Someone Vulgar "Won" The Election

(c) by Mark Dempsey

"What happened in this year’s election was not some kind of flowering of American fascism, but a rebellion against a hated, out-of-touch Democratic Party elite...The only thing the Democrats offered to working people was a recycled anti-Trump campaign....In my ten years of elected office in Seattle, as a socialist councilmember, the Democratic Party was at every stage an enemy of our movements. There are no Republicans on the Seattle City Council, so the Democrats alone carry the water for big business. I don’t mean Democrats were sometimes a hindrance. I mean they fought tooth and nail to either block everything we fought for or water it down — from the $15 minimum wage to our Amazon Tax on big business to our renters’ rights bills." - Kshama Shawant

I've read more than 75% of eligible voters did not vote for Trump, so his victory is hardly a mandate.

Harry Truman used to say there's nothing new under the sun, just history you don't know. The history of vulgarity and opportunism taking power is long but it also reminds us that the recent version of American vulgarity--Trump--is nothing new. Robert Caro's latest book his multi-volume biography of Lyndon Baines Johnson (LBJ), Master of the Senate, discusses this at length.

According to prominent press accounts Trump is supposed to be something exceptional. But LBJ had multiple mistresses, conducted press interviews while seated on the toilet, and even stole the election for his Senate seat--see Caro's Means of Ascent for the election theft details. Colleagues in the Senate used to call LBJ "Landslide Lyndon" since he won that Texas Senate seat by a modest 72 votes even after stuffing ballot boxes.

The big difference between LBJ and Trump: LBJ grew up poor.

But, despite his bigotry and vulgarity, LBJ was a key player in getting Civil Rights legislation, Medicare, and the "War on Poverty" passed. These were striking departures from the right-wing impulse to crush labor and the poor. Will Trump surprise his detractors by, for example, making peace* in the Ukraine and Gaza? Who knows?

Sadly, LBJ's accomplishments were overshadowed by his escalation of the Vietnam War, one he didn't start. The Eisenhower administration sent military advisors in the 1950s and installed a government that kept the French colonial oligarchy in power, despite a peace treaty promising a plebiscite that Communist Ho Chi Minh would have won handily. Eisenhower did not allow the plebiscite. 

Oddly, Vietnam was an American ally in WWII, but while Japan and Germany deposed their oligarchies and enjoyed blanket bankruptcies ("jubilees") for the population's obligation to the defeated elites, the US was unwilling to offer such a deal to Vietnam and defended the colonial oligarchy.

Besides the Democrats' fecklessness, one of the components of Trump's election victory is the population's aversion to continuing the Ukraine and Israel-Gaza wars. Angry comments online from peaceniks who are "fighting for peace" by refusing to vote for Harris are common. As George Carlin says, fighting for peace is like screwing for chastity.

The protests against the Vietnam War encouraged voters to elect Richard Nixon. While Noam Chomsky calls Nixon our last liberal president, his opponent, Hubert Humphrey, LBJ's vice president, was far more liberal. If Humphrey were elected then we would have a very different country now.

Among other things, Nixon initiated a coup in Chile and started the drug war and the massive increase in US incarceration that's currently five times the world per capita average. He also quashed the federal government's program to build affordable housing, contributing to the current homeless crisis.

In the Nixon/Humphrey presidential contest, some antiwar voters believed Nixon had a "secret" way to end the Vietnam War. His "secret," it turns out, was commiting war crimes like bombing Cambodia, but given LBJ's Vietnam policies, it's hardly surprising Nixon employed this brutish "secret."

I regret dismissing Humphrey as simply an apologist for a despised war. My immature self didn't understand that democracy requires compromise, even betrayal, and declarations of loyalty--like Humphrey not criticizing LBJ's war efforts--or it cannot work. The most recent election's loyalty displays included Bernie Sanders' efforts to help his Senate friend, Joe Biden, despite Sanders' rejection of Biden's support for Israel in Gaza.

Odds are Humphrey would have been less callous than war criminal Nixon. And the Nixon presidency was a disastrous turning point in American politics. Here, Humphrey would have made a difference I was too clueless to appreciate.

