Saturday, April 28, 2018

BRONZE AGE REDUX: On Debt, Clean Slates And What The Ancients Have To Teach Us -- Michael Hudson Interview


By Michael Hudson Friday, April 27, 2018 Debt, History of the Near East Jubilee Permalink


One of the most compelling sequences in the Oscar-winning Inside Job, Charles Ferguson’s indictment of Wall Street’s role in the 2008 global financial meltdown, involved not the banker culprits but their supporting cast. These were the Ivy League accomplices. Ferguson mightily skewered these economists for the cover they gave the sub-prime Hamptons dwelling wise guys whose rescue turned out to be a pretext for one of the largest reverse-Robin Hood wealth transfers in history. Though for the foreseeable future they enjoy their tenured posts, control prestigious academic journals and continue to prey on the unformed minds of students, the speculative financial implosion has shaken confidence in the economics academy. And through those cracks (to borrow from Leonard Cohen) shards of light are getting in. Economists once on the academic fringes – in university outposts like the University of Missouri Kansas City and Bard’s Levy Institute – are being looked to not only for understanding how to prevent bankers from setting the economy on fire again, but on how to build a social system that works for the majority.

Among the most brilliant of these heterodox economists is Michael Hudson. Coming to New York City in the 60s to study under a renowned classical music conductor, Michael switched to economics when he became beguiled by an accidental acquaintance with what he saw as the aesthetical flows inter-connecting natural and financial cycles and public debt. His biography contains elements of an epic novel: growing up the son of a jailed Trotskyist labor leader in whose Milwaukee home he met Rosa Luxembourg and Karl Liebknecht’s colleagues; serving as a young balance of payments analyst for David Rockefeller whose Chase Bank was calculating how much interest the bank could extract on loans to South American countries; touring America on Vatican-sponsored economics lectures; turning after a riot at a UN Third World debt meeting in Mexico to the study of ancient debt cancellation practices through Harvard’s Babylonian Archeology department; authoring many books about finance from Super Imperialism: The Economic Strategy of American Empire [1972] to J is For Junk Economics: A Guide to Reality in an Age of Deception [2017]; and lately, among many other ventures, commuting from his Queens home to lecture at Peking University in Beijing where he hopes to convince the Chinese to avoid the debt-fuelled economic model off which Western big bankers feast and apply lessons he and his colleagues have learned about the debt relief practices of the ancient civilizations of Mesopotamia.

I talked to Michael about his forthcoming book Forgive Them Their Debts: Credit and Redemption that comes with an astounding re-reading of the Bible and the true meaning of the life and persecution of Jesus. Based on scholarly breakthroughs in decoding ancient languages, it places a debt cancellation message inherited from Babylonian times at the center of Mosaic law and the Jewish Bible. And when it comes to Jesus, his message is revealed to be a social justice message. Through the lens of this reinterpretation, Jesus was actually an activist advocating for debt cancellation.

He died not for the sins of the people but for their debts.

My interview began with a question about the subject of his new book. I knew Michael has a following well beyond the professional classes. Some years ago on exiting the fancy Park Avenue apartment we borrowed to interview him for our film Surviving Progress [co-directed with Mathieu Roy], I was astonished to witness the Puerto Rican door man rush up to shake his hand and thank him for his appearances on progressive cable shows. It made me wonder if his book re-interpreting the Bible was designed to reach a working class audience, possibly even Trump voters.

Michael: Not at all. I originally wrote the book Forgive Them Their Debts: Credit and Redemption as an extension of the archeological and the Assyriology work that I’ve been doing at Harvard University at the Peabody Museum since 1984. I originally called the book Bronze Age Finance, because I wanted to undertake a study of the origin of debt, and how societies dealt with debt that grew so large that it forced populations into debt bondage, and dependency ….

And I wanted to study the background of Clean Slates, debt cancellations, and I found out that they begin in Sumer, and Babylonia, around 2500 B.C., and every new ruler, when they would take the throne, would start his reign by canceling the debts. In Sumer, the word for that was amargi, in Babylonian the word during Hammurabi’s dynasty was andurarum. Well, I then, after translating many of these debt cancellations from Hammurabi’s dynasty, and from neighboring near Eastern countries I realized that this affected the interpretation of the Bible because the Jubilee year in the Bible, Hebrew deror, is a cognate to Babylonian andurarum, and the Jubilee year was word-for-word exactly the same debt cancellation and freeing of the bond servants and restoration of land that you had occur for 1,000 years in the Near East, and was still occurring in the first millennium BC.

So my aim was not at a religious audience. The initial writing of the book was for economic historians and archeologists and Assyriologists who were part of the group at Harvard that has done the five volumes that I’ve co-edited on the origins of economic practices in the ancient Near East.

Tribes: That said, somewhere in the back of your mind, were you anticipating that what you discovered in antiquity would have application in the present?

Michael: Well, from the very beginning, after working on Wall Street, I realized something that should be mathematically obvious. That the debts now today are too large to be paid without bankrupting society and polarizing it in much the way that occurred again and again in history. It occurred in Rome, it occurred earlier in Sparta. You have a constant historical movement here. So my focus was to trace the history of debt cancellations, primarily.

What I realized is that when Luke 4 reports the first speech of Jesus, when he goes to the temple and gives a speech, his first sermon, he unrolls the Scroll of Isaiah, and said he has come to essentially proclaim the Jubilee year …. The word he used, and that Isaiah used, the deror, was this Babylonian, Near Eastern long tradition that was common throughout the whole Near East.

Now most of the Biblical translations miss this point because, one they were translated in the 17th and 16th century, people didn’t know cuneiform, they had no idea what these words meant and what the background of the Jubilee year was. And maybe 50 years ago, there was almost a universal idea that the Jubilee year was something idealistic, utopian, and could never actually be applied in practice, but we know that in Babylonia, Sumer, Near Eastern regions, it was applied in practice. Because not only do we have the royal proclamations, we have the lawsuits by debtors saying “This creditor didn’t forgive me the debt,” and the judgments for that. We have each member of Hammurabi’s dynasty after him ending up with this great grandson Ammi-Saduqa had more and more detailed anderarum acts, debt cancellations, to close all the loopholes that creditors tried to resort to.

So what Jesus was referring to was a very tangible fight. And in his time, this was the fight throughout Greece, it was the fight throughout the whole ancient world, the fight to promote debt cancellation. And the Dead Sea Scrolls show this. For instance, Melchizedek 12 is a huge Dead Sea Midrash of all of the Biblical citations of the jubilee year, tying them together. And we now understand that the Dead Sea Scrolls were not a sectarian Essene product, but they were basically the library of the Temple of Jerusalem, that was sent and put in these caves for safe-keeping during the civil wars.

So what Jesus was referring to was a very widespread argument in what was really a class war between creditors and debtors that swept throughout the whole period, including Rome itself. And this has not been clear to most people who think they’re taking a literal version of the Bible. And it’s very funny that the people who call themselves fundamentalist Christians will have dioramas of dinosaurs and human beings all sharing the same landscape, literally. But what they ignore is, if you take the Bible literally, it’s the fight in almost all of the early books of the Old Testament, the Jewish Bible, all about the fight over indebtedness and debt cancellation.

Tribes: That’s extraordinary. Elsewhere you’ve made the point … You’ve made the point that it is important to understand the Bible was rewritten after the Jews returned from their Babylonian exile. What’s the significance of this in terms of your reading of Old Testament texts?

Michael: I wouldn’t say that the Bible was re-written after the exile, it was really codified and put together after the exile. This has been the normal view of the Bible for the last 60 or 70 years in Biblical scholarship that realizes when it was put together and under what circumstances. And it was put together logically to weave the tradition of debt cancellation into the whole Jewish history. To make it really the history of how the debt crises had disrupted Jewish and Judean/Israelite society for hundreds of years.

Tribes: What are the textual sources that give you confidence in your reading of the Bible?

