John Oliver's Healthcare Commentary

 

The Failure of Affordable Housing Policy

(c) by Mark Dempsey

If you read most editorials decrying the shortage of affordable housing (here's one), you'll actually believe the USA doesn't have enough houses. That's why we have the largest homeless population since the great depression! If we could only build more homes, that would solve the problem! If only the government would get out of the way and deregulate this stuff, darn them!

Except the US has more vacant homes than homeless people, and in San Francisco, there are five times as many vacant homes as homeless. And yes, government policies like zoning and building codes restrict home building--and we should look into revising them--but the distribution of housing, not a shortage of deregulation, is the problem.

Following the New Deal, the federal government built affordable homes. Of course, they skimped on maintenance and generally sabotaged affordable housing that might be available even to poor people, but at least they built affordable housing in some manner. 

One notion behind the attack on the poor is that they deserve their poverty, and of course, rich people deserve their wealth. Note: A family member who was active in philanthropy met many wealthy individuals and was quick to point out that, while 90% of them were "born on third base," they all wanted to act like they had hit a triple. But hey, it's okay to punish the poor because they deserve it.

Richard Nixon halted federal efforts to build affordable housing in the 1970s. As he cut taxes on the wealthy by roughly half, he and his successor increased payroll taxes eightfold, Reagan reduced HUD's affordable housing budget by 75%. The attack on the poor is bipartisan, too. Bill Clinton signed legislation that included the Faircloth amendment limiting the federal government's ability to fund affordable housing. Meanwhile, the local charity serving the homeless started during the Reagan administration. 

Many people believe our homeless population is largely mentally ill and/or addicted in some way. Even though the majority of the unhoused are really just too poor to afford rent, mentally ill people are a larger portion of the unhoused than the general population. 

With this in mind, it's useful to remember that Reagan closed California's asylums when he was governor, and JFK wanted to close the big federal asylums and move the inmates to transitional housing more integrated into the community. Congress approved the federal asylum closures but failed to fund the transitional housing. Both of these government moves threw the mentally ill out on the street. Senator Daniel Patrick Moynihan described the omission of funding for transitional housing as the most shameful episode of his career in public service.

So rents rising faster than paychecks has been the story for the majority of those who are homeless or even those precariously clinging to their housing.  Surveys also confirm that mental health and addiction problems most often occur after people experience homelessness. Being unhoused can induce a form of PTSD, leading to self-medication. PTSD can also vanish once the unhoused get shelter. Some communities have even found it's cheaper to house people than to deal with the policing and health problems homelessness produces.

One lobby opposing affordable housing is banks. They love higher home prices--with bigger mortgages, they get bigger profits--so they lobby for restricting the supply and type of housing. If you want to see how banks control the housing market, try to get a loan for a boarding house--very unlikely to be approved even if would lower housing costs. If FNMA ("Fannie Mae") introduced a special affordable housing mortgage, we would have much more affordable housing. 

"But where would we get the money to discount loan rates, etc?" Just a reminder: the feds make all the legal dollars. Here's something no one said, ever: "The Japanese just attacked Pearl Harbor, but we're a little low on cash, so I guess we won't respond." Pleading that the government (or public bank) that makes the money can't afford something is slightly ridiculous.  

Former congressional aide and author of Goliath: The 100-Year War Between Monopoly Power and Democracy, Matt Stoller writes that monopolists are driving up the price of land and materials, never mind the monopolists whose rental software algorithms raise rent. 

Contrary to the "deregulate everything" narrative of the Abundance-ists, these are evidence that the government movement toward deregulation is behind at least part of the rise in housing costs. 

Reality! What a concept! (A quick look at films: Rental Family and Good Fortune)

(c) by Mark Dempsey

Some of the best recent movies have Asian provenance. Asian writer and comedian Aziz Ansari's Good Fortune and Brendan Frasier's Japanese adventure (Rental Family) are both outstanding. Good Fortune skates perilously close to the Hollywood/Disneyfied fantasy line, and, ironically, Rental Family is more realistic, even though its a story about creating an illusion.

Jackie Chan's martial arts movies include reality in the final titles with the out takes, where Jackie Chan does not succeed doing the incredible stunts he does for the film. The final titles' failures are the reminder: what you just watched is an illusion  Don't be fooled! Good Fortune exposes some uncomfortable truths about poverty in the US, but Rental Family is my favorite because it reminds us of how convincing illusions can be.

Of course there are other ways to remind the audience not to get caught up in the fiction. Shakespeare has a play within a play in Hamlet, for one example.

Rental Family, starring Brendan Frasier, contains many surprising reminders that the reality portrayed in the film is not always what it seems. Frasier plays a desperate-for-work bilingual (Japanese/English) actor hired to provide emotional support for Japanese clients. 

For the first scenes in his new acting gig, he pretends to marry a Japanese woman. The marriage is a ceremony to provide the woman's parents with satisfying memories before she moves to Canada with her new pseudo-husband. After the wedding, we discover she's lesbian, leaving her family to be with another woman. But the illusion is preserved in wedding photos; everyone gets to save face.

Another family hires Frasier to portray the father of a girl who has actually been raised by a single mother. He's a necessary accessory to the child's application for a good school. As one might expect, Frasier falls for the little girl, and becomes fatherly in ways that convince the little girl he really is her dad. She's later disillusioned when she sees him in a TV commercial.

But Frasier and the little girl reconcile after she's admitted to the school, even though she knows he's part of an elaborate illusion her mother arranged. Frasier tells her his character's real name, and they remain friendly. The illusion isn't necessary, but perhaps the letdown when it's revealed is.

Rental Family has many other twists and turns, but the reminder of the distinction between illusion and reality is central to its theme. 

Currently American culture is fraught with heavily marketed illusions. Hollywood tells us the detectives always catch the bad guy. In reality, police solve less than 15% of crimes. Nevertheless, alternative strategies to manage crime remain unexplored, and cutting police budgets remains taboo.

A movie is only a subtle reminder that there's an underlying pig beneath all that lipstick, but that may be all it takes. Meanwhile, asian-adjacent films like Jackie Chan's, Good Fortune and Rental Family say Asians are more interested in results than words. 

One Western pundit who married a Chinese woman, says that people in her culture are not so interested in declarations like "I love you" as they are in demonstrations of a loving relationship. Talk is cheap, but it's a currency Americans have accepted for some time now.

 

Real Economics

From Corbin Trent (here...well worth reading the whole thing):

In 1950, median INDIVIDUAL income was $1,971. A median home cost $7,354. The nation spent about $83 per person for healthcare. A four-year college degree cost $852.

Do the math. 3.73 years of work to buy a house. One week of work for healthcare. Less than two months for a college degree.

In 2023, median personal income was $42,220. A median home costs $429,000. Healthcare runs $14,570 per person per year. A four-year degree costs nearly $40,000.

10.16 years of work to buy a house. Twelve weeks of work for healthcare. More than six months for college.

So wages went up 21x since 1950. Sounds great, right? But the essnetials the core things we need to survive went up much much faster.

Housing went up 58x. Healthcare went up 175x. College went up 47x. But as I showed in “The Cover Up,” the official inflation numbers hide most of this through hedonic adjustments and statistical manipulation. The experts tell us the cost of life went up maybe 3-4x instead of 50-175x. Inflation is under control, economists and politicians tell us.

....

When my uncle graduated from high school, he took a job as a bag boy at the local A&P. Made enough for an apartment, food, going out, and a new Camaro. My aunt went to ETSU, worked part-time, and graduated debt-free while paying her own way.

....

The government claims real wages have increased 252% since 1950. My math says we’ve lost 61% of our purchasing power....