Finally, many people are now angry at Trump and his supporters--something that plays into the elite's divide and rule strategy. A genuine solution to our public policy problems is more likely to require setting aside anger, despair, and frustration, no matter how legitimate are those feelings. Sure, genuinely anti-oligarchy public policy needs passion, but just as much, it needs calm deliberation about how to address our current problems and prevent disasters.

---

*Scott Ritter--a former arms inspector and current critic of American foreign policy believes Trump's appointment of Tulsi Gabbard may signal the beginning of a less aggressive foreign policy.

Sabotage destroys public programs

(c) by Mark Dempsey

“To ravage, to slaughter, to usurp under false titles, they call empire; and where they make a desert, they call it peace.” - Tacitus (Roman historian)

A friend who works on local low-income housing complained to me that he got to see some nice properties, when new, turned into trash when they became occupied by their low-income residents. The fact that poor people are inattentive to material things, or money apparently surprised him and those who anticipated the property maintenance budget.

But isn't that inattention one reason they're poor? And don't the public policymakers deciding to provide housing for the homeless know that maintenance will be expensive, especially when occupant neglect is expected? The failure to provide adequate supervision and repair is just one of many methods to sabotage these otherwise laudable programs. Ideally, "inclusionary zoning"--mixing incomes in such neighborhoods--would have the less-poor peer pressure the property-damaging poor people to take some pride in their environment.

Naturally, we don't do that. Sabotage has been a baked-in component of affordable housing even during liberal times. Sprawl subdivisions, which describes the bulk of what we currently build, are income monocultures, designed to keep poor people at arms length. Worse, they're the remnant of "white flight" which condemned central cities to a plague of slums.

There's an all-too-human tendency to believe that poor people don't deserve nice things, they're poor, and undeserving, because of their bad choices. Not realizing poor people have different priorities excuses sabotage and negligence.

What's the use of the poor people? I'd suggest they remind us of what it is to be generous. My poor in-laws would literally give me the shirt off their back if I needed it. This is a valuable corrective to the miserly behavior of our current ruling oligarchy which sabotages even palliatives for poverty, reducing social safety nets like unemployment insurance, welfare, and the dreaded (socialist!) Social Security. Both Democrats and Republicans have made those attacks too.

Our central bank, the Federal Reserve declares 40% of the population can't handle a $400 emergency without borrowing or selling something, and 60% of workers live paycheck to paycheck. To top it off, 65% of seniors have only Social Security and Medicare to fund their retirements--and the oligarchy's attacks on those programs are unrelenting, even though they are already plenty stingy. Medicare doesn't cover dental work, for one thing.

Sabotage isn't just a US problem, either. The UK has been de-funding its National Health System, privatizing portions of it, slowly sucking the life out of one of the crown jewels of Britain's public realm. The plan is to sabotage it so service will eventually be bad enough that the public will clamor to privatize it.

Among recent US attempts at enlightened policies, Oregon decriminalized drugs, but sabotage, or simply poor planning, made the Oregon legislature re-criminalize them. The idea behind adopting this decriminalization was to emulate other, successful programs. In Portugal, drug users can get a ticket which is also the pass to enter a rehab program. Switzerland legalized heroin, and crime declined by 85% around the clinic dispensing the drug legally, while needle-borne illnesses like AIDS declined dramatically.

But Oregon relied on its police to dispense the tickets/rehab. Unsurprisingly police did not welcome addicts' defiance. Consequently, the program failed in the short trial period when Oregon implemented it. Why police and not social workers? Perhaps this was an oversight, but it qualifies as a kind of sabotage.

More recently, CNN reported that more active lifestyles can extend life expectancy up to a decade. As someone who spent literally decades trying to get planners and builders to build pedestrian-friendly designs for neighborhoods*, I can testify that the current public policymakers' commitment to auto-centric, couch-potato-friendly sprawl is virtually impenetrable. Despite wide market acceptance for pedestrian-friendly design, public policy makers ignore and discard most steps in that direction.

One example development, Laguna West, attempted a pedestrian-friendly design that might make transit and neighborhood commerce viable. Both transit and commerce need enough potential customers within a walk to be successful. Unfortunately, when Laguna West proposed denser housing, lenders refused to make construction loans to build the apartment housing needed for such a neighborhood's success.

