:
The idea that the constitution providing the power to "coin money" implies the ability to charter Federal Reserve Banks that can issue paper currency and open book entry accounts is much more of a gimmick than just… coining money.
Our federal budget is not like a family “kitchen table” budget. We stopped using gold as our currency a long time ago. We don’t mine or “round up” money at the federal level. Our government does not get “revenue” from taxes. It does not “borrow” money, it prints it.
(In this clip economist Stephanie Kelton explains that our government does not operate like a family “kitchen table” budget):
We (representative democracy through our Congress) decide that we’re going to allocate our resources toward accomplishing something, and we issue dollars as an exchange medium toward that. There are things Congress should do along with issuing currency (which we are not doing because of neoliberalism): Make sure we allocate resources we have (allocate toward steel increasing capacity before allocating toward using more steel than we have) and tax enough to balance the distribution (tax the rich) and soak up some of those circulating dollars.
Breaking away from the idea that the federal govt operates with “kitchen table economics” is a paradigm shift. You see it completely one way (deficits, debt, govt spending are bad), and then when something clicks you can’t see it that way anymore, only the new way (MMT, govt issues currency), and then you are frustrated seeing so many getting it so wrong.
Our government issues currency. So of course we could just “mint a coin” to issue dollars to pay off bondholders. But if we did that, the most dangerous question arises: If we can just issue money to pay bondholders, why can’t we issue money to … do things that people want and need?
Shake The Foundation
Minting platinum coins with a face value of $1 trillion and depositing them with the Federal Reserve is Constitutional and solves the problem. But it brings up questions that shake the foundations of neoliberalism. If we can “mint coins” to pay bondholders, why can’t we mint coins to do things that people want and need? Instead of just relying on private capital (the rich) to make investment decisions and get things done in our economy?
So Biden can do the right thing and just … pay our bills. But then the neoliberal order breaks down. If We (through Congress) can decide to … you name it, then why are we depending on “the investor class” (capital) and “market solutions” etc to decide where to invest, allocate resources, do the planning and everything else?
It is argued that the way around the “debt ceiling” argument is for the government to mint $1 trillion platinum coins and deposit them with the Federal Reserve. This would then reduce the “national debt” by $1 trillion for each coin minted.
The problem people have with this is people just don’t understand what money -IS-.
Money Is Created Not Mined Or “Raised”
I hope everyone reading this understands where banks get the money they loan out from. The answer is they “create” it. They are not loaning out deposits. They create the money out of thin air. If you don’t believe this, go look it up and come back when you understand it.
Like banks, the US CREATES money; it doesn’t get money from taxes or borrowing. The US does not round up gold to trade for armies anymore. The government doesn’t have to “borrow” money or get it by taxing. It just doesn’t. It creates it.
Our “money” says right on it that it is “legal tender for all debts public and private.” It doesn’t say you can trade it in for gold or something, it says it IS the money.
The US govt “appropriates” spending. Money is CREATED to use as the intermediary – the token – of that appropriation. The money the government spends minus the money it taxes bak is the amount of money in circulation. (Think about what “paying off the debt” would mean – it would require taking $30 trillion out of circulation.) Stephanie Kelton does a good job explaining all this in her book about Modern Monetary Theory (MMT).
Republicans Understand Money
Republicans understand money and know that Democrats and the public do not. This is why they ALWAYS use deficit spending and then beat Democrats over the head for “borrowing.” They do this so they can deliver things to the public and keep Democrats from doing the same. They do this every time, and Democrats respond by being “responsible” and imposing austerity on the public.
MMT and Inflation
One last important point. MMT does NOT say we can just print all the money we need. It explains that our govt needs to analyze spending for inflationary effect BEFORE spending. Like how China built tens of thousands of miles of HS rail – they ramped up steel plants etc first. What we do now is superstition – don’t spend “too much” or you “might trigger” inflation. And then you “fight” inflation by putting people out of work.
So Why Can’t Leaders Admit This?
Thinking about WHY Biden and Yellen and all Republicans and Wall Street types maintain this illusion that it would be “irresponsible” to mint the coin or get rid of the “debt limit.” It seems that maintaining the public’s “kitchen table” misunderstanding that the US gets money from taxes and borrows the rest, is the underpinning of the neoliberal order.
If the powers-that-be ever admitted that the US creates money through appropriation, and can control inflation by planning, (and therefore give everyone a job with good pay,) that would undercut the ideology that “markets” are superior to public planning, that capital is better at allocating resources than the public.
The website We CAN Have Nice Things explains MMT and links to many sources, articles, videos, etc.