Michael: Well the first textual sources are the Laws of Hammurabi, the debt cancellations of the Sumerians, Enmetena, Urukagina … In my book I go epoch by epoch. Sumerian, the neo-Sumerian, Ur III period, the intermediate period, the Babylonian period, right down to the Egyptian Rosetta Stone, which is a similar debt cancellation. So there are hundreds of documented, official debt cancellations in great detail. Because these were inscribed publicly on bricks in the temples, or on statues that were put in the temples, or buried in the temple foundations. The central act of a ruler coming to power in the Near East was a debt amnesty. Forgiveness of money or taxes or duties owed to the palace, and debts owed to the palace. And by extension, debts owed to royal collectors, and to creditors in general, most of whom had some relationship to the palace.

Business debts were not forgiven. The debts that were forgiven were personal debts, agrarian debts, and the idea was to liberate the bond servants so that they could be available to perform the corvée labor, which was the main kind of taxation in the Bronze Age, and serve in the army. If you were a debtor and you were a bond servant to a creditor, you wouldn’t be available for corvée labor, you’d be working (for) the creditor, you wouldn’t be available for the army. And you have this very clearly in Sparta in Greece, for instance, by the third century BC, the ranks of the army were depleted because the citizenry had lost its land tenure, and that’s what led kings Aegis and Cleomenes and Agis to push for a debt cancellation to restore the land ownership.

So what we find is something that occurs not only in the Biblical lands, but in Greece, Rome, Egypt, the rest of the Near East. It was universal at that time, and there’s been almost no economic history of this. Either in the Bronze Age, or in Classical Antiquity. And when I began to write this book in the 1980s, it was generally believed that these debt cancellations were simply utopian statements as I said, there was no idea that they were actually enforced. And the idea seemed radical at the time, and now after the five volumes that my group has published through Harvard, now these ideas are generally accepted by Assyriologists and archeologists, but they haven’t spread to the public at large yet, because of cognitive dissonance. People can’t believe that the debts actually were canceled. But this is what revolutions were all about in Greece and Rome for hundreds of years.

Tribes: And I’m assuming that there was sufficiently sophisticated knowledge of economics to explain that Clean slates, debt cancellation, Jubilees, were more than a self-serving interest of the nobility or the aristocracy, the monarch to have soldiers to go to war, that there was some larger purpose than merely freeing up peasants so that they could serve in military campaigns, that there was some knowledge that this was necessary for a sustainable economic system.

Michael: Bronze Age rulers, Sumer and Babylonia, never explained the reason or the logic behind their acts. Later, Egyptians in the first century BC explained to Roman historians what the logic was. But the early Egyptian Pharaohs, nobody would explain, all we have are the records, “Here is the ruling.” There was no abstract economic logic as such, there was no discussion of abstract principles. That only occurred in the first millennium BC, and it’s in the first millennium that Egyptians explained it to the Roman historians, that if you didn;t cancel the debts you wouldn’t have anyone to fight in the army, and to perform the corvée labor that Egypt and other countries depended on to build their basic infrastructure.

The reason there wasn’t an abstract discussion was there was no Milton Friedman or Margaret Thatcher to even advocate libertarian, free-enterprise economy. Their economy was what seemed natural to them, and it never occurred to them to try to develop economics and an individualistic explanation of things. It seemed this is how a fair world works.

Tribes: Did promulgating these Clean Slates that you’re describing occur in relatively primitive societies of their era, or even in more complex ones?

Michael: I don’t like the word primitive. The societies were not complex at all. The palatial economies of Sumer, Babylonia, other Near Eastern regions, Egypt, were by no means primitive. We’re not talking about tribal societies basically, or anthropological type societies, we’re talking about complex urban cultures, and really the origins of Western civilization are to be found not in Greece and Rome, or even in Judah and Israel, but in Sumer and Babylonia, where almost all of the techniques of economic enterprise, the charging of interest, weights and measures, monetary coinage, all begin.

Tribes: You’ve touched on this, but just so that I have it, whose debts got canceled in antiquity, and by whom were they canceled?

Michael: You begin with by whom they were canceled. Rulers canceled the debts. And it was very easy for them to (do) that without opposition, because in the beginning most of the debts that were owed were owed to the palace itself. Both in fees for services the palace provided, or the temple provided, the temple was part of the palace economy, or for land rent by sharecroppers or for the provision of water and agricultural services to the land. So most of the debts were owed to the rulers themselves, or to their palace (tax) collectors who gradually became independent creditors by the wealth that they made. So they were essentially debts owed to wealthy people who could afford not to collect it.

And if the debts had been collected, then the rulers would be undercutting their ability to obtain the labor of debtors, the agrarian debtors, for as I said, corvée services and for the army. The debts that were canceled were personal, agrarian debts. They were called barley debts. Silver debts, among merchants, were not canceled. Business debts were not canceled. Only debts by subsistence farmers were canceled so that they would not be subjected to bondage to the creditors, and so they would not forfeit their lands to monopolists who wanted to acquire the land and would essentially disenfranchise the population.

Tribes: Okay, so moving forward to the time of the Jesus figure and the New Testament, was debt forgiveness still an important practice under the Romans?

Michael: No. The Romans were the first society not to cancel the debts, and there was civil war over that. A century of civil war from 133 BC, when the Gracchi Brothers were killed by supporting the population, to 29 BC when Augustus was crowned. There was a civil war where the advocates of debt cancellation were put to death. Just as Cleomenes in Sparta, in the late third century, was put to death, and Agis, his predecessor earlier in the third century BC, were put to death for advocating debt cancellation. So there was three centuries of constant civil war over this, and ultimately the creditors won, largely by political assassination of the advocates of debt cancellation, who almost all came from the upper class. They were upper class reformers, they were not lower-class particularly. They were the scholars, just as Jesus was a rabbi.

So there was essentially not only personal assassination of advocates of debtors interests, advocates of pro-debtor laws and debt cancellation, but Sparta as a backer of oligarchy would attack democracies that sought to cancel the debts.

Tribes: You touched on that very effectively, and we used you talking about this time period, (in our documentary film) Surviving Progress. But I’ve seen it suggested that some scholars dispute the fact that debt cancellation could’ve been a reality at the time of Jesus, that the idea of a Jubilee makes no sense, because if debts could be canceled, who would lend money?

Michael: Well that’s the big fallacy. Most debts did not occur from lending money. It’s easier today to figure if you have a debt, you must have borrowed it. But three quarters of the debts in Babylonia, for instance, where we have records because they were on clay, cuneiform records that were baked and have survived, most debts were simply unpaid bills. The debts were unpaid taxes, unpaid debts, unpaid rent, and unpaid obligation for services that had been supplied. There was no initial lending of money, necessarily. Maybe one quarter of the circumstances were that.

So the people who say lenders wouldn’t have lent miss the point that most debts were … it’s like if somebody at the end of the spring doesn’t have enough money to pay the income tax that’s due, nobody’s lent them this money, but the income tax is due. So it’s an obligation that is mounted up in the normal course of life that they’ve fallen into arrears on it. It’s a payment arrears, not the result of a loan, except in some cases.

Tribes: Fascinating. This leads you to what for many readers of this interview and I assume of your book will come as an astonishing assertion: that Jesus was crucified for his views on debt. Who exactly in your reading of the Christ story are the powerful creditors that were so threatened by Jesus?

Michael: Well, just as the Bible said, they described the Pharisees as having greed and representing what they called the greedy class. And of course the main opponent of Jesus was Hillel. And it was Hillel that devised the Prosbul, P-R- O-S- B-U- L, which was an addendum to a debt note whereby the borrower would promise not to avail himself of his rights under the Jubilee year. So essentially the debtor would waive the rights under the Jubilee year, so that the creditor could collect even if the Jubilee year were done. And Jesus quite correctly said, “Look, every single book of the Bible from Kings onwards to Isaiah and the books of the prophet, this is the center of Mosaic law.”

And the Bible, the Mosaic law, realized that by the first millennium, the kings not only in Israel and Judea, but in Persia and elsewhere, were basically representing the ruling class, the wealthy class. And the Bible is sort of unique in historical documents for showing that most of the kings were not good kings. The whole Jewish Bible is about bad kings. And so Judaism took the debt cancellation out of the hand of kings, where it had been in the Near East, and put in the very center of their religion. In Leviticus 25, again and again the prophets would say, "We’ve freed you from bondage, and if you’re going to maintain Judaism, you have to respect the debt cancellation.” And the Biblical prophets warned, if you don’t cancel the debts, you’re gonna be canceled. By Assyria, by Babylonia. And they blamed the capture and destruction of Judea and Israel on the fact that they had veered away from the law of God and did not cancel the debts.

