The New York Times this week reported on what appears to be a growing movement to impose what’s being called a “Robin Hood tax” — a tiny levy on trades in financial markets that supporters say would take money from banks and give it to the world’s poor.
The paper says people as diverse as the billionaire philanthropist Bill Gates and Pope Benedict XVI are backing the idea.
What do you think?
A parasite tax
This should be called a 'Parasite tax', not a 'Robin Hood tax'.
Nothing against Robin Hood, who was a fine person, but the purpose of this tax isn't so much to tax from the wealthy and give to the poor – we could do that with property taxes or income taxes – but to discourage the parasitic day traders and speculators, who 'earn' their money by manipulating markets instead of contributing anything to society.
These people are not 'investors' or 'job creators'…they are just gamblers, only the rules are rigged so that the odds are in their favor, and if they do go bust then they get a bailout.
I presume you are referring
I presume you are referring to George Soros.
Soros is one
Soros is one….then there are all of the traders on Wall Street , and more parasites at Jackson & LaSalle, and Kudlow and Cramer, and Steve Forbes, Jamie Dimon, Jon Corzine, and the list goes on…
You do bring up a good point – both parties are run by the financial criminals. Which is why I find it silly when wingnuts accuse Obama and Biden (puppets of Pritzkers and MBNA, respectively) of being 'socialist'.
Uh – in this particular
Uh – in this particular instance, the TAX is Robin Hood, not the people being taxed.
I'm just wondering who the 49% are in this poll who disagree with it. There's a pervasive feeling among Republicans that taxing the rich is a bad idea – mostly based on a (rather illusory) idea that they too will become millionaires and get taxed. Guess what? The rural poor who vote Republican on cultural grounds (abortion, etc) are NOT being protected by the Republicans on financial grounds.
Not a rich vs poor issue
Are you trying to further divide the country, like the current adminisration in Washington has been doing every day.
Do you understand that everybody would pay this tax, not just the rich.
Don't you realize that every time you give the government more money, they will find new ways to waste it.
It is surprising that in a progressive town like Evanston there is more than 30% that don't agree with you.
Tax everyone the same!
"Do you understand that everybody would pay this tax, not just the rich."
So it is a fair tax then! Everyone who purcheases credit default swaps will pay a tax – whether they are billionaires or homeless people! Everyone – rich or poor – who tries to make a profit on the difference between the price of gold in London vs. the price in New York will pay the tax! And it won't matter whether you are rich or poor – if you get a sweetheart deal on the IPO of Facebook and then try to dump your shares on the first day, you will pay a tax!
This sounds great…it isn't like that annoying 'progressive income tax', which unfairly targets the wealthy. This is truly a fair tax, that rich and poor alike will pay!
So why don't the right-wingers like this? I guess that they are just concerned about all of those poor and middle class people who will have to pay more taxes when they day trade or speculate on the spot price of zinc.
I disagree with this tax
I disagree with this tax. I'm very much against giving the government any more money. They've never shown me that they are in any way responsible with it. Government at all levels needs less money and less power.
Did it ever occur to you that maybe the rural poor who vote Republican want less government in their lives? I don't believe that they view the world like you and other liberals. The government is not their savior.
The govt isn’t able to handle
The govt isn't able to handle money and balance accounts accurately and with integrity. Why would we give them more?
I don’t support the
I don't support the "government" taxing financial transactions, that's the dumbest thing I've ever heard. A simple "feel good" tax might make a few of you feel better about squeezing a few bucks out of the system, but would do nothing to punish those who endeavor to illegally manipulate the "markets." Spend your intellectual capital prohibiting the "bailout" of any financial institution that cries poverty over its taking over sized risky bets, let them fail. This lesson will soon tell the "markets" and its investors that if you work with firms that acts against investor best interest, executives running those firms will go bankrupt and its company leaders will go to jail.
The idea of taxing financial transactions is a joke, use your energies elsewhere.