Either we’re losing buying power for the foundations of life or basic math is wrong. Many of our statistics have become completely detached from reality.

The Gap That Breeds Rage

This gap between what the statistics say and what we live breeds the rage you see in our politics.

....The chart below shows the official claims about what our annual income buys in Blue and what my math figures for renters and owners in orange and red.





....Wall Street replaced wages with debt. When we couldn’t afford college, the financial industry gave us loans from Sallie Mae that we can’t discharge in bankruptcy. Can’t afford a house? Sign 30 years away to Wells Fargo. Can’t afford a car? Here’s an 84-month loan. Seven years of payments for a depreciating asset.

In 1950, household debt was $47 billion. Today it exceeds $17.1 trillion. When measured in years of work at median wages, the debt burden has grown from eight weeks of work in 1950 to 63 weeks today. A 670% increase.




What once took one year of labor now demands over three. This isn’t prosperity.

The Distraction

Here’s the trick. Economists and politicians point to the cheap TV. The smartphone. The streaming services. Look how much better life is. You have technology your grandparents couldn’t dream of.

Sure. Electronics got cheaper. I can buy a 55” TV for $300. My grandpa’s 19” black-and-white cost $200 in 1950. That’s equivalent to $2,400 today.

But while the TV got cheaper, everything that actually matters got more expensive. Housing is up 7x since 1980. The official stats say 3.7x. Healthcare is up 13x. Official stats hide 9.3x of that. College is up 12x. Official stats hide 8.3x. Food is up 5.7x. Official stats hide 2x.

As I detailed in “The Cover Up,” roughly 50-60% of actual inflation gets hidden through hedonic adjustments, Owner’s Equivalent Rent, and basket re-weighting....

The Political Consequences

Trump didn’t cause this disaster. He exploited it. He saw the anger, the despair, the realization that the American Dream had become a scam. He told people their pain was real. The system was rigged. Their leaders had failed them. And unlike the economists and media pundits, he never told them to learn to code.

That’s why he won in 2016, and again in 2024.

But look what happened this month. Democrats swept Virginia, New Jersey, and NYC. Voters sided with Democrats on the economy despite Republican advantages on crime and immigration. Independents swung hard left. Trump’s approval on the economy has cratered.

We’re still broke. Now we’re blaming him for it.

But Democrats haven’t see the light yet either. Most of them don’t see the collapse because their numbers tell them everything’s fine. They’re incapable of fixing a crisis unless they can see it exists.

This is what happens when Reagan legalizes stock buybacks, when the Boskin Commission embeds statistical lies, when both parties tell people for forty years that they’re imagining their own decline. People stop trusting institutions. Not because we’re irrational. Because the institutions are lying.

What Any Real Solution Requires

Any politician promising affordability without a bold plan to shift power back to working people is full of shit.

Tweaking tax credits or adjusting interest rates ian’t going to restore affordability in any meaningful sense. We’re need to reverse a 50-year transfer of $79 trillion from the bottom 90% to the top 1%. We’re talking about breaking up monopolies and oligopolies that control our healthcare, our housing, our food. We’re talking about rebuilding unions strong enough to actually negotiate with capital. We’re talking about public ownership and public competition in captured markets.

That takes political power. Real political power. Not the kind you get from being polite or following Senate norms or designing another program with so many hoops nobody can use it. The kind you get from organizing millions of people who are tired of trading their lives for survival while Wall Street and the executives they enriched get richer.

We used to build things in this country. Real things that lifted everyone up. When we invested in ourselves, roads, dams, public universities, the research that created the internet, everybody got richer. Not just the people at the top.

We can do that again. But first we have to be honest about where we are.

These days GDP growth is disconnected from real tangible production. It is fueled by a parasitic elite take more from us. Stock markets soar while families drown in debt. Official real wages rise on paper while buying power crashes in real life. We work harder than our parents did and fall further behind. More and more of us have insurance and still go can’t afford to go to the doctor. We do everything right and still drown in debt.

The people who rigged this system are still telling us everything’s fine. The executives who legalized looting through stock buybacks. The economists who embedded the statistical lies. The politicians who protected the theft.

The Choice

We can keep measuring success by numbers designed to hide our decline. Or we can start building an economy that actually serves the people who make it work.

Right now we’re not just declining. We’re being stripped for parts. One week of our lives at a time. Ten years of labor for a house that used to take three. One decade of debt for an education that used to cost a part-time job.

The parasitic elite aren’t stealing our money. They’re stealing our time. Our lives. The years we’ll never get back.

No amount of statistical manipulation can hide that theft anymore. We see it now.

We need to start thinking about building what we need together, as a people. America is ready for systemic change. Hell, Trump has already done a lot of the destruction. The old order is weakened.

The question is are we ready to knock it over and build something beautiful in its place. Will “We The People” be at the table?

Corbin Trent

Liberal Elites Kicked the Door Wide Open for Trump’s Flagrant Corruption

From Tony Wikrent's Week in review:

Liberal Elites Kicked the Door Wide Open for Trump’s Flagrant Corruption

Dylan Gyauch-Lewis, November 9 2025 [The Intercept]


…While Trumpian corruption is striking in frequency, scale, and just how routine it is starting to feel, this administration was the logical endpoint of the long-standing tradition of elite impunity. The second Trump administration is a striking monument to governmental misconduct, but the ground was broken long ago, with both parties laying the foundation. For the past half century, corporate and white-collar crime have gone largely unenforced. This was the result of both a widespread shift in views of governance (à la the Reagan Revolution) and a coordinated plan orchestrated to enable private wealth to hijack our democracy, as David Sirota and Jared Jacang Maher documented in their new book “Master Plan,” building on a podcast of the same name.

Trump himself is a byproduct of the wealthy being empowered to violate the law. Seemingly his entire pre-government career was predicated on getting away with gaming bankruptcy law, committing widespread financial fraud, and racial discrimination. Now, in government, he is employing the “blitzscaling” model pioneered by firms like Uber to break the law faster than anyone can keep up with….

The Great Recession was a turning point; the extent of corporate lawbreaking in the financial sector was laid bare. And, famously, hardly anyone ever went to jail. Obama-era regulators, in many ways the acme of our last half-century of the hands-off approach to ruling-class misconduct, earned rebuke and scorn as “the chickenshit club,” afraid to square up against the powerful, if not overtly committed to serve elite interests. Since 2008, it has only become more apparent that the wealthy play by an entirely different set of rules.

Trump’s first election was, in part, built on the argument that he knew “how to play the game.” In this telling, his ability to break the rules was actually an asset because he would break them for you rather than just for the powerful. It was always a dubious pitch, but it’s understandable why — faced with the choice between someone trying to convince you the game that’s obviously been fixed is actually not rigged, and someone who tells you how they cheat and promise to help you get ahead a little bit — people would gravitate toward the latter. Part of the early MAGA mythos was built on resignation to the fact that our rule of law is fundamentally perverted to create two parallel tracks of justice: an unforgiving, punitive, carceral system for most people, and a cushy, consequence-free dinner party circuit for the ruling class.

Dethroning Trump will not be enough to restore real rule of law; the Biden administration is proof enough of that. Donald Trump was excised from the White House with historically bad public sentiment in the immediate aftermath of a failed coup. Under Biden, the Garland Justice Department tried to wind the clock back to 2016 and resume operating the way establishment politicians did in the 1990s and 2000s. It failed spectacularly, allowing bad actors like Elon Musk to grow ever more powerful while continuing to flout the law with impunity. The result was an embittered Trump who faced no real repercussions for his corruption — the worst-case scenario….

To dislodge the hold that corruption has on our government and restore the rule of law, Democrats will need to decide who they really are — and who they’ll fight for.