Tribes: Did Jesus have any defenders amongst the elite?

Michael: He must have. I think many of his followers were from the elite. We know that he must have, because there was a whole Melchizedek sect, apparently, there was a whole group we know from the Dead Sea Scrolls that all of these different groups were producing these Midrashes, which is a collection of the Biblical statements of debt cancellation. It was very widespread as part of the war between debtors and creditors that was occurring throughout the entire region.

Tribes: So this would’ve been, in terms of today’s parlance, this would’ve been the kind of liberal, progressive elite of the era?

Michael: Yes. But a progressive elite that also had grounding in traditional Judaism, saying, “Wait a minute, this is what the center of our Bible is all about.”

Tribes: If Jesus was an activist, as you argue, was he part of a social movement to cancel debts?

Michael: Well he was obviously trying to create his own social movement. We don’t know if there were other social movements there, and we don’t really know much about the jubilee year in between the return of the exiles to Judah and the time of Jesus. Because they didn’t write on clay tablets, they wrote on perishable materials, so we don’t have the family wills, the legal records, the dowries, and all of the credit transactions that we have in the ancient Near East where they wrote on clay.

Tribes: When does the concept of a general debt cancellation disappear historically?

Michael: I guess in about the second or third century AD, that was downplayed in the Bible. And you had, after Jesus died, you had first of all St Paul taking over, and basically Christianity was created by one of the most evil men in history, the anti-Semite Cyril of Alexandria. Who decided to gain power by murdering his rivals, the Nestorians, by convening a congress of bishops and killing all of his enemies. Cyril was really the Stalin figure of Christianity, killing everybody who was an enemy, organizing pogroms against the Jews in Alexandria where he ruled.

And it was Cyril that really introduced into Christianity the whole idea of the Trinity. That’s what the whole fight was about in the third and fourth centuries AD. Was Jesus a human, was he a god? And essentially you had the Isis-Osiris, ISIS figure from Egypt, put into Christianity … The Christians were still trying to drive the Jews out of Christianity. And Cyril knew the one thing the Jewish population were not going to accept would be the Isis figure and the Mariolatry that the church became. And as soon as the Christian church became the establishment rulership church, the last thing it wanted in the West was debt cancellation.

You had a continuation of the original Christianity in the Greek Orthodox Church, or the Orthodox Church, all the way through Byzantium. And in my book And Forgive Them Their Debts, the last two chapters are on the Byzantine echo of the original debt cancellations, where one ruler after another would cancel the debts. And they gave very explicit reason for it: if we don’t cancel the debts, we’re not going to be able to field an army, we’re not going to be able to collect taxes, because the oligarchy is going to take over. And they were very explicit, with references to the Bible, references to the jubilee year.

So you had Christianity survive in the Byzantine Empire. But in the West it ended in Margaret Thatcher. And Father Coughlin.

Tribes: He was the ’30s figure here in the States.

Michael: Yes. The anti-Semite, right-wing, pro-war, anti-labor. So the irony is that you have the people who call themselves fundamentalist Christians being against everything that Jesus was fighting for, and everything that original Christianity was all about.

Tribes: Has any modern society declared a Jubilee without a revolt of the creditor class?

Michael: Yes. There was a wonderful debt cancellation, the major debt cancellation of the modern era was in 1947 and 48, the German monetary reform, called the German economic miracle. The Allies canceled all German debts, except for debts owed by employers to their employees for the previous month, and except for minimum bank balances. It was easy for the Allies to cancel the debts, because in Germany most of the debts were owed to people who had been Nazis, and you were canceling the debts owed to the Nazis, the Nazis were the creditors at that time. And that freeing Germany from debt was the root of its economic miracle. So that is the prime example of a debt cancellation in modern times that worked.

Tribes: Okay, now we’re coming up into the present. One in three Americans are reported to have a debt that’s been turned over to a private collection agency, and the ACLU found cases of court warrants being issued over almost every kind of consumer and medical debt. What forms of debt relief would you propose in the current circumstances?

Michael: Well the guiding principle is that debts that can’t be paid, won’t be. The default rates are rising, many people simply can’t pay their debt, unless they lose their home, unless they lose their job, or in some cases now, unless they lose their freedom and are put into debtor’s prisons down south. As you privatize prisons, they need someone else to put in the prisons besides blacks, and debtors are the people who are keeping the privatized prison business going these days.

So basically, you need, every few years, a start-over.

Tribes: Absent a world war or some such catastrophe, what might it take for debt cancellations to be adopted today as economic policy, given the power of Wall Street and the creditor class?

Michael: The first way to achieve this is by simply showing how large debt tends to grow at compound interest, that it’s growing and growing, and that all of the growth in American GDP, Gross Domestic Product, since 2008, all of the growth has been to the financial sector to pay for the rising debt overhead. The tragedy was that when President Obama took office, he broke every promise that he’d made. He’d promised to write down the junk mortgage debts to the amount that could be paid. …

Tribes: That’s the subprime-

Michael: Yeah. -… He essentially appointed Wall Street lobbyists to all of the key positions, as I’ve outlined in (my book) Killing The Host, and the result is that the debts were not written down when they could’ve been. And that means that the debts have been growing and growing and growing, and we’re in a chronic crisis, there has been no recovery. We are still in the 2008 debt crisis, and it cannot be resolved until the debts are written down. There’ll just be more and more poverty and more and more economic polarization.

Tribes: We’re very close to the end, Michael. Practically speaking, if for some unbelievably sci-fi circumstances, you found yourself as the President of the United States, in terms of debt cancellation, what would you focus on in terms of leading us back to a kind of sustainable future?

Michael: The issue of debt cannot be segregated from the overall organization of society.

Now just imagine if instead of banks and their bondholders holding student loans and profiting from it, if the government had made all these loans, the government could easily forgive these loans, because it would be forgiving money owed to itself. But when you privatize not only education, but also student loans, that is what has led to the student loan crisis. It was completely unnecessary, but Joe Biden, as senator for the credit card companies, pushed it through, saying, “We’ve got to make education a profit center for the banks. Our purpose is not to educate the population, it’s to create a situation where in order to get a job, in order to get a union card, they have to go into a lifetime of debt to the banks that cannot be wiped out by bankruptcy.” That’s the Democratic Party policy. And it’s what’s tearing the country apart.

And it’s unnecessary, it’s Thatcherism. So Obama was really the American Margaret Thatcher in pushing forth this privatization. And to do it, of course, he realized you have to put in place a huge prison system that you also privatize to give himself another constituency, especially in the southern states. And I don’t think Americans have realized that it doesn’t have to be this way. That there was an alternative, and the alternative was spelled out throughout the 19th century by nearly all the classical economists. And the alternative has worked before for thousands of years in history. And that’s why I wrote the history of the ancient Near Eastern and Judaic economies.

Tribes: Here’s a question drawn from this morning’s news, I got it right out of the Times. Steve Bannon is quoted as saying the following: “The new politics is not left versus right, it’s globalist versus nationalist.” Comment?

Michael: I think he’s quite right. The globalists are the neoliberals. They want to prevent any government from having the power to check their own oligarchic power. This is the same fight that occurred in Greece and Rome and Babylonia. For the last 5,000 years you’ve had a fight by people who wanna be wealthy breaking free of taxes, breaking free of regulations, breaking free of privatization. They want to privatize what normally would be the public sector. And you have the neoliberals, just as in antiquity, today’s neoliberals use violence, and they call themselves free marketers, but they realize that you cannot have neoliberalism unless you’re willing to murder and assassinate everyone who promotes an alternative. That’s why the first thing that the Chicago Boys did in Chile, after the murder of President-

Tribes: That’s Milton Friedman?

Michael: Yeah, Friedman’s gang. Was to close every university department, except for the Catholic University that used the Chicago textbooks. And then that was followed by a decade of political assassination throughout Latin America, leading to the oligarchy in Brazil that has just put its presidential candidate Lula in jail. So you’re having the neoliberals use violence essentially to privatize, to turn the whole world economy into Margaret Thatcher’s England. A privatized set of monopolies by an elite class, essentially reducing the population at large to something very close to neo-feudalism.