Anyone know any real estate
Anyone know any real estate brokers in the Caymans? This tax gets implemented and the insurance companies that have domiciled in the Caymans will quickly be joined by the investment houses and the Cayman Stock Exchange will be several times larger than the NYSE in less than a decade. Instead of creating incentives for “the 99%” to get richer, the current plan is to pull “the 1%” down. Sounds like a brilliant recipe for success.
A financial tax will only make the biggest banks stronger
There is a misconception of the masses that the big banks will pay for these taxes with their money. This is only a fallacy. If we impose this tax, it will not come from their pocketbooks, it will come from yours. This is why-
– The biggest banks, who received bailout $, are still getting 0% interest loans from the government. WIth this money, they are buying US Treasury bonds with a fixed return rate. What does this mean? They borrow money for free and lock in a win, every time.
– If you impose a tax on the banks, all we are doing is asking for a little of that under the table money back for all the public to see.
-The people who this tax will kill are all the small scale investors, private small banks (that do not receive bank bailouts), and indepedent traders. Why will this destroy their business? The tax is their profit margin. ONly the big banks are getting your tax money, not all the small private investors.
– SO before you answer yes or no, you need to ask yourself "Do I want the biggest banks to get bigger? They hope you vote yes to the tax, because they could scoop up all the small fry in the sea.
I'm catholic, and I think the Pope needs to stay out of financial matters, at all times. HE should be praying for all those in need, but not offering up financial solutions to problems that he does not understand.
here’s the solution, Jen
"- The biggest banks, who received bailout $, are still getting 0% interest loans from the government. WIth this money, they are buying US Treasury bonds with a fixed return rate. What does this mean? They borrow money for free and lock in a win, every time."
So maybe the solution is to not give 0% interest loans to the big banks. If they were using the 0% rates to loan it out to businesses and spur investment, that would be good…but as you point out, they are just collecting rent. We should find other ways to encourage economic growth, like a payroll tax cut, or increased federal spending on infrastructure (stimulus) , etc…. in general, everything that the right-wingers hate.
I agree that the Pope should stay out of economic matters. I didn't like the way that the RC hierarchy came out against the Health Care Act.
I agree that the government
I agree that the government should not give out free money to the banks.
This is a complicated matter that is not easily summarized in a short few paragraphs. But it's Sunday, and I love this stuff… so here is some info sharing.. .
Dylan Ratigan, an MSNBC left-leaning host, just came out with a book about all the government-bank corruption- HEre is a link to an interview with Ratigan on his book "Greedy Bastards: How We Can Stop Corporate Communists, Banksters, and Other Vampires from Sucking America Dry."
http://www.financialsense.com/financial-sense-newshour/guest-expert/2011/12/09/dylan-ratigan/dylan-ratigan-on-his-new-book-greedy-bastards Click on the link next to the top picture to play.
Thinking about taking away 0% interest loans sounds easy, but there is nothing easy about it. IF we suddenly removed the 0% interest loans, our financial structure will collapse. The government needs the the financial system as is, because the big banks are the only major players buying US Treasury bonds.
Essentially, the banks, with tax payer money, are paying for the government spending that you want. THe banks are just taking a hidden subsidy from the tax payer while the federal reserve creates fresh money to lube the system. It is just one big loop right now. Who gets left out? The tax payer.
As for whether or not the government is the best creator of growth jobs, you might consider reading "Economics in one Lesson" by Henry Hazlitt. This book easily summarizes the AUstrian School of Economics model, with direct applications to government spending.
Currently, politicians follow the economic teachings of John Maynard Keynes. THe problem with using Keynes model is that he wrote that government should save during good times, and use the savings to spur job creation during downtimes. Unfortunately, the US government never saved. Keynes also assumed that the markets were nation specific (as they were during his time). We no longer live in a system where money is tied within our respective countries. You can shift your money to another country with the click of a mouse now. The government could increase taxes on the wealthy, but the uber wealthy will just leave the country with their money, and most of them already have.