[TW: More accurately, Democrats will need to decide who they’ll fight against.]

The importance of (public) banking

 Public bank maven Ellen Brown has a new post describing how Zohran Mamdani is going to manage to get the money needed for his programs. Hint: It's a public bank. You might also refer to this previous post for context. It explains why this isn't optional, it's required.

Excerpt:

Banks, Not the Government, Create the Money Supply

How can a public bank lend billions more than the capital it actually has? The answer is in a little-known secret of banking: banks don’t lend existing money. They create it. When a bank issues a loan, it doesn’t hand out cash from a vault. It creates a deposit in the account of the borrower, backed by the borrower’s promise to repay the loan with interest; and these deposits are counted in the money supply. Roughly 95% of the U.S. money supply is created in this way — by private banks, for private profit.

A public bank does the same thing, but in the public interest. It monetizes future productivity — housing that will generate rent, roads and rail that will transport workers, solar panels that will lower energy costs. To “monetize” means to turn future productivity into something that can be spent now — e.g. spent on the labor and materials necessary to create the products that will repay the loan. The money is created into existence, circulates through the economy and is extinguished upon repayment.

Isn’t That the Sort of “Money Printing” That Drives Up Prices?

No. Price inflation is a function of supply and demand: prices go up when too much money is chasing too few goods. Injecting new money (demand) does not drive up prices as long as the money creates new supply to absorb it, keeping prices stable.

China’s development model illustrates this principle. Over the past 29 years, its money supply has increased by a whopping 5,500%. Yet price inflation has remained modest, because the increase in money was matched by an increase in goods and services. The China Development Bank — one of the largest banks in the world — along with other Chinese public banks fund infrastructure, housing and manufacturing, creating real assets that absorb the new currency in the marketplace. 

....

The New York Public Banking Act (S1754/A3352), which Mamdani co-sponsored in the NY Assembly in 2023, would allow cities in the state to obtain charters for their own public banks. Modeled on California’s AB857, it has broad legislative support. However, it remains stalled in the legislature — likely due to pressure from entrenched financial interests. New York State is home to some of the largest and most powerful banks in the world, and they are in the heart of New York City.

New York City is also the home of the most powerful branch of the Federal Reserve, the New York Fed, and like all Fed branches, it is 100% owned by the banks in its district. Because of its proximity to Wall Street and its operational responsibilities, the New York Fed is often considered the heart of the Federal Reserve System. Its Wall Street owners are not likely to relinquish control of that megacity’s finances without a fight.

 

 

 

Ever wonder about the quality of economic advice our leaders receive?

 

Saikat Chakrabarti Runs for Pelosi's Congressional Seat + Thomas Ferguson evaluates Democratic failure

You'll read all about conventional Democrat Weiner running for Pelosi's congressional seat in the "lame-stream" news, but the absolute minimum about the progressive challenger, Saikat Chakrabarti. He's come from AOC's staff, and is very clear about the progressive goals he embraces. For the full story, read or listen to his interview with The Intercept.

One excerpt:"So the thing I’ve been working on at my think tank New Consensus, we’re calling it the “Mission for America.” And it really harkens back to basically what FDR did during the New Deal, but also during the mobilization for World War II to build a whole new economy because I think that’s ultimately the way we defeat authoritarianism. Because back in the 1930s, we had a really powerful, far right in this country. We were actually seeing Nazi rallies in Madison Square Garden, it was filling the stadium.

"And the way we defeated that was FDR came in with the New Deal movement. He built this whole new economy and a whole new society that improved people’s lives so dramatically, it just killed this idea that you need an authoritarian to do it for you.

"He proved democracy can work. And he did that through the social safety net. But he also did that by building an industrial base that created the modern-day middle class. So that’s really what the “Mission for America” is. It’s basically taking a lot of the institutions and the lessons from that era and saying, how do we do that today? Because I argue that it’s not just about some policies; it’s actually this whole other kind of governing that we had back then." 

Meanwhile, Thomas Ferguson evaluates Democratic chances here Hint: follow the money.  

Excerpt:

"The old line continues in a new way as people try to understand the Trump economy. Paul Krugman and many others continue to maintain that Biden left a good economy that Trump is ruining. The very last months of Biden’s term were somewhat better, but the dominant tendency is a deepening of the dual economy Storm and I spotlighted with the continuing stock market boom. The Federal Reserve Bank of Boston just put out a study of wealth, income, and consumption spending. It concludes that it’s the rich who are benefiting hugely in both wage growth and spending, not the lower-income groups. Other studies confirm this. 

"Indeed, segments of the business press now routinely refer to the “K-shaped economy,” alluding to the divergence between top and bottom in income and wealth. Most stories manage not to mention quantitative easing and the Fed’s role, but they document very clearly the way retail sales and other spending divide in our dual economy. That tendency became stronger during Biden’s term, especially once the relief programs were withdrawn and access to health insurance fell. Even the Wall Street Journal has come around on this point.

"The process has been going on for quite a long time, yet Democratic Party elites mostly felt comfortable discussing it in terms of second-order effects suffused in references to racism and gender. You could see that very clearly in 2016, where virtually everybody’s election analysis focused on race and gender. By contrast, in the analysis that Ben Page and my colleagues and I did, we were very clear that Trump’s ascent was first of all an economic story. You only had to listen to him talk to realize that race and gender were also playing big roles in his electoral appeals. But the importance of the economic squeeze on many Americans was clear from day one, as was the disenchantment of many Democratic voters with the party.

"It’s not getting better. Little in the “abundance agenda” now touted by many Democrats addresses the real problems. The recent paper from economists at the San Francisco Fed showing that supply constraints don’t explain housing construction and prices in US cities is devastating, for example. So is the evidence Storm and I presented about electricity rates; you don’t explain those by NIMBYism. Electricity prices are classic cases of money in politics distorting regulation."

Nick French

"To summarize where that leaves the Democrats right now: They still push this narrative that Biden had a great economy, that he delivered for workers. He only lost because the workers are confused by social media or because they don’t care about economic issues…

Thomas Ferguson

"Or the party has somehow not found a message. That’s another nonsense bromide. The Democrats failed to deliver for most Americans who were not rich, full stop."

 

Advantage: China

 

I finally got a chance to read this fascinating paper on productivity in China by Weijian Shan, a man who's had an incredible life, starting as a Cultural Revolution worker in the Gobi desert to today one of the world's most respected investors.

One statistic blew my mind. In… https://t.co/5H5tHY4SY1

— Arnaud Bertrand (@RnaudBertrand) November 12, 2025

 

...worth expanding. The text describes how Chinese workers produce 14 times more than American workers. This is odd because the Chinese work for lower pay than the Americans. But China's commitment to infrastructure, particularly transit and green energy, makes this possible. The US has set up its economy as a series of toll booths, so worker need higher pay just to live their lives. The privatization of everything essential to survival from food, to housing, to healthcare, to education, etc. -- all of that makes just day-to-day living more expensive, and not incidentally, the US less competitive internationally.

Material Conditions Matter: Slavery, the Fall of Rome, and the American Civil War

(c) by Mark Dempsey

A recent article about the fall of Rome cites the corruption and lack of civic consciousness of the elites as some of the causes of (Western) Rome's fall in the fourth and fifth centuries CE. However, it overlooks one important material cause of Rome's decline: food shortages. Material conditions matter.

Early Roman farmers practiced sustainable agriculture, maintaining soil fertility as they grew their crops. As more conquests produced more slaves, however, they abandoned those techniques to farm with slaves. Slaves don't care if they deplete the soil.