Tribes: When I read the Steve Bannon quote to you, you immediately said he’s right, but I assume you wouldn’t go so far as his program to, in his words, “deconstruct the administrative state;” you wouldn’t be on board with that?

Michael: No. You asked what is the fight about? The fight is whether the state will be taken over, essentially be an extension of Wall Street. If you do not have government planning … Every economy is planned. Ever since the Neolithic (era), you’ve had to have (a form of) planning. If you don’t have a public authority doing the planning, then the financial authority becomes the planners. So globalism is the financial interests, Wall Street and the City of London, doing the planning, not governments. And they will do the planning in their own interests.

So neoliberalism is the fight of finance to subdue society at large and to make the bankers and creditors today in the position that the landlords were under feudalism.

Tribes: John Maynard Keynes famously quipped about policymakers being slaves to defunct economic theories. If orthodox economics is bankrupt, and our politics are slaves to defunct economic theories, where are we too look today for schools of economic thought with more to offer?

Michael: I think the classical economic thought, from Adam Smith, culminating in Marx, who was the last great political economist in the classical British/French tradition, discussed all the problems we have. The inability, the fight between finance capital and industrial capital is all discussed in Volume 3 of Marx’s Capital. People imagine that we’re in industrial capitalism, but we’re really not. Industrial corporations have been taken over, and financialized, and run for financial gains, not for profit. So the problem is now not simply the exploitation of wage labor, it’s that the financial system tries to operate without labor at all. It tries to depopulate instead of build up the population. It tends to impoverish the population instead of making money on a growing internal market. So an understanding of the distinction between what the 19th century classical economists hoped would be industrial capitalism and the tragedy of the finance capitalism that’s emerged since World War I, if people are aware of that, essentially that’s the best guide to the future. That’s what I described in my early book, Killing The Host, and I’ve tried to provide a basic vocabulary in J Is For Junk Economics. If you have a vocabulary that can pierce through the euphemisms that you get in the mass media for economics, a vocabulary itself will organize your thoughts into a logical way of coping. So in addition to my book And Forgive Them Their Debts, are these other two books are everything I have to say about how to structure an economy.

Tribes: So it comes down to empowering people with a vocabulary that pierces what?

Michael: That pierces the fog of the euphemism of the mass media discourse that make it appear as if when GDP goes everybody is getting rich. When all the growth in GDP is only for the 1%, only for the financial sector, and the 99% are more and more impoverished.

Tribes: So one illustration of what you’re talking about in terms of the difference between finance and industrial capitalism would be explained by how such a huge proportion of available capital in our society today is going into stock buy-backs, for instance?

Michael: 92% of corporate revenue in the last five years has either gone into stock buy-backs or higher dividend payouts. That means only 8% has gone into new investment to expand production or employ more labor. So the financial business plan is one of asset stripping and shrinkage, not growth. Nobody in the 19th century imagined that industrial capitalism would evolve along these self-destructive lines. They all believed that the most technologically efficient system would win out in a kind of Darwinian or Spencerian struggle of the fittest. But instead, you’ve had a covert, parasitic financial counter-revolution, as the rentier class, land rent, monopoly rent, and high finance, have fought back and created a fallacious vocabulary whose objective is to deceive the population into thinking that giving more money to the wealthy 1% will trickle down to the 99%, instead of seeing this 1% income as extractive, not productive.

Tribes: I’ve been reading a lot recently about the dissolution of the nation-state in the face of these forces, globalization, financialization. Given that the nation-state is associated with the most prosperous and egalitarian periods in modern history, in terms of income and wealth distribution et cetera, et cetera, … under what circumstances do you imagine that finance capital can be overthrown?

Michael: It can only be overthrown democratically. It can’t be overthrown by force, because finance capital in control of the state has a monopoly on force. It can only be achieved, probably in one country after another, by having policies and essentially an understanding of what a viable economic constitution would be. And to realize that politics is basically economics.And again, the alternative to government and the nation-state is Wall Street and the financial interest, the City of England, Frankfurt. And that the question is, who do you want to run the economy? The 1% and the financial sector, or the 99% through politics? The fight has to be in the political sphere, because there’s no other sphere that the financial interests cannot crush you on.

Tribes: Yeah, good. Okay, thanks, Michael.

Michael: Yeah, thank you.

The Federal Job Guarantee is not just "Better" than Universal Basic income, it's the only Reasonable. The UBI is Sinister.




April 26, 2018 aliteralmind Environment

ABOVE: From this tweet

Written by Jeff Epstein, Editor-in-Chief of Citizens’ Media TV. This article was inspired by the tweet at the bottom of this article, and the discussion in this Facebook thread, and in particular, the comments of Steve Grumbine.

FJG > UBI


No. That’s not right. The Federal Job Guarantee is not just better than Universal Basic Income, it’s the only good option. The UBI is a Trojan Horse for the reduction and elimination of wages and safety net programs for the powerless. UBI is sinister.

Universal Basic Income:

UBI adds money to the economy without increasing production or output. This is how you cause inflation: The creation of money without consideration of the real resources available to you. (Sure, everyone can have a pony, but not tomorrow!)
If the government is now paying your salary, even if you are performing poorly, even if you are not working:

This incentivizes private industry to further reduce wages, which logically extends to the reduction – or elimination – of minimum wage laws.

Then what’s the point of social safety net programs such as welfare, food stamps, subsidized housing, Medicaid, Social Security, etc.? These programs would necessarily be eliminated.
Then what’s the point of fighting so hard for free healthcare and free tuition and lower prescription drug costs and so on? Now people can, at least somewhat, at least temporarily, afford the private industry alternatives. The fights for these progressive programs would just…end.
Now, all of the sudden, everyone can afford shit. All at the same time. Competing with everyone for the same stuff, with no increase in productive capacity. UBI is therefore, by its very definition, inflationary. This governmental salary, this “negative tax” for those at the bottom, is instantly devalued. At best, income and wealth inequality is not reduced.

Would this increase or decrease the incentive to get or keep a job? At least at first…

Here’s the true sinister plot behind UBI: Picture a future and less-friendly Congress, after all these safety nets have been reduced or eliminated. They come in and eliminate or dramatically reduce the UBI program because “these deadbeats want everything for free?!” Our nation is instantly plunged into a private corporation slave-wage hellscape. No wage or workplace protections, no safety net programs at all.

UBI risks putting the United States into a much much worse position than it already is today…. Well, that is, if you care about the powerless.

The Federal Job Guarantee: 


FJG adds money to the economy by increasing productivity and output. This is how you avoid, or greatly reduce the severity of, inflation. It forces private industry and the military to up their game, in order to be competitive with the FJG: better than bare-minimum living wage, benefits, and working conditions. It takes away the excuse of “I’m not hiring you… You’ve been unemployed. Ewww.”

If a future, less-friendly Congress were to come in and eliminate or reduce the FJG program, then those FJG job people would indeed once again be unemployed. But everyone else would still have those better jobs with better wages, benefits, and working conditions. Yes, without the “public option” FJG to compete with private industry, these things will start to degrade. But we would revert back to a position still substantially better than we are today.
Two final points: busywork and robots

If the FJG creates “busywork” pointless jobs, it is not a problem of the FJG itself, but rather a reflection of poor implementation of the FJG at the local level. There are basically an infinite number of genuinely useful things to be done at the local level, throughout the country.

The fear of automation is nonsense. We should embrace automation. Robots can cook our cheeseburgers, wash our cars, and accept and dispense cash better and faster than humans. But robots cannot take care of our children or seniors, they cannot entertain us, create works of art, write our books, or be our primary care physicians or psychologists. Leave the more physically taxing and repetitive drudgery work to the robots. Leave the infinite number of more satisfying and productive jobs for us humans.

[First appeared in Citizens' Media TV: 100% funded by readers. Please support independent journalism. Help pay for Citizens’ Media TV.]