However, I don't want you to read this post, and think that I am advocating for a right-wing take over.
There is no real financial difference between the right wing and left wing.
Look at http://www.opensecrets.org/pres08/moneyweb.php?cycle=2008
THis is a website that documents who financed/finances political candidates. CHeck out the presidential contributions from 2008- Obama's top contributors- GOldman Sachs, JP Morgan and CHase, Lehman, UBS. SEe something in common there?
John McCain main contributors in 2008-.Goldman Sachs, Citigroup, Merril Lynch
Look at the open door between GOldman Sachs and the US Treasury-
If only the tea partiers and occupy people could see that they looking at two sides of the same coin. The tea partiers blame the government. Occupy blames Wall Street. There is no difference.
What to do about all this? Brace your family for the worst. The system we have is totally unsustainable, and it will collapse. This collapse will dwarf 2008. No one politician can prevent this, and no one politician caused this.
After this financial collapse, we as a country will have to rise again and re-build. It would be best if people put down their bibles and guns, and tossed aside their eat the rich slogans, and did it together.
I'm voting for Ron Paul in 2012, because he alone stands outside the field of corruption. His is winning in some polls against Newt, and is always ahead of Romney, yet the media ignores him. WHy? He is the only one running who can't be bought by the banks.
The media is attacking him and creating many falsehoods about Paul's anti-abortion stances, and soft military policies. Paul is a man of deep religious convictions, and he has personal opinions on many matters. However, he believes that the government should not be used to force beliefs on others, thus he would not create abortion laws or gay marriage laws…
Before you believe any of the crap the media writes about ROn Paul, see what he really stands for- http://en.wikipedia.org/wiki/Political_positions_of_Ron_Paul
Go on opensecrets.org and see who financed him in 2008- TOp contributors- Google, MIcrosoft, US Army (members of), US Navy, US Airforce.
Here's to a better future!
good points but what to do?
Jen – how can any levy be placed on the banks, or on any business for that matter, that will not simply come through to the end user, the consumer, in higher prices?
The ultimate income inequality was shown for hundreds of years by royalty. The king not only had a huge income by right, but was free to make power plays against other monarchs with expensive armies made up of the 99.9% who were not only living on the edge but were forced to serve for king and country. How many centuries did it take to upset that arrangement? The desire to properly "soak the king" got rid of him entirely in two notable revolutions!
So much progress has been made – we now have armies made up of the 99.9% as before, but at least we can say they choose to join (with awful alternatives the usual option). We no longer have a single king or queen, but one or two hundred thousand people who are in the top .1%. Truly, the wealth has been more widely spread, though it's worth considering how this select group can still get a war going in which they will not have to serve.
To prevent social unrest, there must be income redistribution and the progressive income tax is the most direct way of doing that – but not if it is riddled with loopholes as it is.
Now consider power. The founding fathers realized that some human beings are driven by a lust for power that could prove dangerous, even fatal to the state. They knew that to control this power it was necessary to have a division of power and checks on power that they wrote into the Constitution. Otherwise, any man or small group of men could become monsters of oppression.
But power is exhibited both in politics and finance. The fabulously rich have long since gone beyone money as income to money as power – a marker of power against other moguls/CEOs.
The problem of power in politics has been somewhat controlled (though it is failing) but the power in wealth has not and is showing how money can be political power quite easily, stepping around the long standing checks of the FF. One need look no further than Congress to see that money is power and one man/one vote is almost entirely irrelevant. You, me and the two Koch brothers have four votes. But how do the four of us compare as influential in the halls of Congress?
The issue of social unrest aside, I would be very happy to see the ultra-rich keep every penny they have to buy dozens of mansions, yachts and trips into space if their money could be kept out of politics. Public financing of election campaigns would be excellent but you know who will fight that with every dollar they have!