The depleted soil meant declining food production for Rome, which became more dependent on imported food, particularly from its North African colonies. The Vandals battled their way down the Iberian Peninsula to North Africa and shut off that food source. When the barbarians came to Rome, the hungry population opened the gates for them.*

One reason farming with slaves came to the New World in the American South was because Old World diseases like malaria and yellow fever decimated populations that might have otherwise supplied workers.** Africans had resistance to these diseases, so slavery made economic sense in a New World short of human labor, and was particularly necessary in the areas where the yellow fever and malaria vectors (mosquitoes) existed--roughly from the Mason-Dixon line to the northern border of Argentina.

Those diseases may also be the reason Napoleon's soldiers couldn't defeat a 1791–1804 slave revolt in Haiti. An army with too many deaths from illness is much easier to defeat.

Plantation operators solved the depleted soil problem in the New World not by planting soil-restoring crops like peanuts, but by moving to new territory and "mining" that soil. As the US expanded westward, the debate about whether the new territories would allow slavery was one of existential importance, at least to the South, where soils were degrading thanks to slave-based farming. The South's economic dependence on soil fertility trumped all the moralizing from abolitionists.

Farming cotton with slaves is perilous for other reasons too. Andrew Jackson's administration stole much of the Southeastern US from its native inhabitants despite Supreme Courts in Georgia and Washington D.C. confirming that the natives owned the land. Jackson dared the Supreme Court to enforce its order, and evicted the tribes from their land with a march called the "Trail of Tears." Note: Trump is not the first president to defy the courts.

This defiance made lots of new territory available for cotton farmers who occupied the land and borrowed to buy new slaves. But the income with which they expected to pay those loans did not materialize because they produced so much cotton that the price descended to new lows, even though they warehoused 60% of the crop.

Their difficulties were further compounded because, in 1835, Andrew Jackson paid off the national debt entirely and revoked the charter for the National Bank. That meant there was no public currency. People did their business with specie (monetized gold) and over 7,000 varieties of private bank notes of varying reliability. 

It was a business nightmare, and many planters lost everything because they lost their dollar savings and couldn't pay slave loans with either their cotton income or those savings. A wave of asset forfeitures and foreclosures – the "Panic of 1837"– ensued.

These events set the stage for the American Civil War. That war impoverished the South even more since, after the South lost, all its banks failed, and its Confederate currency was worthless. 

The postwar period was full of predatory lending from suppliers – the "furnishing man" later shortened to "The Man" – and the Gilded Age of predatory capitalism met with populist resistance from the only partly successful Farmers’ Alliance and the People's Party.

Both Rome and the American South illustrate how social inequality leads to a deterioration of civic life and the danger of social collapse. Currently, the US is experiencing massive social inequality, and even echoes Rome's dependence on imported food.

"Sustainability" is a watchword for some public policy candidates, but there's seldom any interest in a comprehensive pursuit of that goal. Even the way the US builds its cities--"suburban sprawl" – means maintenance expenses grow faster than the tax base, so our particular Ponzi scheme is literally cast in concrete. 

The rhyme of history may not be the one we want to hear.

*This simplifies some complex history, but if you're interested in the details, read Peter Heather's The Fall of the Roman Empire: A New History of Rome and the Barbarians.

**See Charles Mann's 1491: New Revelations of the Americas Before Columbus

Deaths of Despair

 

Incarceration across the US & World

 

Defense Spending Exposed (Australian edition)

 

Reference 👇pic.twitter.com/QIypouBZrL

— Arnaud Bertrand (@RnaudBertrand) November 4, 2025

No Fooling

 "The first principle is that you must not fool yourself and you are the easiest person to fool." - Richard Feynman 

It's humbling to admit how easy we are to fool. Give a hypnotist ten minutes and he can have a crowd of people clucking like chickens. 

The ubiquitous marketing we encounter is always trying to fool us, to get us to buy things we may or may not need and believe things that are or aren't true. It's smoke and mirrors, bullshit and manipulation, the lipstick on the pig.

Part of the problem is that basic human knowledge depends on a narrative, language, or vocabulary to perceive the world. The visual cortex in our brains gets only ten percent of its nerves from data (the optic nerve). The rest is connected to language and memory. Even sight requires a vocabulary, and is susceptible to optical illusions.

Another source of deception is supernormal stimulus--something like buggy biological software. Here's a concise introduction to the concept in a comic by Stuart McMillan. 

 

Our bodies navigate the world with many algorithms. For example, if you stand up after lying down, your heart will (automatically) start pumping harder to make sure your blood pressure to your brain doesn't decline enough to make you faint. This kind of "software" manages everything from respiration to reproduction, walking to balancing on one foot, and like all software, is prone to defects--bugs.

Refined sugar takes advantage of one such bug. You can drink one of those gigantic sugary drinks all day long and the usual mechanisms that tell you that you've had enough to eat simply don't work. McMillan notes such bugs are not exclusive to humans--animals have them too--and they make them act in counter-productive ways. In humans, the seven deadly sins--Pride, Wrath, Greed, Gluttony, Envy, Sloth and Lust--are likely such bugs. 

We can also add the appetite for infinite fairness frequently on display in young children. Creditors often take advantage of interest compounding--which goes to infinity--and the feeling of obligation even though the source of repayment is finite, so people often willingly submit to debt peonage.

The effect of bugs on computer programs is to weaken the computer's computational power, and possibly even crash the machine. People angry about politics may vote for an opponent simply because that opponent is the only available alternative. 

"I don't care who people vote for as long as I can pick the candidates" said Boss Tweed (the corrupt manager of Tammany Hall). Political parties count on their marketing to make their candidates the only alternative.

As one Australian said "You Yanks don't consult the wisdom of democracy; you enable mobs." 

 Despite Abe Lincoln's old saying that you can't fool all the people all the time, Bridget Read's Little Bosses Everywhere, an exposee of multi-level marketing reminds us that fooling can persist for decades. Here's an excerpt:

"If the story of multilevel marketing sounds too good to be true, that's because it is. The parable of homespun Yankee ingenuity and the power of free enterprise that MLM has been telling for the better part of acentury contains inventions and elisions that have gone largely unchecked through fourteen U.S. presidential administrations and may constitute one of the most devastating, long-running scams in modern history." 

So...let's be careful (and humble) out there. 

 

The Present Political State of Play + Artificial Intelligence

 (c) by Mark Dempsey

In an interview with Charlie Sheen, Hollywood's bad boy, he describes an encounter with Donald Trump. He was with his fiancee in a restaurant when Trump visited to his table. Trump apologized for being unable to attend the wedding, sheepishly admitting he hadn't even got them a gift. Sheen told Trump that was okay, while thinking "Well, you weren't invited, so..."

Flush with inspiration, Trump says he's going to give Sheen his "Harry Winston, platinum, diamond" cufflinks, which Sheen accepts before they part company.

A few years later Sheen is having some jewelry appraised for the sake of his insurance and he asks the appraiser to take a look at the cufflinks. "They're pewter and cubic zirconia," says the appraiser. 

So...Trump is a con man through and through. Many voters were taken in, but others recognized that the system left them by the Obama administration was worth wrecking, regardless of Trump's lies and incompetence, so they sent a wrecking ball to Washington. 

One of the best analyses of the problems that led to Trump comes from Rob Urie...here.

 Excerpts: 

"For those who may have forgotten, the (Barack) Obama administration was warned when it shifted the judiciary function for capital cases abroad to the White House that doing so would come back to bite the Democrats. While Democrats trusted Mr. Obama to adjudicate fairly and only kill (as a King would) those who were deserving, few others in the world did. To now complain that too much power is concentrated in the Executive Branch would be rich if Democrats had any knowledge of what I am referring to.

