[GJM] What Drives the American Economy, Private or Public Credit?

[Rodney Shakespeare]

Curtiss,
Thankyou for drawing attention to the tenth anniversary of your excellent letter to the Boston Globe.

Yes, in essence, the problem is debt -- particularly deb that unnecessarily bears interest and is NOT directed towards the development and spreading of productive (and the associated consuming) capacity so as to achieve a Say's Theorem balance of supply and demand (producers and consumers being the same people)  and, at the same time, forwards social and economic justice.

As thigns stand, it looks like a global catastrophe will soon be precipitated.  

Readers of this email may wish to go to www.binaryeconomics.net and, among the pages listed at the top, read the one with the title  Global Crisis -- Financial and E nvironmenntal - and Solution.  I would be interested to read any commnet.

Yours,
Rodney Shakespeare.


----- Original Message ----- 
From: "W. Curtiss Priest" <bmslib at mit.edu>
To: "List, Cyberspace Society" <cyber-soc at topica.com>; "List, Debt" <Debt at topica.com>; "List, Discussion Forum for Global Justice Movement" <Discussion at globaljusticemovement.net>; "list, Federal-Debts" <federal-debts at topica.com>; "List, IJCCR" <ijccr at yahoogroups.com>; "List, LWSIDE1" <lwside1 at yahoogroups.com>; "List, Social Credit" <socialcredit at ecn.net.au>; "List, Telecom Policy - NorthEast list" <tpr-ne at mit.edu>; "List, TOP (The Optimum Policy)" <TOP at topica.com>
Sent: Tuesday, March 25, 2008 8:45 PM
Subject: Re: [GJM] What Drives the American Economy,Private or Public Credit?