What to do? Some ideas
1. Go back to a gold standard. IF we had a gold standard, the government could only spend what it takes in. If politicians wanted to spend more, they would have to show tax payers why.. what programs would come from the spending. Where is the money going. Nixon took out the gold standard in the 70s.
2. End the federal rereserve- Right now, the federal reserve has unlimited, un-elected power to play with the money supply at will. This includes outright printing of money, as well as setting the interest rates. America has not always had a federal reserve system. ROn Paul has been adovating an audit of the FEd for years, and has met with much resistance.
3. End politicans ability to make personal $ off the laws that they create- Any politician who writes a law for an industry should be forbidden from investing his/her own personal money in this industry. If not outright forbidden, then there should be most transparancy into how the politician will directly benefit from the law. There is an excellent book out on this issue right now called "Throw them ALl out" http://www.washingtontimes.com/news/2011/nov/22/legislators-and-honest-graft/
4. Bring home our troops, from everywhere.. I do not think you will find any top income earner say that they want NO social safety net. No one is advocating letter the poor, old, or young die on the streets. HOwever, how much of our tax money even goes to helping these people? The majority of our tax money goes to finance war… Ron Paul has taken a big stance on this issue. He was a naval surgeon early in his career. Respect the soldier, speak out against the wars.
5. End government interventions in the free market- The government should be a referee to the financial markets and housing markets, but not a key player. People have said that capitalism has failed, and now they are looking for the government to regulate finance. However, we do not have a capitalist system. A capitalist system would not have the government picking winners and losers, or intervening to help out connected folks.
5. Encourage savings.. Job creation comes from people saving money. This money can be used to create new business, when given out as loans. Right now, there is no incentive for people to save $.. Partly thanks to the federal reserve artificially keeping interest rates so low.
You say, "If we had a gold standard, the government could only spend what it takes in." Why is that a good thing?
Isn't the Federal government in an enviable position as the world's pre-eminent fiat currency issuer whereby its ability to spend is not constrained by the amount of revenue it takes in? Why would you want to purposely introduce a solvency risk that does not currently exist? So that the U.S. government can be in the same situation as Greece, the State of Illinois, or the City of Evanston? Why would we want to do that? How exactly does that help the economy?
I like Ron Paul and a lot of his ideas. But I've never understood this desire to go back to the Gold Standard. And as far as this hatred of the Federal Reserve- could any of this stem from a lack of understanding of how the Federal Reserve operates?
re: gold standard
The previous commenter wrote (to Jen):
You say, "If we had a gold standard, the government could only spend what it takes in." Why is that a good thing?
I don't even think that what Jen wrote is true. If we had a gold standard, the government could still incur debt. That is what it did to finance the Civil War and World War II.
The gold standard never stopped any government from running up debts…the Spanish Habsburgs, the French Bourbons, etc. As long as there are people willing to lend, the government can borrow.
Gold standard not stopping running up debts.
I think I answered the question above why we should only spend what we take in..
again, I've got my husband in here to answer this one, because he knows just about everything about the history of money..
Hubby once again,
Of course, in the revolutionary war, the civil war, WW1 and WW2, our government effectively went off the gold standard and printed money to finance these endeavors. The result was always the same, a worthless currency that had to be repegged to gold to reestablish credibility.By the way, during the civil war the South actually backed its currency with cotton in order to finance its effort. As the North captured New Orleans and cut off the cotton supply, the currency collapsed…
Essentially, we don't have to peg our currency to gold, it just has to be something with universally recognized intrinsic value- For example, after the Weimar Republic hyperflationary currency collapse in the early 1920s, the Germans backed their currency with German land. This re-established the credibility of the currency. Two years after this, they also returned to the gold standard.
But let's not confuse the gold standard being at fault for the fall of a currency when the true cause is the government not honoring it. It's like saying a diet doesn't work when you don't follow it.