Yolo County tried no-cash bail when COVID first began, and basically turned prisoners loose. No supervision, no alternatives to meditating in one's cell, just turned 'em loose. Surprise, surprise! More crime and recidivism!

So...it pays to be at least a little suspicious of the crowing about the failures of the poor, drug programs, or anything short of brass knuckles to the skull in controlling socially undesirable behavior like crime. The sabotage--even unintentional sabotage--may have already decided the outcome.

--

*The author spent nearly a decade on a Sacramento Community Planning Advisory Council, and continued to lobby for such civic design while working as a real estate broker and mortgage lender.

What should we eat?

 One of the most comprehensive experimental examinations of the connection between diet and health is an interview Eric Topol conducted with Kevin Hall. Hall reports on the connection between ultra-processed food and appetite (unsupervised, people consumed 500 calories more of the ultra-processed food). 

The interview also examines the weight loss and immune system effects of low-carb (keto) vs. low-fat (plant-based) diets. 

...and a good deal more.

Re: Ukraine - Links/videos for today

 Glenn Greenwald's interview with Scott Horton discloses the US role in the Ukraine Coup. This is a pretty detailed account of how Western provocations led Russia to attack.

Jeffrey D. Sachs: Reveals the complex history of the Ukraine War:

How to Cut $2 Trillion in Federal Spending Without Breaking a Sweat

 How to Cut $2 Trillion in Federal Spending Without Breaking a Sweat - Modern Money Theorist Stephanie Kelton explains...it's easy. Short version: cut interest rates.  Alternative: buy all the interest-bearing treasury bills/bonds with non-interest-bearing dollars. The bulk of the spending to cut is interest.

See also my post: "How Money Works"

Matt Stoller Explains Spirit Airlines' Bankruptcy

Spirit Airlines CEO Got A $3.8 Million Bonus A Week Before Its Bankruptcy

by Matt Stoller

In January of 2024, a judge blocked the attempted merger of Spirit Airlines and JetBlue. “The airline industry,” wrote Boston-based Judge William Young, “is an oligopoly that has become more concentrated due to a series of mergers in the first decades of the twenty-first century, with a small group of firms in control of the vast majority of the market.”

Young was correct in his assessment. But at the time of the decision, I made the point that a re-regulation of airline travel was essential if we are to end a cycle of bankruptcies and consolidation. “You can’t just hope competition will win out,” I wrote, “in an unregulated industry, the result will be mal-investment, bankruptcies, consolidation, and then mass bailouts.”

Eleven months later, on Monday, Spirit declared bankruptcy, negotiating a deal with its creditors to reduce its debt, wipe out its shareholders, and continue flying as an independent airline. All tickets are still being honored, it’s still a going concern, so there’s no actual change to the air travel system. Still, a lot of observers have used this example to show why antitrust enforcement is bad. The Wall Street Journal, for instance, wrote an editorial making this point directly.

Meet the latest victim of Biden Administration antitrust policy: Spirit Airlines. Spirit declared bankruptcy Monday after the Justice Department cut off a lifeline by blocking its merger with JetBlue Airways. Too bad the government won’t compensate the workers, flyers and creditors harmed by its blunder.

This argument isn’t correct, and I am going to explain why. But let’s start with something that you won’t hear from from most of the people making the argument about how antitrust drove the bankruptcy. The CEO of Spirit Airlines, Ted Christie, a man who presided over the insolvency of the firm, was paid a $3.8 million retention bonus the week before the bankruptcy filing. The reason such a fact matters isn’t just because it’s outrageous, it’s because it’s one more bad decision by a bad management team that is blaming the government for their own choices.

Let's start at the beginning. Prior to Covid, the big four trunk airlines - American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines - had focused on business travel, while ultra-low cost segment of carriers, which includes Spirit Airlines, had targeted price-sensitive leisure travelers. After Covid, demand for air travel shifted from business to leisure as businesses replaced in-person conferences with Zoom meetings. So the big four began going after leisure travel.

The big four have significant competitive advantages. They control a disproportionate share of airport infrastructure, and can cross-subsidize money losing routes. They have more flights, erect barriers to entry through loyalty programs, and can hire away pilots during a staff shortage. So when they started competing, it put pressure on the low cost airlines.