"It is the Democrat’s inability to self-reflect— a product of their near-complete ignorance of the policies that they claim to support, that makes them so repellant to so many. While the following was as true of George W. Bush’s supporters as it is with today’s Democrats, those most supportive of the party know the least about its actual policies. Barack Obama’s economic policies, in particular his bailouts of Wall Street, were amongst the most socially destructive acts in modern American history....."

To connect this to AI:

"In terms of AI being naively brilliant, this refers to its deference to social logic rather than possessing analytical methods that it then applies to the underlying questions of interest on its own. Philosophically inclined readers will recognize the reach of philosophical Postmodernism here. The realm of AI is social, not physical. AI ‘trains’ on texts that reflect human interpretation of facts, not on the underlying facts themselves. This is, in fact, an implied restatement of the postmodern conceit that scientific knowledge is ‘socially constructed.’" 

American doctor goes over how Barack Obama destroyed American Healthcare

 

American doctor goes over how Barack Obama destroyed American Healthcare

Before Obamacare in 2010
- A family of 4 had $13,000 per year in premiums with a $3,000 deductible

Now in 2025
- A family of 4 had $35,000 per year in premiums with a $6,000 deductible

“Obamacare has now… pic.twitter.com/CkK61eDf1i

— Wall Street Apes (@WallStreetApes) October 23, 2025

A Review of Biden Press Secretary Karine Jean-Pierre's book

Jean-Pierre was Biden's press secretary, and her book, Independent, a Look Inside a Broken White House Outside the Party lines , is an ode to failed Democratic Party ideas from which she's trying to distance herself by repeating. The full review is here. Excerpts: 
'Jean-Pierre is revealingly blinkered. She may represent the future of the Democratic Party, despite her notional disavowal of it. Like many younger Democrats, she came of age in the in-this-house era and made her name by embracing its symbolism and sensibility. Now, she has perhaps been advised by a team of pollsters and PR professionals to distance herself from a party that is rapidly hemorrhaging appeal and support. Yet, like her colleagues in the halls of Congress, she appears to have little authentic understanding of why her erstwhile party’s approval rating has cratered. The approach she opts for in this book — loudly declaring herself an independent in a futile effort to cleanse herself of the taint of her party, all while espousing the same old worldview in the same old tired tone — is one that will surely tempt many of her peers. The silver lining is that she has provided an object lesson in exactly what not to do. The question is whether the Democrats are capable of learning from her example.

"Jean-Pierre’s central complaint boils down, more or less, to a vague sense of personal grievance. The Democrats were mean to Biden, her boss; they were mean to her personally, as she outlines in a lengthy diatribe against fellow staffers who leaked unflattering information about her to Politico; and they were mean to Harris, whom they refused to anoint as the nominee without a fight. Jean-Pierre sums up her complaints when she writes that she’s “exasperated with the shady way Democrats do business” — but not, we may presume, with the business itself." 

The State of American "Justice" (A Musical Tribute to Houston's Harris County Jail)

 

 

Mostly true of the Sacramento County Jail, too. Sixty to eighty percent of the Sacramento County Jail prisoners aren't convicted of anything except being too poor to afford bail. In Sacramento County, you're not "innocent until proven guilty," you're "guilty until proven wealthy."

The triumph of classical economics

 Classical economics proposed the law of declining profits. In a totally free market with plenty of competition and low barriers to entry, firms will lower prices, lowering profits until they barely make enough to survive. Naturally, US firms do everything possible to avoid this, lobbying for regulatory barriers to entry, buying competitors, making monopolies and oligopolies. The Chinese have apparently figured this out, as this tweet discloses:

The US economic model is based on massive corporations establishing monopolies through mergers and acquisitions and then charging monopoly rents to maximize profits, benefiting shareholders at the expense of consumers.

China's model forces companies to fiercely compete, and the… https://t.co/tGAWdrnedP pic.twitter.com/T77Te8kHzc

— Ben Norton (@BenjaminNorton) October 22, 2025

...which leads to a comment about the current business model of tech:

A note about the relationship between coercion and the tireless pursuit of scale and efficiency by tech platforms.

Coercion isn’t a side effect of tech platforms. It’s the business model.https://t.co/mrmuUOH4rU pic.twitter.com/tabkXBx73W

— Lee Hepner (@LeeHepner) October 21, 2025

The Obama Legacy

 

It's my view that promising people hope and change and then bailing out bank donors as they threw 10 million families out of their homes was the defining political moment that birthed this era & it's my view that liberals/Dems still refusing to reckon with this & discard the…

— David Sirota (@davidsirota) October 21, 2025

Amen, Brother Sirota. Without this recognition, Trump voters are just ignorant bigots to be shunned. With it, their anger is understandable...not that anger makes for clearer thinking or better outcomes. Still, there's no more effective way to divide (and rule) the population than lording the innocence of the Democrats over Trump's "wrecking ball" presidency.

It’s my view that since that time we’ve been living in a dictatorship of Capital.

— RedBordeaux (@bourdeau_ed) October 21, 2025

Why the left always loses (it's the money, honey)

I came across this article in the Sheerpost blog. It contains a handy history of New York City's financial troubles in the '70s. Wall Street's refusal to market or buy its municipal bonds sunk many of the admirable programs it offered, including free college tuition at NYU. It's another case of the perverse "golden rule." (Whoever has the gold makes the rules.)

The city's administration also appealed to the federal government to give them bridge loans until they could finance their debt, The Ford administration refused, inspiring the famous "Ford to City: Drop Dead" headline.

To me this is yet another reminder that public financing and public banking is an absolute necessity, otherwise, even noble efforts like Mamdani's agenda will be impossible to implement. This impossibility would make progressive candidates into liars unless they construct a workaround like public banking.

One follow-up: Because City was strapped for cash, it had to sell land it had set aside for affordable housing to a developer eager to cash in on the distress: Donald Trump. Naturally he built high-end housing, not the affordable stuff. Gee, I wonder why real estate is so expensive in NYC! 

The Biggest Threat to Mamdani’s Agenda Isn’t Hochul or Trump — It’s Wall Street

October 20, 2025

 

Zohran Mamdani at the Resist Fascism Rally in Bryant Park on Oct 27th 2024 (by Bingjiefu He) | Wikimedia Commons

By Michael Beyea Reagan / Truthout

If polls are to be believed, Zohran Mamdani is likely to win the mayoralty of New York City this November. An October 9 Quinnipiac University survey taken after Mayor Eric Adams dropped from the race shows Mamdani is up 13 points over his nearest competitor, disgraced former Gov. Andrew Cuomo.

Despite his youth and executive inexperience, Mamdani has all the advantages — a better ground game with tens of thousands of volunteers, a better social media campaign driven by young activists with an irreverent style, more favorable national and international media coverage, as much as four times more campaign cash on hand than Cuomo, a spate of high-profile endorsements (although not the leading officials of his own party), and other strengths.

Yet despite these electoral advantages, the deck is stacked against Mamdani’s administration. This is because the political coalition necessary to govern is quite different from that which can get him elected.

If Mamdani wins in November it will demonstrate that progressive Democrats, running within the party, can win elections based on popular working class reforms — that is, if they aren’t thwarted by their own party leadership.

In the post-World War II period, this was a winning strategy. New York had a highly developed social welfare state, once considered the closest U.S. example of Scandinavian-style social democracy.

Between 1945 and 1975, New York had free public higher education and a free municipal hospital system, spent billions on public and cooperative housing, initiated rent control and job training programs, expanded welfare payments, and, famously, subsidized the transit fare, which stayed at just five cents for the first 40 years of the MTA’s existence.