By the way, all of you who have an interest in the subject, there is a lovely book out there high on the bestseller list called "currency wars" by James Rickard. It is a precious piece of work on the subject.
Austrian fantasy land
"But let's not confuse the gold standard being at fault for the fall of a currency when the true cause is the government not honoring it. It's like saying a diet doesn't work when you don't follow it."
Yes, and Stalin's Five-Year Plans were great, too….if only they hadn't been sabotaged by the bourgeoisie and Trotskyites.
You seem to be repeatedly telling us the this gold standard is great…if only political and economic realities would stop getting in the way. The same argument could be made in favor of an egalitarian socialist state.
inflationary stealing versus gold standard
The biggest difference between the gold standard and what we have now is that at least if the "bourgeoisie" class was going to take money from the middle class, it would be transparent.
Right now, inflation is and will continue to devalue our currency. Any time you devalue the currency through inflation, it is a direct transfer of wealth from the middle class to the rich- because the middle class tends to hold their money in the bank (in paper money) or in US Treasury Bonds, while the rich do not.
The middle class knows that they are being robbed, but they just don't understand how it's happening. If we had a gold standard, it would be far easier to see.
I won't have time to debate this issue again until the weekend. If you want to discuss further, please post and I'll check in again this weekend.
what happens when we spend more than we take in?
This is an excellent question!
Why should we only spend what we take in?
Because eventually, someone has to pay the bill.
So we have 2 main problems here:
1. The current method of trying to pay the bill is printing money- By printing money, it is an indirect tax on all money saved in paper form. Why? There is more money in circulation, and therefore you need more money to buy things.
The government tells us that CPI (consumer price index), which is the measure of inflation is low. WHat they don't say is that the way CPI is measured changed in 1983. Anyone who shops for the family though instinctly sees that prices are going up, and wages are staying the same. Who holds most of their $ in bank accounts, in paper? The 99%.
2. Printing money will no longer work, at some point. This lesson can be learned from Argentina. They were once the 7th richest nation on earth. They fell into the same trap as America, printing money to bail themselves out of trouble. If you are interested in where this got them, read here :http://financialcrisisaftermath.com/the-instability-scenario/lessons-from-argentinas-hyperinflation/
As for whether I understand the federal reserve.. WHo owns the federal reserve? The federal reserve is NOT a governmental agency. It is a privately held company. IT's main shareholders? The biggest banks. http://www.globalresearch.ca/index.php?context=va&aid=10489
Enquiring minds want to know what is so special about gold?
Why not silver or zinc? Not rare enough? Then why not platnium..irridium, or osmium?
Wouldn't this just give gold-producing countries – South Africa, Russia, and Canada – or gold-holding countries (China?) the power to manipulate our economy, instead of the Fed?
In the history of mankind, only currencies that were tied to real assets stood the test of time. Gold presents itself as one but not the only store of value for the following reasons:
1. IT is rare. Current gold production is approximately 1.5% of total supply per year, which correlates roughly to global population growth.
2. IT is virtually indestructible.
3. It is barely consumed for industrial purposes like silver or the other metals you list. ONce again lending itself to a store of value.
Yes, it would be advantageous to gold producing companies. However, the US still holds the largest quantities of physical gold in the world. It is not so much that gold needs to be the standard benchmark for money supply, but that we need to follow rules to keep our money supply in check. IF we were able to do so through legal/political means, it would be fine. However, if history is any guide, politicians will try to circumvent any rules to gain political advantage.
FRB Income Distribution
You said "As for whether I understand the federal reserve.. WHo owns the federal reserve? The federal reserve is NOT a governmental agency. It is a privately held company. IT's main shareholders? The biggest banks"
Do your homework. Most of the income of the FRB is returned to the Treasury.http://www.federalreserve.gov/newsevents/press/other/20110110a.htm
. The federal reserve buys treasuries for which is receives interest payments. THose interest payments should be returned to the treasury. However, the physical payment of these transfers are held back and an IOU from the fed. to the treasury is issued instead. The effect of this accounting loophole is that the federal reserve can show more assests on its balance sheet while the treasury can claim that it is receiving money from the federal reserve. What this means is you have double accounting.