Thursday, April 26, 2018

Cal Thomas tires of telling the kids to stay off his lawn

Today, the Sacramento Bee published a column from Cal Thomas in its electronic edition entitled "Crazy Bernie is at it again." The gist of the column is that Bernie Sanders' recent proposal that the government guarantee jobs for the unemployed is politically naive, unworkable, unaffordable, and just plain wrong. The link is to a right-wing website where the column originated, and the column itself claims several things:

1. George McGovern ran against Nixon on a "similar" platform. No, no he didn't. McGovern was the "get the heck out of Vietnam" candidate, while our last liberal president, candidate Richard Nixon, claimed he had a secret plan to end the war. His secret plan: continue and expand (illegally) the bombing that failed LBJ.

Seldom mentioned in this campaign are Nixon's dirty tricks: specifically persuading his future Secretary of State, Henry Kissinger, to sabotage LBJ's peace talks with the Vietnamese. In fairness, he could certainly have learned a dirty trick or two from LBJ...but two wrongs still don't make a right, and Cal Thomas looks like he's lying just to keep in practice.

2. Says Cal: LBJ's "war on poverty" promised something like a job guarantee and failed miserably. Not really, although there were plenty of job training programs in that "war."

So was that program a failure? See for yourself:

Datei:US poverty rate timeline.gif
(From Wikipedia) The program began in 1969, and has mixed results at best.

The really effective anti-poverty program appears to be the New Deal and the decades of government-sponsored programs that followed it. The New Deal  did include something like a job guarantee (the WPA). Naturally, Reagan's cutbacks coincide with the return to higher poverty rates. See American Amnesia: How the War on Government Led Us to Forget What Made America Prosper for the full story.


3. It's unaffordable! Eeek! We're running out of money!

Gee, I wonder who makes the money, and who made $16 - $29 trillion to bail out the financial sector in 2007-8? (The figures are from the Federal Reserve's own audit.) This doesn't pass the sniff test.

On the other hand, Mr. Thomas' response has been anticipated. Polish economist Michal Kalecki wrote a paper ("The Political Aspects of Full Employment") about the job guarantee in 1943. He expected resistance because such a guarantee would mean an end to "labor discipline." That means the peons would no longer have to suffer the indignities of poverty, homelessness and even starvation if they turned down a crappy job.

Basically, though, government is willing to buy agricultural commodities, even financial instruments ("Quantitative Easing"), so why would it not buy surplus labor? No reason.

See also Warren Mosler's talk about government's role in full employment.

Wednesday, April 25, 2018

The Affordable Housing Conundrum

The following describes some European remedies for problems with rental (i.e. affordable) housing.

It does not mention the effect of the U.S. 1986 tax law–a Reagan-era income tax revision. That law eliminated a tax break for apartment owning limited partnerships, and literally bankrupted those apartment-building partnerships by retroactively removing a tax break budgeted to be part of their income and profits.

The tax break allowed limited partners to take passive losses (e.g. depreciation) even though they weren’t liable for the losses of a project. As I say, all apartment-building limited partnership failed. The fortunate ones deeded the apartments to the banks rather than go through the pain of foreclosure. The rate of rental building also declined after this, sabotaging transit-friendly projects that require density to provide enough riders for transit. In Sacramento, Laguna West could not build apartments since construction financing was not available for them.

This change occurred in the era of the S&L crisis that prefigured the sub-prime/derivatives meltdown. All those bankrupt apartments didn’t help the S&Ls either.

The socialists will tell you giving tax breaks to the wealthy is a second-rate housing solution since those taking them remove some money from the apartment’s income, whereas simple government ownership of affordable housing means 100% of the money spent / earned builds apartments. Nevertheless, the subsidy eliminated by the Reagan administration’s tax law revision was devastating.

Section 8 (rental subsidies) is another solution that works when it’s implemented. Since its inception, it’s been underfunded so there’s a large queue of poor people waiting for those Section 8 vouchers. Recent administrations have cut funding further, too. Section 8 is also something ex-felons can’t get, so the pressure on the incarcerated doesn’t let up just because they’re turned loose.

The bottom line, at least to me, is that Americans believe that poverty is really morally reprehensible. The poor deserve their poverty, and must be punished. This is perverse fallout from that “Protestant ethic."

Five changes that could make make housing better for generation rent

April 23, 2018

Research by the Resolution Foundation has confirmed what many young people already sensed; that for them, the private rented sector in Britain is less a stepping stone, and more of a trap. The research predicts that up to a third of millennials will live in private rented housing from the day they’re born, until the day they die.

Many aspire to own their own home, pay off the mortgage and have an asset against which they can leverage the support they may need in their old age, or pass on to their children. But this traditional dream is becoming increasingly distant, as more of the UK’s housing stock is owned by organisations or landlords with multiple properties.
What went wrong?

Home ownership is increasingly the preserve of those with wealth, or older people who bought at a time when housing was cheaper. Some of the wealthy don’t just own their own home, but also others, which they collect the rent on to buy more properties.

While owner occupation, as a proportion of market share, has not changed dramatically, very recently (it has been around 62% for a couple of years) the private rented sector has grown at the expense of the social housing sector.

Social housing – that’s homes owned by local councils or housing associations, rented out at significantly less than the market rate – has become rarer. And there’s more so-called “affordable” housing – usually a set proportion of up to 80% of the market rate – which in many cases just isn’t affordable for those on lower incomes.

In continental Europe – especially countries such as Sweden – there is a different approach. The level of owner occupation is much lower, while the private rented sector is better quality, more affordable and more secure for renters.
What could work?

There are plenty of policies which could improve the situation for “generation rent”:


Cap rents in the private rented sector and regulate landlords, so that properties must meet quality standards; this is the case in countries such as Sweden, but the differences between markets means comparisons are nuanced and complex.


Reform tenancy law and enforce better protection for tenants against “rogue” landlords. There are stories about landlords undertaking “revenge” evictions against tenants who have complained. There are examples of poor or no repairs, hazardous and unhealthy conditionsto live in, but the legal redress for tenants is slow, costly and limited.


Invest government money to build more social housing, and keep it in public ownership for those who can’t access the private market. At the moment, “personal subsidies” do not provide long-term assets of bricks and mortar, but instead go into into welfare payments which, through rental payments, can ultimately boost profits for private landlords.


Disrupt the flow of public housing into private hands by halting the Right to Buy, which allows eligible social housing tenants to buy their home with a discount of up to £108,000 (£80,900 outside London). The Local Government Association refers to a “firesale” of social housing, with over 55,000 homes sold under RTB in the last six years.


Put more housing into the hands of communities by establishing co-operatives and community land trusts (CLTs), which have the power to decouple housing cost from market value, and link rent cost to earnings, with the uplift in value retained by the community co-operative – not wealthy private individuals. There are over 200 examples of small scale urban and rural schemes in England - such as East London CLT – learning from embedded projects, such as Champlain Housing Trust in Vermont, US. The relaunched Community Housing Fund will go some way to boosting activity here.
Why things won’t change tomorrow


The UK can’t just set out tomorrow and become Sweden by placing more stringent regulations on rent levels, tenancy security and quality of housing. The UK’s political and economic systems are materially different, and this manifests in the flavour of its housing markets.

In his 1995 book, Jim Kemeny highlighted how, in England, the housing private market is protected from competition through the suppression of social renting. Neo-liberal policies which promoted private commercial interests over social ones were the bedrock of this paradox, and this remains the case now more than ever.

Pendulum politics, resulting from our democratic process, means short-termism is the only political game in town. Reforming the housing market, fixing the private rented sector and building more genuinely affordable housing need a longer term approach.

Then there are voter dynamics to consider: for example, Right To Buy appeals to people already in the social housing sector who wish to own. The policy is often leveraged as a political at election time. But it benefits the few, rather than the many, and it disproportionately disadvantages young people who are in the private rented sector and cannot benefit from Right To Buy.

Older people, those who own their own homes, or wish to buy their council or housing association home, are more likely to engage with the current democratic system and vote. Until more and more young people use their ballot card, their voices will be marginalised.