One result is that Frontier, in 2022, sought to merge with Spirit Airlines to create a significant ultra-low cost network that could match some of the advantages of the big four. Only, at that point, JetBlue, which had already engaged in a quasi-merger with American Airlines through a joint program called the Northeast Alliance, made a hostile bid for Spirit. They proposed, on overlapping routes where they competed, to rip out seats and hike prices, which is a classic indication of a strategy to lessen competition.

Spirit's board hired a consultant to evaluate the deal, who told execs/shareholders that the JetBlue offer would likely violate the antitrust laws. Their CEO publicly recommended against the JetBlue bid, saying “The latest offer from JetBlue does nothing to address our Board’s serious concerns that a combination with them would not receive regulatory approval.” The board even presented this legal analysis to shareholders. Here’s one of the slides.

What ensued was a bidding war between Frontier and JetBlue over Spirit Airlines. JetBlue raised their bid, and ultimately, shareholders and executives accepted the higher JetBlue offer. The result was exactly what the Spirit Board had predicted; the Antitrust Division sued in 2023 to block the JetBlue-Spirit deal. The law is the law.

That’s not all. In 2024, during the trial over JetBlue’s proposed acquisition of Spirit, the judge directly asked Spirit executives if they would go bankrupt should the merger fail. The reason is that there’s a special loophole in merger law, such that if your firm would otherwise fail absent a merger, you can get special dispensation to sell your company even if such a sale would erode competition. And that makes sense, if the company goes out of business then there wouldn’t be competition anyway. So what did Spirit executives tell the judge? They said, no, we’re not a failing firm, we’ll be fine if the merger doesn’t happen.

In other words, they turned down the Frontier merger and accepted JetBlue’s proposed illegal one to get more money. Then the executives misled the court or themselves on the firm's financial condition so they wouldn’t have to admit they had run the airline into the ground.

So that’s the situation. But an additional question is as follows. Is the bankruptcy actually bad? Sure shareholders will get wiped out. Guess what? GOOD. They deserve it. They opted for an illegal deal instead of a legal one. Plus Spirit will keep flying as a competitive airline, at least for now. This particular kind of bankruptcy isn’t necessarily a bad thing, it just means you reorganize the creditor relationships but keep the entity as a going concern.

Financial failure in the airline industry is exceedingly common and has been since the 1970s. American Airlines, Delta, United, Northwest, U.S. Air, they all went through it. Why? Well it's a a function of deregulation, as I noted in 2022 during that nightmarish travel summer.

To understand the roots of this instability, we have to go back to legal changes in the 1970s. At the time, a government agency called the Civil Aeronautics Board set routes and prices. Airlines were a regulated public utility service, with essentially a guaranteed reasonable return on their capital. They didn’t have to harm their customers to earn money, and they weren’t subjected to the same boom and bust cycle regularly buffeting the industry. Despite the more intrusive public rules, there was a lot more competition, with new airlines entering on a regular basis. And air service was evenly distributed around the country, you didn’t have mid-size cities cut off from the air grid when an airline decided to close a hub, as happens today.

The reason for the success and necessity of this particular regulatory framework has to do with the economics of flight. It is costliest to take off and land, so airlines like flying long routes over short ones. And it is cheaper to serve a busy airport than an empty one, because you can use the same equipment on more flights. So everyone in the industry naturally wants to serve long flights between big cities, not short flights or small cities. 

The result is that, absent any regulation, airlines will all cut flights to smaller cities, and pile into the popular routes. If a bunch of airlines are all trying to compete on the New York to LA route, they will be willing to cut prices to nearly nothing simply to capture an additional customer, since the plane is already budgeted to fly the route. The net effect, if everyone is doing this, is that the industry becomes structurally unprofitable, airlines go bankrupt, and then there’s consolidation. As with ocean shipping and rail, air travel is a high capital cost industry, and without public rule-setting ‘ruinous competition’ takes over and bankrupts everyone.

When we deregulated airlines in 1978 and let airlines charge whatever they wanted and fly wherever they wanted, that’s what happened. Service to small cities ended, and the busiest routes went way down in price to consumers. The Department of Transportation saw promoting the financial health of airlines as its charter, so it didn’t really protect consumers for fear of harming the airlines financially. Then came waves of bankruptcies and consolidation, leading to price regulation, only this time privately through monopoly.