So the fed promises the money back, theoretically, but keeps the money indefinitely on their books-
THis is bad for us commoners because you are increasing the money supply out of thin air which leads to inflation- (see post above as to impact of inflation)
Ron Paul’s ideas
Ron Paul is a breath of fresh air. He's the only candidate that is speaking to us sincerely and talking about views that are honestly held regardless of the effect they have on big money donors. Whatever you may think of his views – and most of them I like – he's telling us the truth as he sees it rather than carefully considering what he thinks we would like to hear.
But, like dp_witt, his attachment go gold escapes me. Right now, we are suffering from a huge over-extension of credit. The banks normally create money every day by extending loans. They went nuts with this. If there were a law that there could only be so many dollars out there per ounce of gold the credit binge would not have happened.
However, imagine the crimp on all economic activity of a hard standard for currency. Too much credit is a bad thing as we've seen, but how about credit being almost impossible to obtain – no more dollars being available until more gold was mined? With a standard that could not be changed, how could even the most sensible projects get financed? If, as Milton Friedman suggested, there was a gradual change in the relation of dollars to gold to allow expansion of the money supply – who would be making the decision on how much to expand?
As for the Fed – the lack of tranparency is terrible, but that's deliberate. The Fed does the job of keeping the financial system from collapsing due to bank failures as happened in the Depression. It does this by funding the banks by hook or by crook as we've seen. In keeping the banks going it has been a success, but that doesn't mean we can all cheer because the result can be years of a walking dead economy. Given the choice of a collapse with huge immediate losses and catastrophe a la Depression or an extended period of business failures here and there and lesser unemployment but over a longer time – which would you choose?
With no Fed, we would have to take our medicine and suffer the immediate consequences no matter how painful. Debts would be wiped out overnight, but so would the people who hold them, even the biggest banks would collapse, no amount of FDIC money could cover the loss. Your savings account and checking account could drop to zero before you had time to get the money out. ATM's would be shut down. How many years would go by before the dazed and devastated could even start to make a comeback? What kind of social unrest would occur? Would you try selling apples on the streetcorner? Recall that the Depression was so awful, communism was actually gaining a foothold in the United States.This is the terrifying scenario the Fed is set up to avoid, and it has worked.
Instead, we are now in a limbo of indefinite duration. No fighting in the streets, but a sluggish economy may go on for many years with no clear sign of the event (we don't want another WWII) to rescue it. For all its shenanigans, I will take the Fed. You can truthfully say it's motto is "save the system, ignore the public" but it has worked. The banks are open.
Turning off the money supply
"With no Fed, we would have to take our medicine and suffer the immediate consequences no matter how painful"
Yes- it would be complete social unrest.
However, the problem with the current system is that we are not making investments for the future. IF we were to inflate and use the inflated funds to increase productivity of our country, the case for quantitative easing would be easier to justify. Instead, our government expenditures are growing 10% a year without any increasing the efficiency of our economy.
THe path to prosperity lies in savings/investment, not in consumption. Savings and investments lead to increased capital, which can then be consumed. Changing the order of this economic principle is nonsense, as you can not consume something that you have not produced.
However, it would be political suicide to prescribe the bitter pill of economic reality until a forceful economic crisis arrives. Sadly, this crisis is probably inevitable at this point.
Being proactive now would lead to a better outcome than being reactive after the poop hits the fan.
US is not Argentina
The problem with Argentina as I understand it was that they pegged their currency to the USD which effectively turned them from a currency issuer to a currency user. This is Greece's problem- their debts are denominated in a currency that they do not control.