There are too many vested interests in the political system to maintain the status quo. The people who can change the system – British MPs – have too much to lose. Just over 120 MPs – that’s almost one in five - declared on the register of interests that they rent out one or more homes or private properties. There is too much at stake for them to seek more regulation and fewer profits – turkeys won’t vote for Christmas.
Author

 
Jo Richardson

Professor of Housing and Social Research, De Montfort University
De Montfort University provides funding as a member of The Conversation UK.

Jo Richardson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Wednesday, April 18, 2018

Framing the Progressive Platform


Posted on April 16, 2018 by J.D. Alt |

This essay was first posted at www.realprogressivesusa.com

I keep reading the big challenge Democrats face in the 2018/2020 elections is that they have moved too far left, proposing a platform that includes “free” universal health care, “free” college tuition, “free” pre-school day-care—and a national infrastructure building and repair program paid for, not by the states, but by the federal government (i.e. “free infrastructure”). Progressives seem to genuinely wonder why mainstream Americans would object to these proposals. Why would American voters be put off by proposals they’d obviously gain so much real—and in many cases personal—benefit from?

The answer lies in three objections which flow together to become an undercurrent mantra of the American psyche:
  1. When the government pays somebody to provide a service, it is the government who gets to decide who that provider is, and the quality of the service provided. Americans, in general, do not like that idea: they call it “socialism.” Americans prefer the idea that the individual citizen pays for his or her own services and, therefore, gets to choose who provides those services—presumably based on the value and convenience the provider offers.
  2. To pay somebody to provide a service, the government must collect taxes. The more services the government decides to provide, the more taxes it must collect. Alternatively, the government can borrow dollars to pay for the services it provides—but ultimately it will have to collect more taxes, again, to repay what it has borrowed. Americans do not like to pay taxes—and they do not like the idea of their government being “in debt.”
  3. Many of the services progressives want the government to provide can, in fact, be provided at lower costs—and with better results—if they are structured with the same profit-motive that organizes and incentivizes the Market Economy. The need to constrain the federal government’s taxing and borrowing means, by logic, that “costs” for government-provided services must be reduced—and it is a demonstrated fact that costs are reduced by the creative competition of a Market Economy seeking to maximize profits. It is also a demonstrated fact that where the government provides services “for free” (“socialism”) there is no incentive or dynamic for controlling costs, maximizing efficiency, or creating value. The “socialist” model encourages reliance on the government, unmotivated idleness on the part of citizens, one-size-fits-all products and services, and a massive bureaucratic state that is unresponsive to customer needs and obstructive to creative innovation. A profit-motivated structure, in contrast, encourages self-reliance, freedom-of-choice, creative entrepreneurship, and merit-based rewards that keep people busy and constructively motivated.
These are not idle objections. Progressive Democrats ignore or brush them aside at their peril. I would go further and say the only viable HOPE for the progressive agenda is not just to consider these objections, but to embrace them—to specifically frame progressive goals in terms of both the fears and aspirations the objections express. In other words, the Democrats must begin speaking not only to the needs of mainstream America, but to its underlying psyche as well.

Here are a few ideas for reframing the message:

Paying Americans to CARE for Americans: How our fiat-money system works.

Health-care is never “free.” It “costs” real time and effort on the part of doctors, nurses, technicians and administrators to keep American’s healthy. The “government” is not going to provide these services—American health professionals are going to provide them. Paying these care-givers to give the time and effort to heal and nurture disabled, sick and injured Americans is one of the primary purposes of our modern fiat-money system. This monetary system—which has been willfully misunderstood, but operational now for over half a century—pays Americans first, then collects taxes second.

Paying Americans to TEACH Americans: How our fiat-money system works.

Education is never “free.” It “costs” real time and effort on the part of teachers, administrators, (and students). The “government” is not going to provide these services—American education professionals are going to provide them. Paying Americans to spend the time and make that effort to educate and train our future workers, managers, and creative entrepreneurs is one of the primary purposes of our modern fiat-money system. This monetary system—which has been willfully misunderstood, but operational now for over half a century—pays Americans first, then collects taxes second.

Paying Americans to CARE for CHILDREN: How our fiat-money system works.

Pre-school day-care is never “free.” It “costs” real time and effort on the part of early-childhood care-givers and teachers. The “government” is not going to provide these services—American child-care professionals are going to provide them. Paying Americans to spend the time and make the effort to ensure that working parents have a safe and nurturing place for their children is one of the primary purposes of our modern fiat-money system. This monetary system—which has been willfully misunderstood, but operational now for over half a century—pays Americans first, then collects taxes second.

Paying American business to REBUILD AMERICA: How our fiat-money system works.

We know we must repair, rebuild, and modernize America’s infrastructure. There is no choice. The “government” is not going to get this done—American design and construction professionals are going to accomplish it. Paying America’s engineers, architects, fabricators and builders to repair and modernize our bridges, roadways, damns, water and sewer systems, airports and seaports, rail and urban-transit systems—paying Americans to spend the time and apply their skills and creativity to rebuild and re-envision all these systems is one of the primary purposes of our modern fiat-money system. This monetary system—which has been willfully misunderstood, but operational now for over half a century—pays Americans first, then collects taxes second.

When we use our sovereign fiat-money system to pay Americans to provide health-care, education, and child-care services to American families, those families choose who provides them the service. They choose their doctor. They choose their college or technical school. They choose their child-care center. The providers of these services must compete for the “business” of American families.

When we use our sovereign fiat-money system to pay American engineers, architects, and builders to design and construct our modernized infrastructure, it is regional, state, and local communities who decide what should be built—and what should not be built. We have a traditional democratic process that can make those decisions: The Referendum. An “infrastructure referendum” is not a referendum on whether we should tax ourselves to accomplish a needed or desired collective goal—it is a referendum on whether a particular goal is something we want to pay ourselves—as a democratic society—to accomplish.

Because our modern fiat-money system pays us to accomplish collective goals first, then collects taxes afterwards, we can re-evaluate how much taxing the federal government needs to do to drain excess dollars from the economy (to manage inflation). This might well result in reducing the taxes Americans have to pay.

What is at play here is not just framing the progressive agenda in terms of the reality of modern fiat-money—but framing modern fiat-money in terms of the values and traditions embedded in the American psyche. This is the REAL challenge the progressive platform faces.

Tuesday, April 17, 2018

Today's Bee Letter responds to "Congress' and Trump's deficit binge paves way for the next one"

RE: 4/17/18 "Congress' and Trump's deficit binge paves way for the next one"
by Washington Post writers Damian Paletta and Erica Werner

Your story about the deficit misleads about National "Debt," conflating it with household debt. It's more like bank debt.

When you have a bank account, it's your asset, but the bank's debt. The common name for bank debt is "depositors' accounts." The common name for National "Debt" is "citizens' dollar assets." Reduce the "debt" and you'll impoverish the population. Historically, this leads to waves of asset forfeitures.

How often do you hear depositors clamoring for their bank to reduce its debt (i.e. their account balances)? The “Fiscally Responsible™” who want to impoverish the population by reducing their savings are not promoting thrift or virtue; they are promoting ignorance in the service to vulture capitalists who will pick up those foreclosed or forfeit assets on the cheap. Please stop this deception.

Tuesday, April 10, 2018

The Plutocrats' Toxic Narrative: Lies, Half Truths and Bigotry in Service to Big Money

My neighbor Jeff sent me a "sobering" editorial entitled Goodbye California from Hoover Institute  fellow, and military historian, Victor Davis Hanson. Hoover is a conservative think tank, funded by plutocrats like the Scaifes and Waltons among others.

Hanson repeatedly assures us he's not editorializing...and then proceeds to slant his presentation so dramatically that it amounts to distortion in the service of his point of view.

What's his point of view? Why the smart, handsome, productive rich are victims of poor people who are parasites, and California is going to hell in a handcart, propelled by it's regulations, liberal bias, Mexicans (Eeek!) and profligate welfare spending. The rich are victims, I tell you! Honest! Pay no attention to the man behind the curtain!