Part of this change, from public price-setting to private price-setting, involved refusing to enforce predatory pricing laws, which allows larger airlines to intentionally lose money and drive smaller ones out of business. We can see this dynamic in a different airline merger the DOJ did recently allow. After the Department of Justice challenged Spirit’s merger attempt with JetBlue, those same enforcers allowed Alaska Airlines to buy Hawaiian Airlines.

Why? Well, financial fragility. About five years ago, Southwest entered the Hawaiian market, and it did so by vastly undercutting pricing, such that it was almost certainly losing money to drive Hawaiian out of business. That’s probably an illegal predatory pricing strategy, but predatory pricing law is notoriously hard to enforce, such that the practice has driven consolidation across many industries, including airlines. There really was no choice but to let the two firms combine, or have Hawaiian go under. Hawaiian is now cutting jobs after its merger, showing that mergers are not panaceas for poorly run or financially fragile companies.

This financial attack happened to Hawaiian, but the ability of large players to undercut ultra-low cost carriers with money losing strategies, cross-subsidized by higher tickets elsewhere, has hit a whole host of smaller airlines, including Spirit. Only, instead of doing a legal combination, or being honest about their financial fragility, Spirit executives and shareholders demanded enforcers let them violate the law.

In other words, the real reason for blaming this bankruptcy on antitrust enforcement is because it’s too embarrassing to point to the real problems, which are poor management, lax predatory pricing law, and ultimately deregulation. But again, just remember the CEO’s multi-million dollar payday. This guy drove Spirit into bankruptcy, got a big bonus, and then blamed enforcers for upholding the law. Nice work if you can get it.

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Thanks for reading. Send me tips on weird monopolies, stories I’ve missed, or comments by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.

cheers,

Matt Stoller

Thomas Frank on the Election: The Elites Had It Coming

The Elites Had It Coming

Thomas Frank [New York Times, via Naked Capitalism Water Cooler 11-13-2024]

"...At the Republican convention in July, JD Vance described the ruination visited on his working-class town in Ohio by NAFTA and trade with China, both of which he blamed at least in part on Mr. Biden, and also the human toll taken by the Iraq War, which he also contrived to blame on Mr. Biden. Today Mr. Vance is the vice president-elect, and what I hope you will understand, what I want you to mull over and take to heart and remember for the rest of your life, is that he got there by mimicking the language that Americans used to associate with labor, with liberals, with Democrats….

“Liberals had nine years to decipher Mr. Trump’s appeal — and they failed. The Democrats are a party of college graduates, as the whole world understands by now, of Ph.D.s and genius-grant winners and the best consultants money can buy. Mr. Trump is a con man straight out of Mark Twain; he will say anything, promise anything, do nothing. But his movement baffled the party of education and innovation. Their most brilliant minds couldn’t figure him out. I have been writing about these things for 20 years, and I have begun to doubt that any combination of financial disaster or electoral chastisement will ever turn on the lightbulb for the liberals….

"Only a resolute determination by the Democratic Party to rededicate itself to the majoritarian vision of old: a Great Society of broad, inclusive prosperity. This means universal health care and a higher minimum wage. It means robust financial regulation and antitrust enforcement. It means unions and a welfare state and higher taxes on billionaires, even the cool ones. It means, above all, liberalism as a social movement, as a coming-together of ordinary people — not a series of top-down reforms by well-meaning professionals. That seems a long way away today. But the alternative is — what? To blame the voters? To scold the world for failing to see how noble we are? No. It will take the opposite sentiment — solidarity — to turn the world right-side up again....”


"The overturning of the New Deal Democrats, the Great Society Democrats was a generational story. I don’t know if there’s a social science term for it but people never betray their betrayals. Once you do something like that, once you turn the Democratic party, which these guys did in the 1970s, once you turn on the Democratic party and say we’ve had enough of organized labor, and we’ve had enough of the party of the New Deal and all that, you’re never going back. That is what you did as a generation. It is your accomplishment. They’re psychologically incapable of saying “Oh, we were wrong, our great moment as a generation was a mistake.” No human can do that.”

Update #1: Democrats and the Cult of Learned Helplessness - from former congressional staffer, anti-monopolist Matt Stoller.