The USG is the issuer of its own non-convertible fiat currency. All of its debts are dollar-denominated so there is no solvency risk. We are like Japan or GReat Britain. The Japanese govt has run up massive deficits relative to its GDP- more than any other first-world country in the world going on two decades and they have NO inflation to show for it. In fact, deflation has been their problem. I think the hyper-inflation worry may be unfounded for the USA.
Nice to see all of the interest in Ben Bernanke though. No doubt the FR should be more transparent and accountable to the People.
I am an expert in children/language and literacy- THis question goes beyond the depth of my knowledge… So, I"m turning it over to my husband, as he is an expert in this issue. He is usually not one for online discussions of any kind. However, I have convinced him that this group of people discussing all these issues have been respectful and enquiring. Plus, most of you probably live in Evanston, and we have a vested interest in this community, as we are raising our children here.
Ok, Jen's hubby now 🙂
1) Yes, Greece's problem is that they are not the master of their currency and therefore can't default via inflation. Argentina, while pegged to the dollar, printed currency like crazy which of course led to the dollar peg to break down and then lead to hyper inflation. Chances are that Greece will leave the euro in the next 6-9 months and will choose the same path in order to default on its obligations and start fresh.
2) Yes, the USG is the issuer of its own fiat currency and its debts are based in $. However, while there is no liquidity risk thanks to the Fed, there is a solvency risk. That is a crucial distinction. Of course, we can always print money out of thin air and give that to our creditors but in that case, our currency will fall in value causing higher prices and a lower standard of living to those using it, the US citizens.
3) Japan is a a basket case economically and in my opinion a major domino to fall in the next 2 years. Aside from that, we are nothing like Japan. Japan has a huge trade and current account surplus which is one of the reasons their currency is so strong despite weak growth. Also, 80% of Japanese debt is internal so there is little currency risk from that end unlike the US.
As for deflation being their problem. Well, I am not so sure I agree with that statement. Depending on your definition of deflation, deflation is not necessarily a bad thing. We all look for "deflation", or lower prices when we shop for anything so a stronger currency is quite beneficial to the citizens that own it. The ideal situation to be in is in a world where our wages/domestic assets inflate while consumer goods/energy/imports deflate. This was pretty much the case from the mid 80's through 2000 but unsustainable as it was based on credit expansion rather than real productivity growth. Now we face the ugly sister of this problem, namely stagflation which is falling wages/domestic assets(real estate) while consumer goods/energy/insurance/tuition/food… inflate.
In the end, if our only solution to every credit contraction is printing money, the only logical outcome is a massively devalued currency which means higher interest rates, higher inflation and at some point uncontrollably high levels of such.
Austrian school vs. MMT
Jen and Jen's husband:
I am not an expert on these matters either, but reading the work of Warren Mosler has really changed my opinion regarding the solvency risk & inflation risk (or lack thereof) resulting from our national debt. His "7 Deadly Innocent Frauds of Economic Policy" in the Mandatory Readings section of his website http://www.moslereconomics.com was illuminating.
Also, with respect to Japan, if their country has been shielded from currency collapse for two decades due to their current account surplus and internal debt holdings, why do you expect them to be the next domino to fall over the next couple of years? What do you expect to change? Do you expect Japan become a net importer of goods?
I asked Richard (my hubby) to comment, but not sure if he'll have the time or energy to discuss this.
However, considering that we discuss his job almost every "date" night and I've read quite a few of his economics books, I think I know what he will say about the Mosler issue.
I don't know about the Japan issue, but he has been in the business of international currency exchange since 1998, so if he has time later I'll see if he can comment on that.
I looked at your Mosler book. This looks like one of the basic premises of his idea, quoted from his text.." The common thread tying these themes together is simplicity itself. It’s that modern money is a spreadsheet! It works by computer! When government spends or lends, it does so by adding numbers to private bank accounts. When it taxes, it marks those same accounts down. When it borrows, it shifts funds from a demand deposit (called a reserve account) to savings (called a securities account). And that for practical purposes is all there is. The money government spends doesn’t come from anywhere, and it doesn’t cost anything to produce."