But I know some actual poor people, even some poor Mexicans. I didn't just bicycle past them, as Hanson says he did in his account. Here are a few excerpts from his essay with my comments:

Hanson begins with a gratuitous lie, appealing for sympathy from farmers, that "arbitrary cutoffs of federal irrigation water" have made farmers suffer. Of course we know that anything federal is bad, and must be condemned. But dude! Calfornia's been in a drought for years! Those cutoffs were not arbitrary! They were warranted by the circumstances! (For more about the campaign to convince people of the badness of government, see American Amnesia: How the War on Government Led Us to Forget What Made America Prosper by Hacker & Pierson)

In fact enough groundwater has been extracted to compensate for the lack of rain that other problems like subsidence have emerged. See Overpumping Central Valley Groundwater causes crisis, experts say, for just one example.

But darn those arbitrary federal bureaucrats! (Not editorializing, just FYI.)

Hanson also observes that lots of manufacturing has gone overseas. Darn those regulating California bureaucrats! He fails to mention that the offshoring of manufacturing has been a corporate priority for decades (since Reagan, at least) as a way to disempower unions. One of the outsourcing pioneers, Jack Welch (CEO of GE), sent GE's customer service call centers to India.

Welch got cheap, third world labor and multi-million-dollar bonuses in return, while unemployment in the U.S. got a boost. GE and several other large corporations (AT&T, IBM, etc.) also looted the defined-benefit pensions that 70% of American workers once enjoyed. (see Ellen Schultz's Retirement Heist for the gory details)

Just so you know, defined benefit pensions are roughly twice as remunerative as the defined-contribution pensions (IRA, 401Ks) that those of us lucky enough to have savings now have. Some public sector employees still have defined benefit plans...but Hanson and his allies are working to end that...In fact, they're working to ensure Americans don't have what we used to call a "good job." The ultimate destination: debt peonage for the population, with a few plutocrats collecting rent. We're pretty much there now...


Hanson is right about rural California looking like some third world country. Regulations are not strictly enforced. Why not? Hanson's answer speculates: "..are we all terrified by the national debt and uncertain future?"

That rhetorical question is where Hanson shows his true colors. With it, he promotes panic about running out of money (Eeek! National Debt!) while deriding the poor condition of infrastructure.

But America's recent austerity is strictly optional. The U.S. has made money without limit to bail out banks and prosecute wars. Why not improve the infrastructure? Well, for one thing, once enough people complain, you can privatize it, and turn the economy into a series of toll booths for roads, schools, healthcare, etc. It keeps the dept peons in debt.

And us peons had better take whatever crappy job is on offer, or we'll suffer the indignities of poverty, homelessness and even starvation. Ending the social safety net is the whip in the hand of our plutocratic masters.

To clarify: national "debt" is nothing like household debt. It's like bank debt. If you have a bank account, that's your asset. But to the bank, it's a liability (i.e. a debt). When you write a check, you're assigning a portion of the bank's debt to the payee. Currency is simply checks made out to "cash" in fixed amounts. The U.S. Central Bank (The Federal Reserve, or "The Fed") carries currency on its books as a liability, too.

The common name for all the dollar financial assets in circulation--that is the savings of the population--is "National 'Debt,'" just as one common name for bank debt is "my bank account." Reduce that "debt" with austerity, and you starve the poor, degrade infrastructure, and diminish the population's savings, turning a once free people into debt peons. We know the history.

So...how often do you hear of depositors going down to the bank, complaining about the size of the bank's debt (i.e. their accounts)? "You're going to have to reduce your debt to us with higher fees or lower interest paid on savings," say the depositors....NOT!

This assumes you do not bank at the Bank of Crazy. For even more about this, see Warren Mosler's video here.

Back to Hanson: "...coastal elites [are so bad they]...have no interest in the epidemic dumping of trash...throughout California's rural hinterland." Sheesh! What a whiner!

Just FYI, I used to live in a relatively poor rural community (Rio Linda) where illegal dumping was epidemic. To solve this problem, the Sacramento County Supervisors added 50¢ to local garbage bills and the County now does big item garbage pickups on demand every 18 months, so no one pays the dump fee if they use this service. This eliminates most illegal dumping.

I don't know whether the neighborhood Hanson observed adopted this tactic, but I doubt it. Notice that government, even that nasty, unresponsive County bureaucracy, was the solution to this problem, too.

Hanson, still not editorializing, you understand, says "...regulations...have driven residents out of the state, at the rate of 2,000 to 3,000 a week." I call bullshit. California's population has increased without letup in recent years. Inflows of people exceed outflows. Don't take my word, check for yourself. That link shows more than 200,000 inhabitants are in California than last year.

Hanson, again not editorializing, honest!...uses the phrase "the nearly 47% of U.S. non tax payers"... That means 47% of the population doesn't pay income tax--accurate, but deceptive. Not mentioned: doubly regressive payroll taxes which exceed income tax for lower incomes and is about the same amount as income tax at $50K/year income. Also not mentioned: "Jawb Creators" like Mitt Romney and Warren Buffett paying lower tax ratest than their secretaries.

Yep, the wealthy have this huge burden of unproductive parasites that they nobly carry on their backs! Darn those parasitic poor people (who deserve their poverty, darn them!).

Also omitted: The Reagan administration roughly halved the top marginal income tax rates paid by the wealthy, while Reagan and his successor increased payroll taxes eightfold. Gee, I wonder why the middle class got so impoverished! Did they deserve it because they thought government could help them rather than helping themselves? Were they unproductive?

Here's a look at who has received the economic benefits of increased economic productivity:
So...productivity gains could increase real incomes...if they were shared. The plutocrats skimmed off the real income gains.

Here's a graph of who has received the benefit of income growth in the expansions following economic downturns:


The bottom 90% of the income distribution has seen an increase in its real income of a whopping $59 a year since 1972.   Meanwhile, healthcare, education and housing have all increased in price, so borrowing by the bottom 90% increased to keep pace.

If that $59 real income increase were an inch on a bar graph, the bar indicating the income increase to the top 10% would be 141 feet tall, the bar for the top 0.1% would be five miles tall. (Source: investigative reporter David Cay Johnston)

The bottom 90% of incomes have been basically shut out of any economic growth for nearly a half century, while the top 10% reaped all the benefits. Why, with all that extra money, they can hire shills like Hanson who paint them as the victims! Can anyone say "Chutzpah"?

Hanson--he's really not editorializing, I tell you!--notes poor people are using food stamps despite their visible wealth (cars, "electrical appurtenances"). He doesn't mention that since Bill Clinton and Newt Gingrich conspired to "end welfare as we know it," welfare has diminished considerably. In fact, before that "end," 76% of those needing public assistance got it. After: 26%.

That "end" meant a half million people lost food stamps. They aren't too easy to get now--like I say I know actual poor people--so Hanson is just another despicable rich guy claiming that the relatively tiny expense of welfare is somehow a social burden. He also ignores that loans and leases make autos available even to the poor and that cars and relatively inexpensive cell phones are necessities. After all, we've built our cities so every significant trip must be in an auto--no transit please! it just encourages the poor!--and who can find work without a phone?

The annual Federal budget was roughly $4 trillion in 2017, but for the really big money, take a look at the bank bailouts. According to the Federal Reserve's own audit, it gave Wall Street $16 - $29 trillion in credit in the eight months following Lehman's bankruptcy in 2007--proof, if of nothing else, that there never is a shortage of dollars when the really important people want them. Social safety net programs like welfare and food stamps are a rounding error in comparison to the bank bailouts and wars.

Why for just $9 trillion, the Fed could have paid off everyone's mortgage rather than bail out the banks. Apparently it was more important to save the banks, though. The Fed still has $4 trillion in "Quantitative Easing" assets on its books to prop up the stock market.

Hanson continues: "I do not editorialize [honest!], but I note these vast transformations over the last 20 years that are the paradoxical wages of unchecked illegal immigration from Mexico"

Unbelievable! He blames this on the Mexicans! Sure, we gave the banks trillions, and the Iraq war trillions more ($3 - $7 trillion, says Nobel laureate economist Joe Stiglitz), but it's the Mexicans, I tell you! Madre de dios!

Just so you're clear about what Hanson is doing: he's race-baiting to direct public attention away from the genuine malefactors. Crooked banksters, not Mexicans crashed the economy. As with all racist arguments, the object is to divide and conquer the public.