Understanding The Election

 

Early predictions of tonight’s election are in and it’s a landslide victory for the oligarchs. pic.twitter.com/ZPTSYxuBMS

— Danny Haiphong (@SpiritofHo) November 5, 2024

I really encourage people who think the Biden economy was great to read this paper from May by Thomas Ferguson and Servaas Storm. "Trump versus Biden: The Macroeconomics of the Second Coming." Need to understand the economic context of this catastrophe. https://t.co/LI41QPehjV pic.twitter.com/UoCREFlp3u

— Neal Meyer (@nealmeyer) November 6, 2024

 

 

Nothing to see here, just a centrist losing by half a million votes in a state where leftwing labor policy won. https://t.co/MiRq73hkis

— Aren R. LeBrun (@arenrlebrun) November 6, 2024

Abortion rights are beating Kamala in every single state that voted on them.

Progressive policies aren't unelectable - unpopular Democratic politicians are. pic.twitter.com/Akum3h67jZ

— Holding Dems Accountable (From the Left!) (@PushBidenLeft) November 6, 2024

...

"Never underestimate Joe [Biden]'s ability to f**k things up" - Barack Obama. At first glance, I took Obama's statement to be a kind of insult. Now I think it's praise for Biden's abilities as a "defender" to disrupt the "offense" of federal programs that help the poor.

...also worth remembering: "The Biden—now Harris—campaign committee raised $997.2 million and Trump’s campaign committee raised $388 million in total between Jan. 2023 and Oct. 16, 2024, the most recent date for which Federal Election Commission filings are available, ending with $118 million and $36.2 million in cash on hand, respectively." - Forbes

If your calculator is not handy, that means the Harris campaign raised a little more than two-and-a-half times the Trump campaign, and spent slightly more than that two-and-a-half times what the Trump campaign spent, yet lost decisively, despite the advantages of incumbency and more money. (Note: this doesn't include spending outside the campaigns...which hit record levels)

Update #1:

 

 Post election prediction: D's will blame everyone from the Russians, to the electorate, to aliens from Mars, but will never accept responsibility for the disastrous policies that put them so far in the hole. More validation that it's difficult to get someone to understand something if their paycheck depends on them not understanding.

Update #2: Chris Hedges take on the American Culture of Despair that gave us Trump.

Update #3: Democrats lose...on purpose...[posted 10 months ago].

 

The idea that American elections are as staged as professional wrestling matches, with predetermined outcomes means that the US doesn't have elections, it has election theater. It's like the TSA that's supposed to keep us safe in air travel but missed 19 of the 20 (fake) bombs sent through airport security. We don't have security, we have security theater. It's not a big surprise, at least in retrospect, that someone who thoroughly understands pro wrestling like Trump should emerge victorious.

 

Update #4: (From Michael Roberts' blog, thenextrecession.wordpress.com...one of the best analyses of the composition of voting in the recent presidential election)

 

 
In line with Update #3, "Harris lost the election heavily because the Democrats campaigned on the identity issues that concerned voters much less, while Trump campaigned on what mattered most to Americans in 2024: inflation, the cost of living and what is perceived as uncontrolled immigration.

"Three out of four Americans who said that inflation caused them and their family severe hardship in the last year voted for Trump. And as I have argued in previous posts, the perception that average American households have suffered a loss in living standards in the last four years is no myth, contrary to the views of mainstream economists.

"Between 2020-2023, real pretax income growth for the bottom 50% of income earners in the US was basically zero. Prices of goods and services are up over 20% since the end of the pandemic and for basic foodstuffs it is even higher. Moreover, the huge hike in interest rates by the Federal Reserve to ‘control’ inflation drove up mortgage rates, insurance premiums, car lease payment and credit card bills.

"Inflation and the drop in living standards for many Americans was blamed by sufficient numbers of voters on the Biden-Harris administration. As in many other countries, incumbent governments that presided over the post-pandemic period have been ousted. Indeed, it is the first time since the beginning of universal suffrage that all the incumbent parties in developed countries have lost vote share. The Democrats are the latest – Germany next.