This “social welfare” economy of NYC came crashing down with a punch delivered by Wall Street in the 1970s. The 1975 fiscal crisis was the result of a collapsing municipal bond market and a severe economic depression. The city lost a whopping 500,000 manufacturing jobs between 1969 and 1975 as North American manufacturers moved plants out of cities and eventually out of the country. Both the depression and the market collapse were the result of actions by the “masters of the universe,” the Wall Street investors whose funds flowed to overseas investments rather than supporting domestic industry and the cities where they were rooted.

New York was caught in this neoliberal slurry. With a declining economy, it couldn’t pay its bills. And with the municipal bond market in free fall, it couldn’t get access to credit to help it bridge the down years.

This is where Wall Street’s punch came in. The punch was a “capital strike” in which major banks refused to issue New York City bonds until the municipal government cut social programs to the satisfaction of financiers. Welfare programs, public schools, drug treatment centers, senior centers, and even police and fire stations all got the axe. The City University of New York (CUNY) imposed tuition for the first time in its 130-year history. Sydenham hospital in Harlem was shuttered. By some estimates, as many as 60,000 municipal workers lost their jobs.

With NYC municipal bonds locked out of the credit markets, Gov. Hugh Carey and Mayor Abraham Beame turned to the federal government for short-term aid. But a new Republican president, Gerald Ford, and his phalanx of neoliberal economists — most prominently Alan Greenspan (chair of the Council of Economic Advisors) and others like Treasury Secretary William Simon and the infamous Donald Rumsfeld (then chief of staff) — refused the city bridge loans. In fact, at a closed-door White House meeting where the Ford administration debated funding New York, Rumsfeld urged the president to tell the city, “Not just ‘no,’ but ‘hell no.’”

That attitude, to let the people of New York City dangle, or “drop dead” as suggested by a headline in the New York Daily News, was shared by the banks and the federal administration. So-called fiscal responsibility has been the bugaboo of social reform ever since.

In 2025, for Zohran Mamdani, these conditions remain largely unchanged — especially one: Wall Street’s stranglehold on city finances. With private financing necessary for public programs, the private sector has the ultimate veto over social policy. It can simply close the purse.

For his part, Mamdani has promised to pay for these programs through tax increases at the state and city level. His programs will add an estimated $7 billion to the city’s $116 billion annual budget. And he says he will pay for them through a series of progressive taxes that would increase income tax rates for those earning over $1 million a year and increase the state’s corporate tax rate to match that of New Jersey — 11.5 percent.

Indeed, this is how city finances were managed through the golden age of post-war growth, imposing a municipal income tax in the late 1960s, as well as maintaining a stock transfer tax and other progressive business taxes.

To get his taxes, Mamdani will have to go through Albany. The Democratic governor of New York, Kathy Hochul, has promised to block any tax increase meant to fund social programs. New York businesses and bourgeoisie are also threatening not a capital strike, but capital flight — to leave the city if Mamdani is able to increase taxes.

In short, the economic and political structures that brought an end to New York’s experiments in social democracy in the 1970s are still in place. First, the structure of the federal system makes changes at the local level very difficult. With necessary changes to improve city finances having to pass through Albany or Washington, it can be virtually impossible to develop and finance the social welfare structures that working people desperately need in the city. This is even more difficult with neoliberal and far right politicians, Hochul and Trump, holding state and federal positions.

But there is a deeper problem. When public programs are financed through the private sector, banks hold the ultimate veto power. This is what happened in the fiscal crisis of 1975, when Wall Street locked the city out of the credit market and forced New York to make cuts to the satisfaction of the banking sector. And this had happened before, in 1933, at the height of the Great Depression, when the “bankers’ agreement” closed credit markets on the city and forced austerity on municipal spending. This is the structural veto that Wall Street holds over our very democracy.

This is not to say that these obstacles are insurmountable, or that the hope of progressive reforms can never be achieved in the U.S., or at least in New York City. Indeed, Mamdani may be savvy enough, may have the popular support he needs, may benefit from an organized working population that can force through these reforms and the financing necessary to pay for them.

It is to say, however, that in a capitalist democracy, capital holds all the cards. Electing a single, lone, progressive politician is not enough to discipline the rich to pay for what all we need. That necessitates power. We would need mass movements that can threaten much bigger disruptions unless the rich capitulate. As we’ve seen with the Obama, Sanders, and other campaigns, translating an electoral coalition into a political force with popular power to govern is not always possible.

To do so would require amassing power outside of elected office, a power that can overcome the structural power of the banks and the investment class. Indeed, popular movements are always necessary to force elected officials, even ones as earnest as Zohran Mamdani, not to compromise on their promises. And there is indication that Mamdani may already be planning to do exactly that.

This kind of popular power is possible. After all, during the New Deal, the business class was chastened enough to allow the passage of major, humane, social reforms — to the benefit of working people. With the Trump administration’s assaults on the New Deal “administrative state,” that cycle seems to have run its course.

What comes next is anyone’s guess, and if Mamdani is elected, his victory would bode well for what progressives can achieve. But his plans will get nowhere without disruptive popular movements forcing these changes on the rich. At best, this will get us a sort of new, new deal — but with an old deck. This is good, but not enough. Perhaps, with movement organization and institutions of popular power, we can get to a place where it’s possible to imagine a new deck entirely, not just a new deal. And one day, we may be able to flip the table and drive the moneychangers from the people’s temple altogether.

Nobody benefits more from this than China

 

Nobody benefit from this hallucination more than China. pic.twitter.com/1C59DV3rih

— Kamran (@Kamran18736336) October 19, 2025

Why the ACA ("Obamacare") is less-than optimum

 The ACA was first proposed by Richard Nixon. It was codified by the same Heritage Foundation that produced "Project 2025" and protoyped by Mitt Romney in Massachusetts. It's nothing like an actual Democratic project (Medicare), and Obama even turned down the public option--a chance to buy into Medicare--because he'd made a deal with Big Pharma. I've even read he campaigned for the Senate on single-payer Medicare-for-All, but did an about face because he was concerned all those health insurance workers would be unemployed. (Hint: the Feds could have employed them to help run expanded Medicare, but the plutocrats in the C-Suite would have had a pay cut.)

 Now...notice the cost savings (NOT!)

 

Warren Mosler's Public Policy Recommendations

 From the Seven Deadly Innocent Frauds of Economics [pdf] 

The entire document is worth a look, and Mosler is one of the founders of Modern Money Theory. If you read the entire document, you'll see he's a smart cookie, and understands finance inside out. The following are his public policy prescriptions based on that understanding. 

Part III: Public Purpose

Functions of government are those that best serve the community by being done collectively. These include: The military, the legal system, international relations, police protection, public health (and disease control), public funding for education, strategic stockpiles, maintaining the payments system, and the prevention of “races to the bottom” between the states, including environmental standards, enforcement standards, regulatory standards and judicial standards.

What has made the American economy the envy of the world has been that people working for a living make sufficient take-home pay in order to be able to purchase the majority of the goods and services they desire and are produced. And what American business does is compete for those dollars with the goods and services they offer for sale. Those businesses that produce goods and services desired by consumers are often rewarded with high profits, while those that fail fall by the wayside. The responsibility of the federal government is to keep taxes low enough so that people have the dollars to spend to be able to purchase the goods and services they prefer from the businesses of their choice.

Today, unfortunately, we are being grossly overtaxed for the current level of government spending, as evidenced by the high level of unemployment and the high level of excess capacity in general. People working for a living are getting squeezed, as they are no longer taking home a large enough pay check to cover their mortgage payments, car payments and various routine expenses, never mind any extra luxuries. To address the current financial crisis and economic collapse, I recommend a number of proposals in the pages ahead.