> As some may recall, we are at the 10th anniversary of
> my letter in the Boston Globe:
> 
> The Boston Globe May 10, 1998, p. C6
> 
> WARNING: DEBT IS WHAT CAUSES DEPRESSIONS
> 
> There is certainly a madness in our midst. Ravi Batra's new book,
> "Stock Market Crashes of 1998 and 1999" talks about how those hawking
> mutual funds based on strong fundamentals neglect to say that the
> fundanentals in 1929 were also very strong days before a depression
> that spread worldwide.
> 
> As best economists can tell, what precipitates an economic catastrophe
> is debt. We are probably not going to avoid a depression, the depths
> of which will likely be greater than that of the '30s. Why? Because
> our level of indebtedness in relation to total domestic revenues is
> nearly twice the amount of debt we had when this contry was ravaged by
> the last depression.
> 
> But perhaps we can do what the banking regulators of the '30s failed
> to do. They failed to put in place a foolploof mechanism to prevent
> future depressions. We need to take special note of what and why the
> euphoria preceding a depression occurs. For only if we fully identify
> its features and causes will the next generation be able to avoid yet
> another catastrophe.
> 
> W. CURTISS PRIEST Melrose
> 
> The writer is director of the Center for Information, Technology &
> Society, and a member of the American Economic Association
> 
> Prior text of Terry Wright, perceptive posting on Cyberspace Society,
> of March 24th:
> 
> Subject: RE: What Drives the American Economy, Private or Public
> Credit?
> Date: Mon, 24 Mar 2008 22:06:18 -0400
> From: Terry Wright
> <tennbears at wildblue.net>
> Reply-To: cyber-soc at topica.com
> Organization: Tennbears Beef & Livestock Ranch
> To: cyber-soc at topica.com
> CC: "'Michael J. Dean'" <mikedean at carolina.rr.com> References: 1
> 
> John Gelles writes:
> 
> On Fox News Sunday, Chris Wallace presented the following questions to
> Lawrence Summers, former Treasury secretary under President Clinton,
> and Glenn Hubbard, former chairman of the Council of Economic
> Advisors under President Bush.:
> 
> (TW> I do not trust the ethics, character, or integrity of any of the
> people mentioned above. And after reading their conclusions and
> recommendations you provide below, my distrust appears highly
> justified.)
> 
> John writes (questions put to this panel):
> 
> 1. How serious of a problem is the state of the nation's economy and
> are we in a recession?
> 
> 2. Is the government doing enough to keep the situation under control?
> 
> Wallace, Summers and Hubbard all understood the questions. Answers
> were developed for audience. I was very much impressed with what we
> were told:
> 
> a. The problem is serious. There is need of more private credit from
> our private banks. Therefore government must lend financial capital
> to the banks so they can lend more to business and ordinary retail
> consumers.
> 
> (TW> The gist of what is being recommended by these people sounds to
> me like the following:
> 
> "Listen up you bankers, now that your incredible GREED and propensity
> to "game" the system through predatory and unscrupulous lending
> practices, and "tinkering" with interest rates to promote the
> expansion of one industry over another (e.g., housing) has brought us
> all to the brink of economic collapse, we're going to lend you some
> more of THE PEOPLE'S hard-earned money so you can profit from the
> backs of the PEOPLE again, only this time, don't bring us to the brink
> of disaster!!") 
> 
> John writes:
> 
> b. Businesses and ultimate private consumers, already in more debt
> than their current prospects justify, must find the confidence to go
> further in debt in order to keep retail and wholesale volumes high
> enough to pay for jobs, wages and profits.
> 
> (TW> Following previous rationale, this answer seems to be saying to
> people and businesses:
> 
> "Now we know you all have no reason to trust the government and money
> changers of the world, especially since the Enron and WorldCom
> debacles, and even more so, the recent greed-based subprime fiasco
> that cost many of you people your home, savings, retirement, general
> well-being, and peaceful state of mind, and many of you businesses
> your markets, customer bases, access to reasonable financing, and so
> on, but don't hold these things against us. Everyone needs to "TRUST"
> that the people, their thinking, and their behaviors that brought us
> all to the brink of total economic meltdown have learned their lesson,
> and will be "much better" at what they're supposed to be doing in the
> future. What we mean by "much better" in the future is that you won't
> actually "feel" their hands on your wallet quite as like you have felt
> it recently; instead we will slowly rob you and your progeny through
> the invisible tax of inflation!)
> 
> John writes:
> 
> c. Government must follow up its low interest decrees and tax refund 
> stimulus package with more of the same, at the risk of more inflation 
> and a greater decline in dollar against harder money. Exports must 
> continue to do well and even better, as they currently are, to help
> pay for American jobs, wages and profits.
> 
> (TW:> And the above recommendation, seems to be saying:
> 
> "Listen folks, we're going to print a lot more money, oh heck, maybe
> we'll just credit a lot of bank accounts with our big computer, and
> yes...we know we'll be causing greater inflation, which will make your
> money even more WORTHLESS than what our GREED and predatory practices
> have recent made it, but this will play right into our grand strategy
> of having America become the lowest cost labor on the planet, so all
> those manufacturing, financial services, and helpdesk jobs that were
> outsourced over the last few decades will finally come back to us for
> the same reasons we outsourced them in the first place...cheap
> labor!!! So just keep your heads down and keep working...we've got it
> all under control.") 
> 
> John writes:
> 
> d. Possibly, over the next year, the loss in the value of residential 
> housing values will stop and prices will steady and then begin to rise