"In 2020, Trump was the incumbent and was blamed for his disastrous handling of the COVID pandemic. But in 2024, the Biden-Harris administration has been blamed for the failure to deal with inflation and for not stopping immigration. Many Americans saw ‘uncontrolled immigration’ as causing a loss of jobs and rising crime – against all the evidence. Nevertheless, this irrational fear had traction, especially in small towns and rural areas where there are few immigrants visible.

"Biden and Harris crowed about a vibrant, healthy, low unemployment US economy, better than anywhere else. Sufficient American voters were not convinced of this message coming from the so-called ‘liberal elite’, given their own experience. They reckoned they were losing out because of high prices and costs, precarious jobs and uncontolled immigration that threatened their livelihoods, while the rich and educated in Wall Street and in mega hi-tech companies made billions.

"Of course, Trump won’t change any of that – on the contrary, his pals and financial backers are a bunch of rogue billionaires who look to gain yet more riches from cuts in taxes and deregulation of their activities.

"But elections are just a snapshot of public opinion at one moment – nothing stands still."

More of the effects of daylight savings time...

 

Busy, cold night at Stonehenge as we move the stones backwards an hour... pic.twitter.com/V1f3Ws712r

— Papa Woof und Krampus und Bleaken (@woofknight) November 2, 2024

How Money Works: The Overview

© by Mark Dempsey


Since before the Renaissance, businesses have used double-entry bookkeeping to track their finances. This means financial items have two names: asset and liability (debt).

If you have a note and deed of trust—the California equivalent of a mortgage—that is your liability. The note is the IOU, and the deed of trust specifies the security for the loan. People buying a house with a note and deed of trust pay the note holder, that is their liability. But the note holder collects their payments, so to the note holder, the same thing is an asset, not a liability. Similarly, if you have a bank account, that is your asset, but to the bank, it's the money they owe you. It's the bank's liability.

You can march down to the bank and demand it reduce its debt because you hate the word "debt," but it's not a very sensible thing to do. The bank would just make your account—your asset—smaller. Most people don't connect this to national accounting, but the same double-entry naming system applies there, too.

To understand the connection, we need to understand a little federal fiscal policy. First of all, the federal government is the monopoly issuer of currency. Dollars don't grow on billionaires. The Federal Reserve ("the Fed"—the US central bank) and Treasury issue dollars at the direction of Congress.

Incidentally, most of those dollars are electronic entries in Fed bank accounts. A Fed technician types "1" in a special computer terminal to make a dollar. If the technician adds three zeroes, it's a thousand dollars. Three more zeroes and it's a million; three more zeroes and it's a billion...et cetera. We will run out of dollars when the Bureau of Weights and Measures runs out of inches. Never.

The usual description of federal fiscal policy is "tax & spend." That's deceptive but plausible since it's the fiscal sequence for a household. But households don't issue currency. The question the tax & spend crowd needs to answer is this: Where would taxpayers get the dollars with which they pay taxes if the monopoly provider of dollars didn't spend them first? Dollars don't grow on billionaires; the federal government issues them.

So, unlike a household, federal fiscal policy must be "spend first, then retrieve some dollars in taxes." Notice that, unlike a household, the spending is completely independent of tax revenue. This is not a new observation, the chair of the New York Fed, Beardsley Ruml, wrote a paper in 1945 entitled "Taxes for Revenue Are Obsolete."

Taxes are important because they create the demand for the currency, among other things. Taxes do not, and cannot provision federal spending. If you went to the local IRS office to pay your taxes in paper dollars, they would mark your bill paid, and then shred the dollars.

And what are the dollars spent by the government, but not yet retrieved in taxes—you know, the dollars in your wallet? Answer #1: the dollar financial assets of the population. In other words, part of peoples' savings. Answer #2: part of the national debt. Both answers describe the same thing.

You might notice that your dollars are notes—the phrase "Federal Reserve Note" appears on one side. The notes—IOUs—are from the Fed to the note holder. What does the Fed owe you for your dollar? Answer: a dollar's worth of relief from an inevitable liability: your taxes.

Confusing currency creators like the federal government with currency users like households is the source of some mischief, too. And the "Fiscal Responsibility™" illusion has persuaded governments to reduce national debt significantly seven times since 1776. The last of these reductions was the Clinton surplus. Perhaps the most dramatic occurred in 1835 when Andrew Jackson paid the national debt off entirely and refused to renew the charter of the US Central Bank.