A Payroll Tax Holiday

I recommend that an immediate “payroll tax holiday” be declared whereby the U.S. Treasury makes all FICA, Medicare and other federal payroll tax deductions for all employees and employers. This proposal will increase the take-home pay of a couple making a combined $100,000 per year by over $650 per month, restoring their ability to make their mortgage payments, meet their routine expenses, and even do a little shopping.

People with money to spend will immediately lead to a pickup in business sales, which will quickly result in millions of new jobs to serve the increased demand for goods and services. And people able to make their mortgage and loan payments is exactly what the banking system needs most to quickly return to health, not government funding that can only keeps them limping along with loans that continue to default. The only difference between a good loan and a bad loan is whether or not the borrower can
make his payment. 

Revenue sharing

My second proposal is to give the U.S. state governments an immediate, unrestricted $150 billion of revenue sharing on a per capita basis (about $500 per capita). Most of the states are in dire straits as the recession has cut into their normal revenue sources. By pushing back federal funds on a per capita basis, it will be “fair” to all and not specifically “reward bad behavior.” This distribution will give the states the immediate relief they need to sustain their essential services. As the economy recovers, their revenues will increase to pre-recession levels and beyond.

National Service Jobs

The next recommendation of mine is to fund an $8/hour [the figure is from 2010, so is low] national service job for anyone willing and able to work; this will include child care, the current federal medical coverage and all of the other standard benefits of federal employees. This is a critical step to sustain growth and foster price stability. This provides a transition from unemployment to private sector employment. Businesses tend to resist hiring the unemployed, and especially the long-term unemployed. This national service job provides a transition from unemployment to employment, and, as the economy recovers (due to my first two proposals), businesses will hire from this pool of labor to meet their needs for more workers.

Universal Health Care Coverage

My proposal regarding health care is to give everyone over the age of 18 a bank account that has, perhaps, $5,000 in it, to be used for medical purposes. $1,000 is for preventative measures and $4,000 for all other medical expenses. At the end of each year, any unspent funds remaining of the $4,000 portion are paid to that individual as a “cash rebate.” Anything above $5,000 would be covered by a form of Medicare. There would be no restrictions on purchasing private insurance policies. This proposal provides for universal health care, maximizes choice, employs competitive market forces to minimize costs, frees up physician
time previously spent in discussion with insurance companies, rewards “good behavior” and reduces insurance company participation. This will greatly reduce demands on the medical system, substantially increasing the supply of available doctor/patient time and makes sure all Americans have health care. To ensure preventative measures are taken, the year-end rebate can be dependent, for example, on the individual getting an annual checkup.And though it is federally funded, it can be administered by the states, which could also set standards and requirements.

There is no economic school of thought that would suggest health care should be what’s called a “marginal cost of production” means that it is bad for the economy and our entire standard of living to have business pay for health care. This proposal eliminates that problem for the American economy in a way that provides health care for everyone, saves real costs, puts the right incentives in place, promotes choice and directs competitive forces to work in favor of public purpose.

Proposals for the Monetary System

First, the Federal Reserve should immediately lend to its member banks on an unsecured basis, rather than demanding collateral for its loans. Demanding collateral is both redundant and obstructive. It is redundant
because member banks can already raise government-insured deposits and issue government-insured securities in unlimited quantities without pledging specific collateral to secure those borrowings. In return, banks are subject to strict government regulation regarding what they can do with those insured funds they raise, and the government continuously examines and supervises all of its member banks for compliance. 

With the government already insuring bank deposits and making sure only solvent banks continue to function, the government is taking no additional risk by allowing the Federal Reserve to lend to its member banks on an unsecured basis. With the Federal Reserve lending unsecured to its member banks, liquidity would immediately be normalized and no longer be a factor contributing to the current financial crisis or any future financial crisis. 

Second, the government should also remove the $250,000 cap on insured bank deposits, as well as remove regulations pertaining to bank liquidity, at the same time that it allows the Federal Reserve to lend unsecured to member banks. The Federal Reserve should lower the discount rate to the fed funds rate (and, as above, remove the current collateral requirements). The notion of a “penalty” rate is inapplicable with today’s nonconvertible currency and floating exchange rate policy.

Third, an interbank market serves no public purpose. It can be eliminated by having the Federal Reserve offer loans to member banks for up to 6 months, with the FOMC (Federal Open Market Committee, the collection of Fed officials who meet and vote on monetary policy) setting the term structure of rates at its regular meetings. This would also replace many of the various other lending facilities the FOMC has been experimenting with.

Fourth, have the Treasury directly fund the debt of the FHLB (Federal Home Loan Bank) and FNMA (the Federal National Mortgage Association), the U.S. Federal housing agencies. This will reduce their funding costs, and this savings will be directly passed on to qualifying home buyers. There is no reason to give investors today’s excess funding costs currently paid by those federal housing agencies when the full faith
and credit of the US government is backing them.

Fifth, have FNMA and the FHLB “originate and hold” any mortgages they make, and thereby eliminate that portion of the secondary mortgage market. With Treasury funding, secondary markets do not serve public purpose.

Sixth, increase and vigorously enforce mortgage fraud penalties with Federal agencies.

Strategic Stockpiles

When families live on remote farms, for example, it makes sense to store perhaps a year or more of food for crop failures and other potential disruptions of the food supply. However, families living in cities, as a practical matter, instead can only save U.S. dollars. Unfortunately, in the event of actual shortages of food and other strategic supplies, numbers in bank accounts obviously will not do the trick. It is therefore a matter of public purpose to insure that there are actual strategic reserves for emergency consumption. Currently we have a strategic oil reserve. This should be extended to stores of other necessities for the purpose of emergency consumption. The purpose should not be to support special interest groups, but to provide the consumer with real supplies of actual consumables for rainy days.

A Housing Proposal for the Financial Crisis:

1. If the owner of a house about to be foreclosed wants to remain in the house, he notifies the government, which then buys the house during the foreclosure sale period from the bank at the lower of fair market value or the remaining mortgage balance.
2. The government rents the house to the former owner at a fair market rent.
3. After two years, the house is offered for sale and the former owner/renter has the right of first refusal to buy it. 

While this requires a lot of direct government involvement and expense, and while there is room for dishonesty at many levels, it is far superior to any of the proposed plans regarding public purpose, which includes:

a. Keeping people in their homes via affordable rents;

b. Not interfering with existing contract law for mortgage contracts;

c. Minimizing government disruption of outcomes for mortgage backed securities holders;

d. Minimizing the moral hazard issue.

With this proposal, the foreclosure process is allowed to function according to law, so no contracts are violated. And renting to the former owner at a fair market rent is not a subsidy, nor is the repurchase option at market price a subsidy.

How We Can All Benefit from the Trade Deficit

The current trade gap is a reflection of the rest of the world’s desires to save U.S. financial assets. The only way the foreign sector can do this is to net export to the U.S. and keep U.S. dollars as some form of dollar financial assets (cash, securities, stocks, etc.). So the trade deficit is not a matter of the U.S. being dependent on borrowing offshore, as pundits proclaim daily, but a case of offshore investors desiring to hold U.S. financial assets. To accomplish their savings desires, foreigners vigorously compete in U.S. markets by selling at the lowest possible prices. They go so far as to force down their own domestic wages and consumption in their drive for “competitiveness,” all to our advantage. If they lose their desire to hold
U.S. dollars, they will either spend them here or not sell us products to begin with, in which case that will mean a balanced trade position. While this process could mean an adjustment in the foreign currency markets, it does NOT cause a financial crisis for the U.S. The trade deficit is a boon to the US. There need not be a “jobs issue” associated with it. Appropriate fiscal policy can always result in Americans having enough spending power to purchase both our own full employment output and anything the foreign sector may wish to sell us. The right fiscal policy works to optimize our output, employment and standard of living, given any size trade gap.