> again at a very low sustainable rate.
> 
> (TW> And item d above sounds a lot like them saying:
> 
> "There's a slight chance that, over the next year, your home...if you
> still have one... will stop losing its value, level out in value, and
> then slowly begin rising again but at such a slow rate that you'll all
> be dead and buried before you ever get to enjoy any equity you might
> have once had in it. You see folks, we've nearly satisfied our
> insatiable greed through foreclosing on many of your dear homes,
> getting most of them on the cheap, after you made a lot of mostly
> interest payments to us over the years. We can now sell these all over
> again, doubling, maybe tripling our money, if we can only convince you
> all of the saliency of our recommendation "b" above.")
> 
> John writes:
> 
> e. All of the above meant the American economy would not collapse; but
> it would not find a footing from which to grow at the high rates it 
> would take to spread prosperity to the bottom of the American
> population whose education, training and standards need to radically
> improve if America is to lead the world in an economic revolution to
> parallel revolutions in technology (in information, biology and
> materials) which may reorder the greatness of the worlds continents
> and nations.
> 
> (TW> And item e above sounds a lot like:
> 
> "Now folks, don't get mad. We know our economic policies, meddling in
> education, and currency manipulations have combined to send a lot of
> your jobs overseas. And doggone it, we've tried our best to brainwash
> you (through our control of big media) into thinking that things
> aren't so bad as we hammer mind-numbing auto ads and prescription drug
> recommendations at you 24x7 on TV, and scare the crap out of you with
> our news casts and looming threats. No one is perfect!! You folks on
> the bottom, hey, what can we say...you're still screwed because you
> couldn't afford the education and training you need to be of value in
> the modern world. We're really sorry that the ECONOMY we're about to
> rig will be such that you'll never climb out of the hole we put you
> in.") . John writes:
> 
> What must dive the American economy, private or public credit, IF 
> America is to lead the world in an economic revolution to parallel 
> revolutions in technology (in information, biology and materials)?
> 
> Is it better that our present ideology reorders global power and 
> leadership so that Eurasia leads humanity, as Europe once did and 
> America still does (if barely)?
> 
> (TW> Our "present ideology", in my opinion, does NOT reflect the will
> and spirit of the American people...it reflects the greed, cronyism,
> corruption, power-mongering and politics of an extremely small number
> of mostly idiots that "we the people" were "forced" to elect under the
> combination of a controlled and biased media, failure to enact
> meaningful campaign finance laws, government deception, financial
> community greed, and a global socialist and fascist agenda of the
> super-wealthy. Here are two examples that should readily demonstrate
> whose interest is being looked after by the powers that be:
> 
> 1. U.S. senators receive 100% of their working (if you can call
> anything done in Washington true "work") salaries for life. Did you
> get 100% of your working salary for your retirement?
> 
> 2. Now the Federal Reserve...if you can believe this...has opened up
> the discount lending window the "investment bankers"...(i.e., the Fed
> has decided that what we "really" need is for the biggest and
> greediest "system gaming" gamblers on the planet to be able to borrow
> funny money as cheaply as legitimate banks...oh yeah...this will
> really fix everything, eh?)
> 
> John writes:
> 
> Is capitalist fundamentalism superior to economics in the public 
> interest--that would revive the tools and attitudes we once
> owned--that allowed Keynesian money to drive America's satisfaction
> of its political and military needs and its defense of human rights
> in the 1940's?
> 
> (TW> There is nothing wrong with fundamental capitalism because no two
> entities will trade anything of value for something else of value
> unless both entities are better off for that trade. The problem that
> makes capitalism unrecognizable is the fact that we have these
> "tinkerers" on the sidelines trying to "control" the economy to suit
> their own agendas.) 
> 
> John writes:
> 
> Wallace, Summers and Hubbard did NOT care to recognize our abdication
> of leadership, represented by failure to finance and drive the
> American economy with public credit in humanity's long term interest.
> 
> The private interests encouraged by laissez-faire were accepted as
> good enough.
> 
> (TW> And what should we expect these people to say, that their bosses
> are/were idiots? 
> 
> John writes:
> 
> The fact that we could immediately reach full employment of all our 
> labor and capital, by becoming the arsenal of economic growth to
> house, feed, train, and care for the world, and were electing NOT to
> do it, did not cross their collective mind.
> 
> (TW> John, I truly believe a lot of things were different for us after
> WWII than they are now. The dollar was still worth most of what it was
> in 1911, peace had been won, and the economy needed to be stimulated
> to come close to matching what it had been during the war. We'd have
> all these brave soldiers coming home that would need jobs. We didn't
> need to make planes, bombs, guns, and so on at the same rate as we did
> during the war, so the government invented a lot of public-good
> projects (e.g., TVA, Interstate highways, infrastructure) to take up
> the economic slack that the end of the war was going to produce. 
> 
> By contrast, today the dollar is worth less than 4 cents (in 1911
> dollars), and monetary policies have allowed the money-changer crowd
> such liberties and lack of oversight that they have now gotten things
> into such a state that there is no good way out. By their own
> admission above, any kind of fix will involve the introduction of
> guaranteed inflation, that invisible tax that hits those who can least