Those darn Hispanics in the woodpile are sabotaging everything, I tell you! They're taking our jobs and devouring our grandchildren, right? Well...maybe it's really the Jews, or the Muslims, or maybe those other people...over there! (Pay no attention to the plutocrat picking your pocket)

The Hispanics--those bad hombres--are typically refugees. Ask any of them whether they would rather be back in their country. They'll tell you exile was not their preference, every time.

With the Monroe Doctrine, the U.S. declared that South and Central America were no longer European colonies; they were American colonies, and we've been treating them that way ever since. Between 1798 and 1994, the U.S. was responsible for 41 changes of government south of its borders. These changes were certainly not always peaceful, often done through proxy wars, or economic or political sanctions. Bush 43 had the military kidnap the elected leader of Haiti and then drop him off in Central Africa. You just can't make these things up.

A recent example of the U.S.' economic persecution of Mexico is NAFTA. That treaty was such a great idea that within a few months of its passage the capital flight it permitted meant the U.S. had to bail out Mexican banks, many of them branches of big U.S. banks, with $50 billion. Naturally the Mexican government guaranteed the loan, and paid it back.

As for the direct effects of NAFTA itself, one might guess that shipping a bunch of subsidized Iowa corn down south would put Mexican subsistence farmers out of business, sending them north as economic refugees. And sure, corn is only arguably the world's most important food crop, and those little Mexican farmers kept the diversity of the corn genome alive, but they weren't making any money for Monsanto, darn it!

So...in the wake of NAFTA, Mexican real incomes declined 34% (source: Ravi Batra's Greenspan's Fraud). One has to go back to the Great Depression to find a decline like that in the U.S. economy. And that prompted no great migration...Oh wait! The Okies!

The U.S. has been attacking our Southern neighbors, militarily, economically and politically literally for centuries. And we're going to blame them for our economic troubles because they send their refugees north to do the crappy jobs no gringo will take! Wow! Chutzpah squared!

Ronald Reagan once asked the President of Mexico to endorse his proxy war in Nicaragua--remember Iran/Contra?--because the Nicaraguans were a threat to the U.S. Just FYI, Haiti and Nicaragua are the two poorest nations in the hemisphere.

The Mexican President replied that he would be glad to go along with his good friend Ronnie if there were any way he could do so without being laughed out of office.

Unfortunately, guys like Hanson are all too common, and all too plausible (I've encountered them before).

Too few people are laughing at their ridiculous arguments, too. They're well funded--the right-wing billionaire Kochs  spent $889 million in the 2016 election cycle promoting this stuff--and as deceptive as any of those ads from big tobacco discounting cigarettes caused cancer. Hey, nine out of ten doctors agree Camels are good for you, right?

So I don't blame Jeff or anyone else who is fooled. But you've read this. Can you honestly say you still believe Hanson's toxic, racist propaganda?....

(A version of this appears on LAProgressive.com)

Tuesday, April 3, 2018

Supervisor Frost (or her proxy) Responds: She's just being sensible! Really! Wait! Come back!

"Anonymous" comments about a previous posting:
I also read Supervisor Frost's article [in her newsletter] regarding rent control. As such, I have two questions for you:
  1. In her article she provided a source that there are virtually zero nationally recognized economists that agree with your position. Why do you think that is?
  2. You indicated that you believe her argument is "right-wing". If that is the case, why has California (arguably the most liberal state in America) not even allowed rent control bills to get passed by a single committee?

Answers:
1. Why don't economists bless rent control? Who cares? Orthodox economics is a form of advanced superstition, like 19th century medicine. Then, Doctors believed bleeding patients would cure them. Similarly, orthodox economists, from "righty" Mankiw to "lefty" Krugman, did not predict the Great Recession, arguably the biggest economic event in nearly a century.

Lest you think I'm just some crackpot, opining about the bankruptcy of an entire "science," here's what Nobel Laureate economist Joe Stiglitz said about economics: "When the recession began there were many wise words about having learnt the lessons of both the Great Depression and Japan’s long malaise. Now we know we didn’t learn a thing."

Steve Keen, who did predict the Great Recession, and won the Revere prize for doing so, also wrote Debunking Economics: The Naked Emperor Dethroned  which describes the dismal scholarship and awful record of predictions by economists published in the mainstream press--inaccuracies surprisingly similar to the economics that preceded the Great Recession too, as Joe Stiglitz says.

So the high priests of economics don't think much of rent control. So what?

Meanwhile, economists aside, where's Ms. Frost's proposal for a better solution, for example restoring inclusionary zoning? What about a living minimum wage? Or a Job Guarantee? What about taxing the unearned increment (the premium paid land speculators), and using the money to fund affordable housing?

Where does she propose any solution besides economically crushing renters as rents rise?

This is a real problem, too. See this Business Journal article for how dramatic that rise has been. Sacramento's rents are rising far faster than wages or even general inflation.

Rent control may be a second-rate solution, soothsayers and economists may even agree, but what's the alternative that actually works, even a little bit? Why is all we hear from Frost: "Suppress anything the little people do to control their destiny! Off with their heads!" Okay, now I exaggerate. She didn't say that; she implied it.

And no, relying on that quasi-religious faith that the magical market will build more housing isn't and hasn't been working any more than deregulating Wall Street prevented Ponzi schemes, or orthodox economics predicted the Great Recession.

2. California is a “lefty” state, so why hasn't it passed rent control?

First, let's deal with the distortion: Right-wing politicians called Barack Obama, a man who governed to the right of Richard Nixon, a "Kenyan Socialist" to move the popular perception of  what's the center of public policy solutions rightward. Calling something "lefty"--even an Eisenhower Republican like Obama--that really isn't lefty has been a very successful technique that doesn’t lack funding, either. The Kochs spent $889 million promoting it in 2016. The entire political spectrum has inexorably moved rightward with those millions impelling that move, buying up the media, paying to primary any representatives who step out of line, and so on.

Calling California--a state that repeatedly elected Ronald Reagan--unambiguously "lefty" is at least an exaggeration. When it had the chance, California did not elect a genuine lefty (Upton Sinclair).

Real lefties exist, too, like Dennis Kucinich, and Bernie Sanders, and they would likely meet resistance, even in California. They would certainly find the media resistant to their message. Mainstream media virtually ignored Sanders' presidential run while it gave billions in free publicity to Trump.

Even the "liberal" Sacramento Bee--a paper with a multimillionaire CEO and a history of labor trouble--regularly publishes a Business section, but only publishes labor news in a single column every other week.

And just so we're clear about the distinction: right wing policies favor capital; left wing policies favor labor.

Supervisor Frost consistently favors plutocrats over working America. She talks as though she's the Fiscal Conservative, but ignores genuine solutions to fiscal problems (I've sent her some, too).  Her solution for public policy problems appears to be either handing the plutocrats all the money, or austerity, certainly not figuring out how to provide concrete benefits for the population at large--stuff like stable rents, a living wage, free tuition, or working transit.

Her preferred solution--cutting public spending--austerity--disproportionately favors the wealthy, who aren't as dependent on public services, and can pick up any assets of the recently crushed poor that have been forfeit or foreclosed, perhaps because their rent became unaffordable, on the cheap. This subjects poor people to debt peonage--just what Mr. Potter wanted in It's A Wonderful Life.
Image result for mr. potter it's a wonderful life

If you don't think debt peonage is on the agenda of Ms. Frost's plutocratic masters now, see this (includes a graph of private indebtedness as a fraction of GDP). The economist who pays attention to this?...Steve Keen.

Another example: Federal funding for higher education is down 55% since 1972. Gosh, I wonder why our colleges keep raising tuition, and why our kids graduate as debt peons? Wasn't that "lefty" Hillary Clinton one of the Senate votes to make student loans immune from even bankruptcy relief?

People still believe Bill Clinton, the guy who deregulated Wall Street and ended welfare "as we know it," colluding with Newt Gingrich's Republican congress, is a "lefty." Before the "end" of welfare, 76% of those needing public assistance got it; after: 26%. It threw a half million people off of food stamps. But Clinton's a "lefty," doncha know!

So let's say rent control is a bad solution for even those bad, bad lefties in California. What's a good one that works without squeezing the economic life out of renters?

We're waiting, Sue.

The Davis Vanguard Wants to Sacramentorment Davis Housing

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