There are some truths here- Modern money, in america, is a spreadsheet. It is just a transfer of numbers to bank accounts. Paper money costs relatively nothing to produce. This theory is exactly what the politicans in office are following right now. How has that worked out for this country, in your opinion?
What is money?
"Money" is only a symbolic representation of people's productive efforts. People have used various things throughout time to symbolize this exchange of efforts. However, when you remove the idea of productivity from dollars, as your book suggets, money really is just worthless paper.
When you simply create money out of thin air, as Mosely argues you can.. What are you doing? You are creating inflation. Inflation is stealing value from all those who have dollars in the banks. Inflation is driving up prices on those who have saved their whole lives and now want to live off their pension, which will not go up in dollars. Do you believe that this is the right thing to do?
If you are interested in seeing some other perspectives that lie just a bit outside of the mainstream media, check out the ideas of Jim Rogers. Rogers was Soros partner at the Quantum Fund. Or look for Peter Schiff, who runs EuroPacific Capital
If you prefer an academic opinion on the Austrian School of Economics, check out the ideas of Niall Fergusson at Harvard. Niall has had quite a few good debates with Paul Krugman of NY Times Fame on these vary same issues we are discussing. Niall also did a wonderful 4 part PBS documentary called "The Ascent of MOney" that chronicled the history of money, the beginnings of the bond market, and how government lending/borrowing plays into things.
My favorite book on economics/government spending is still "economics in one lesson" by Henry Hazlitt. Here is a pdf version of it.. For free. http://www.fee.org/library/books/economics-in-one-lesson/#0.1_L2 If you haven't read it, it's short and it's interesting.
" Inflation is stealing value from all those who have dollars in the banks. Inflation is driving up prices on those who have saved their whole lives and now want to live off their pension, which will not go up in dollars. Do you believe that this is the right thing to do?"
And what does deflation do?
It increases the real value of debts, that's what. Mortgages, student loans, municipal bonds…
It encourages people to hold on to their money and get a guaranteed return, instead of investing it.
Economics from the NY Times
Think about the computer as an example- Why do computers have a deflated price compared to their earliest production?
Deflated prices, for most items, represent increased efficiency in production..
House prices are deflated for a different reason, and that is a complex discussion that I am not willing to go into on this site. If you want to see the effect of the government on housing prices, I recommend the award winning documentary the "the INside Job." It has a nice section on the housing bubble and role of the government.
Keeping the money supply the same would keep the debt "real" and this is exactly why the government has chosen to print money and inflate away the debt. As Henry Hazlitt says "Inflation is the opiate of the masses." The union workers can keep the same rates of pay, even get a yearly increase, it just won't buy anything.
Let's give it 5 years and talk again then.
This has been a great discussion all, but I have to get some work done and my husband doesn't have time to discuss anymore.
As a concluding thought for anyone who gets their financial opinions by reading what is printed in any large mainstream media, including NY Times/Fox/whatever.. Something to think about- There is a group called the Bilderbergs. It is a yearly meeting of the top leaders (business, media, government) from the western world. The discussions at the meetings are secret, but the agenda and list of participants is not and you can google it to find it.
The Bilderberg group influences all aspects of life- from who gets NOble PRizes to what can be discussed on the media to who wins presidential nominations. If you believe Paul Krugman is a genius because of his NObel PRize status, this is exactly what they want you to believe. I wouldn't call it "conspiracy" because if you know where to look, all the information is out there.. Here is an excellent interview about the BIlderbergs that includes this idea about who is given places of power in the media..
On the financial sense news hour, interview with ANdrew Gavin Marshall.
Best of luck with your investments all. I hope I am wrong and that we can inflate our way to prosperity.
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