> afford it the hardest, and government bailouts of the rich, which is
> outright fascism. I heard today that J.P Morgan, and their "partner"
> the FED (which is backing their takeover of Bear Sterns), have upped
> the valuation of BS by 500% (instead of $2/share, now its $10/share).
> I guess all the wives complained about the severe hit to their
> lifestyles the $2 share price was going to cause. After all, we can't
> have the big gamblers who caused this mess being forced to live in the
> mess they created, like the rest of us have to. 
> 
> I also heard today that truckers are going broke, and are threatening
> to strike. How much fun will life in the suburbs be once the grocery
> stores run out of food about 3 days after the trucker's strike? Also
> heard that now even qualified borrowers can't get loans, even though
> the government and fed are infusing capital like crazy just for this
> purpose? I guess the Carlyle Group is moving to Dubai, and Halliburton
> is already there...beyond the reach of our legal systems. The list
> goes on.
> 
> I guess I'm just tired of the talking heads on TV telling us what
> we'll have to do to get back to some semblance of economic viability
> that is far less robust than where we are (or were). We have to get
> rid of the economic tinkerers, quit telling others how to live and
> govern themselves, adopt a sensible energy policy and commit to making
> it work (a great public-works project), and start treating the 99+% of
> our population currently enslaved by the <1% of the elitists a whole
> lot better. 
> 
> But I appreciate your optimism. --Terry
> 
> 
> 
> 
> John Gelles wrote:
>> 
>> WHAT DRIVES THE AMERICAN ECONOMY--OR, MORE TO THE POINT, WHAT OUGHT TO
>> DRIVE THE AMERICAN ECONOMY--PRIVATE CREDIT MONEY CREATED TO CHASE PROFIT
>> IN THE FORM OF MONEY, OR PUBLIC MONEY (CREDIT BASED OR OUTPUT BASED,)
>> CREATED TO MOTIVATE WORK THAT WILL PRODUCE THE NEEDS OF NATIONS AND
>> THEIR PEOPLE FOR CONSUMPTION GOODS AND FACTORIES, ETC., -- TO SUSTAIN
>> THE ECONOMIC GROWTH THAT IS NECESSARY IF WE WANT THE MINIMUM STANDARD OF
>> LIVING (ON EARTH) TO BE RAISED TO THE HEIGHTS TECHNOLOGY AND DEMOCRACY
>> HAVE MADE POSSIBLE AND DESIRABLE?
>> 
>> Terry Wright has read Gelles' opening arguments answering the above
>> rhetorical question in favor of PUBLIC MONEY--to drive us all to work in
>> the public interest and allow even more work in the interest of
>> individuals in a free economy that is NOT free to fail!
>> 
>> Terry points out, fairly and thoroughly, the many shenanigans our
>> present system tolerates that seem to want to do us in--and that may
>> succeed--if we do not know how to create a fail-safe economic system
>> with rules to prevent ruinous deflation, inflation, and absence of
>> rational national purpose to protect ourselves from ourselves and from
>> nature's curve-balls like scarcity, sibling rivalry, natural disasters,
>> and human predators who must be restrained, re-trained, and made to do
>> the right thing or, at least, stop ruining it for everyone else.
>> 
>> I can accept all that Terry contributes to our task.
>> 
>> Now I ask that we all admit that we are what we do: and if we do
>> nothing, for whatever reason, we are nothing. Admit it. Admit that
>> unemployment for anyone wanting work is intolerable. Full employment is
>> our right and is what all mammals enjoy who never heard of money.
>> 
>> Admit, too, that monetary systems of production have proved to be very
>> effective--especially in 20th century wars in democratic nations, whose
>> unemployment rates effectively were zero.
>> 
>> If we make these admissions, we must notice that "markets" do not demand
>> full employment or the end of poverty and want.
>> 
>> Which brings us to the heart of the matter: can governments offer money
>> enough (for circulation and resting in savings accounts) to employ every
>> willing person without destroying good study and work habits that
>> translate into production of all a nation needs?
>> 
>> In World War II we proved the answer was YES.
>> 
>> After the war we wanted to prove the opposite: we wanted to prove that
>> only competition to produce in markets as we knew them would allow
>> people to arrive at the best habits and best results.
>> 
>> Socialism, which featured full employment, proved to be a failure.
>> 
>> A full employment, free-enterprise, fully capitalized capitalism was not
>> invented. It did not materialize.
>> 
>> ----- Nothing compelled democratic nations to learn from wartime
>> capitalism how to create peacetime full employment--with a steadily
>> rising minimum standard of living and excellent protection of the
>> earth's environment and the family values of healthy human beings.
>> 
>> Terry Wright sees inflation as the more likely result of a fully
>> capitalized capitalism than the Utopian conditions I claim will result.
>> 
>> My fully capitalized free enterprise system, driven by government
>> contracts for clean energy, water, housing, health and education
>> systems, etc., seeks your support--in place of your support for a
>> national economy driven by taxes on the consumption of beer, cigarettes,
>> entertainment, gambling, fatty foods and the latest fads, etc., that
>> looks for stable prices on this junk instead of looking for zero crime,
>> zero war and zero poverty.
>> 
>> Argument cannot settle this matter. Only if some nation proves that we
>> can create a Utopian capitalism in place of the socialist dream, will
>> all of the above (which is the Keynes without debt system) ever be
>> tempting enough for others to try it.
>> 
>> Of course, there is another way: the current war will lead us to this
>> system in order to finance democratic success--or we will succumb to
>> some well executed mass murder of whole cities (ours and theirs).
>> 
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> 
> -- 
> 
>    W. Curtiss Priest, Director, CITS
>      Center for Information, Technology & Society
> 466 Pleasant St., Melrose, MA  02176
>   781-662-4044  BMSLIB at MIT.EDU http://Cybertrails.org
> 
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