That debt payoff meant there was no public currency. People did their business with monetized gold ("specie") and over 7,000 varieties of private bank notes of varying reliability. Jackson effectively sucked all the dollar savings out of the economy. It was an economic nightmare, too, culminating in the "Panic of 1837," a large depression. Speaking of depressions, the Coolidge and Hoover administrations also sought to significantly reduce the national debt which led to a wave of asset forfeitures and foreclosures now known as the Great Depression. Significant economic downturns follow all the substantial reductions in national debt.

So...why are Wall Street financiers who should know better still lobbying for a smaller national debt? Remember, that a government that issues fiat currency, like the US, is fiscally unconstrained. It can pay any debt owed in that currency, and would never be involuntarily insolvent. Why would otherwise financially sophisticated people try to trigger a wave of asset forfeitures or foreclosures?

Unfortunately, we have a plague of vulture capitalists who are eager to take advantage of a population impoverished by national debt reductions. Some want to dominate labor by reducing social safety nets for the sake of "labor discipline"—the message that you had better take whatever crappy job is on offer or suffer the indignities of poverty, even homelessness, and starvation....and if you're rebellious, we'll put you in a cage.

Currently, the US is the world's leading incarcerator. With five percent of the world's population, the US has 25 percent of its prisoners. Labor discipline and vulture capitalism (AKA "disaster capitalism") are currently ascendant. Until people know how money works, this will likely continue, too.

The object is to get cheap labor and pick up distressed assets for cheap. Labor discipline and fiscal austerity serve the wealthy and keep their wealth intact, inflating stock and real estate prices while draining the pocketbooks of the poor.

One frequently heard objection to this overview is this: "If the government just prints lots of money, then we'll get [gasp!][hyper]inflation." This is a theoretical possibility, but history does not support this concern.

The (right-wing, libertarian) Cato Institute published a study of 56 historical hyperinflations. How many originated with a central bank printing too much money? Answer: zero. The typical inflationary episode began with a shortage of goods accompanied by a balance of payments problem.

The classic examples of Zimbabwe and Weimar Germany support that observation, too. In the former Rhodesia (Zimbabwe), the colonial farmers left and the natives were unable to produce the same amount of food. For one thing, raising European livestock requires a tsetse fly eradication program—otherwise the herds die of sleeping sickness. So a country that had previously fed itself was forced to rely on imported food. Hyperinflation followed after the food shortage and balance of payments problems.

In Weimar Germany, the French were impatient that the Germans didn't provide their WWI reparations (in this case, some telephone poles) so they marched their army into Germany's industrial heartland, the Ruhr, and shut it down. A shortage of goods ensued. The reparations were already a balance of payments problem.

The most devastating episode of US inflation in recent years occurred in the '70s when the OPEC used the "oil weapon" to protest the Yom Kippur war fought by the Israelis. US pre-fracking peak oil was in 1971 when the price of oil was $1.75 per barrel, so the US couldn't produce its way out of the OPEC shortfall. The price quadrupled virtually overnight, peaking at $42 per barrel in 1982. The shortage of this critical commodity produced a wave of inflation throughout the country, and not incidentally, a balance of payments to OPEC problem.

Finally, here's a statement no one said, ever: "Hey, the Japanese just attacked Pearl Harbor, but we're a little low on dollars, so we won't respond." On the contrary, the government took over roughly half of the US economy in World War II. Federal taxes increased, not to pay for the war, but to suppress the demand for resources needed to fight the war. Supply shortages might cause inflation, but not if people don't have the money to spend.

The Green New Deal would only consume 5% of the economy, and we would not need to raise taxes to implement it.

That's how the money works.

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The author teaches "Heterodox Economics" for the CSUS Renaissance (senior education) program.

Update #1: One person reminds me that we could balance the budget with a trillion-dollar coin. Congress has authorized Treasury to issue coins of any denomination for coin collectors, but the Obama administration turned down the suggestion of the trillion-dollar coin. It's admittedly a gimmick, and Treasury doesn't count coins as "notes" (debt). The inflationistas could be placated by simply depositing the coin--or several of them--in the Treasury's account at the Fed without spending it. It would make the Treasury's Fed account "balance," but it's too gimmicky to really amount to anything, at least in this writer's opinion.