Industries with Strategic Purpose

Our steel industry is an example of a domestic industry with important national security considerations. Therefore, I would suggest that rather than continuing with the general steel tariffs recently implemented, defense contractors should be ordered to use only domestic steel. This will ensure a domestic steel industry capable of meeting our defense needs, with defense contractors paying a bit extra for domestically-produced steel, while at the same time lowering the price for non-strategic steel consumption for general use.

Using a Labor Buffer Stock to let Markets Decide the Optimum Deficit

To optimize output, substantially reduce unemployment, promote price stability and use market forces to immediately promote health-care insurance nationally, the government can offer an $8 per hour job to anyone willing and able to work that includes full federal health-care benefits. To execute this program, the government can first inform its existing agencies that anyone hired at $8 per hour “doesn’t count” for annual budget expenditures. Additionally, these agencies can advertise their need for $8 per hour employees with the local government unemployment office, where anyone willing and able to work can be dispatched to the available job openings. This job will include full benefits, including health care, vacation, etc. These positions will form a national labor “buffer stock” in the sense that it will be expected that these employees will be prone to being hired away by the private sector when the economy improves. As a buffer stock program, this is highly countercyclical anti-inflationary in a recovery, and anti-deflationary in a slowdown. Furthermore, it allows the market to determine the government deficit, which automatically sets it at a near “neutral” level. In addition to the direct benefits of more output from more workers, the indirect benefits of full employment should be very high as well. These include increased family coherence, reduced domestic violence, less crime, and reduced incarcerations. In particular, teen and minority employment should increase dramatically, hopefully, substantially reducing the current costly levels of unemployment.

Interest Rates and Monetary Policy

It is the realm of the Federal Reserve to decide the nation’s interest rates. I see every reason to keep the “risk free” interest rate at a minimum, and let the market decide the subsequent credit spreads as it assesses risk. Since government securities function to support interest rates, and not to finance expenditure, they are not necessary for the operation of government. Therefore, I would instruct the Treasury to immediately cease issuing securities longer than 90 days. This will serve to lower long-term rates and support investment, including housing. Note, the Treasury issuing long term securities and the Fed subsequently buying them, as recently proposed, is functionally identical to the Treasury simply not issuing those securities in the first place.

I would also instruct the Federal Reserve to maintain a Japan like 0% fed funds rate. This is not inflationary nor is it the cause of currency depreciation, as Japan has demonstrated for over 10 years. Remember, for every $ borrowed in the banking system, there is a $ saved. Therefore, changing rates shifts income from one group to another. The net income effect is zero. Additionally, the non-government sector is a net holder of government securities, which means there are that many more dollars saved than borrowed. Lower interest rates mean lower interest income for the non-government sector. Thus, it is only if the borrower’s propensity to consume is substantially higher than that of savers does the effect of lower interest rates become expansionary in any undesirable way. And history has shown this never to be the case. Lower long term rates support investment, which encourages productivity and growth. High risk-free interest rates support those living off of interest payments (called rentiers), thereby reducing the size of the labor force and consequently reducing real national output.

The Role of Government Securities

It is clear that government securities are not needed to “fund” expenditures, as all spending is but the process of crediting a private bank account at the Fed. Nor does the selling of government securities remove wealth, as someone buying them takes funds from his bank account (which is a U.S. financial asset) to pay for them, and receives a government security (which is also a U.S. financial asset). Your net wealth is the same whether you have $1 million in a bank account or a $1 million Treasury security. In fact, a Treasury security is functionally nothing more than a time deposit at the Fed.

Nearly 20 years ago, Soft Currency Economics was written to reveal that government securities function to support interest rates, and not to fund expenditures as generally perceived. It goes through the debits and credits of reserve accounting in detail, including an explanation of how government, when the Fed and Treasury are considered together, is best thought of as spending first, and then offering securities for sale. 

Government spending adds funds to member bank reserve accounts. If Govt. securities are not offered for sale, it’s not that government checks would bounce, but that interest rates would remain at the interest rate paid on those reserve balances.

In the real world, we know this must be true. Look at how Turkey functioned for over a decade—quadrillions of liras of deficit spending, interest rate targets often at 100%, inflation nearly the same, continuous currency depreciation and no confidence whatsoever. Yet government “finance” in lira was never an issue. Government lira checks never bounced. If they had been relying on borrowing from the markets to sustain spending, as the mainstream presumed they did, they would have been shut down long ago. Same with Japan – over 200% total government debt to GDP, 7% annual deficits, downgraded below Botswana, and yet government yen checks never bounced, and 3-month government securities fund near 0%. Again, clearly, funding is not the imperative. 

The U.S. is often labeled “the world’s largest debtor.” But what does it actually owe? For example, assume the U.S. government bought a foreign car for $50,000. The government has the car, and a non-resident has a U.S. dollar bank account with $50,000 in it, mirroring the $50,000 his bank has in its account at the Fed that it received for the sale of the car. The nonresident now decides that instead of the non-interest bearing demand deposit, he’d rather have a $50,000 Treasury security, which he buys from the government. Bottom line: the US government gets the car and the nonresident holds the government security. Now what exactly does the U.S.government owe? When the $50,000 security matures, all the government
has promised is to replace the security held at the Fed with a $50,000 (plus interest) credit to a member bank reserve account at the Fed. One financial asset is exchanged for another. The Fed exchanges an interest bearing financial asset (the security) with a non-interest bearing asset. That is the ENTIRE obligation of the U.S. government regarding its securities. That’s why debt outstanding in a government’s currency of issue is never a solvency issue.

Children as an Investment Rather than an Expense

Anyone who pauses to think about it will realize that our children are our fundamental real investment for the future. It should be obvious to all that without children, there won’t be much human life left in 100 years. However, our current institutional structure—the tax code and other laws and incentives on the books—have made our children an expense rather than an investment. And a lot of behavior most of us would like to see not happen, including deficiencies in education, child neglect and abuse and high rates of abortion, could be addressed by modifying the incentives built into our financial system.

Public Purpose

For me, all federal public policy begins and ends with public purpose. I begin with a brief list of the functions of government, all of which comprise what can be called public infrastructure, that in my estimation do serve public purpose and should be provisioned accordingly. 

The first is defense. It is my strong belief that without adequate military defenses, the world’s democracies (a word I’ll use for most forms of representative governments) are at risk of physical invasion and domination by nations with dictatorships and other related forms of totalitarianism.

While democracies will move to defend themselves, in today’s world, it is most often the dictatorships that move militarily to attack other nations without the provocation of a military threat. Examples include Pakistan threatening India, North Korea threatening not only South Korea but others in the region, Russia supporting military actions against most any western democracy, Israel under constant threat of attack by all the region’s dictatorships and the Taliban attempting to take control of Afghanistan and disrupt any attempt at establishing representative government. It is evident to me that if the western democracies decided to abandon all defense measures they would immediately become subject to hostile invasion on
multiple fronts. Therefore, there is a critical public purpose being served by allocating real resources to national defense. The next step is to set the objectives of our defense effort. At one time this included “the ability to fight a prolonged war on two fronts” much like the European and Pacific fronts of World War II. Other objectives have included the ability to strike mostly anywhere in the world within a certain number of hours with a force of a pre-determined size, to maintain air superiority and to be able to deliver
nuclear weapons against the Soviet Union and other potentially hostile nations which can direct nuclear weapons at the U.S. and, more recently, to have the capability of using drones to assassinate hostile individuals remotely anywhere in the world.

These are all military objectives. Some are general, some very specific. In the United States, they are ultimately political choices. For me this means the President, as Commander in Chief, submitting these types of high-level military objectives to Congress for approval, and then working to achieve those objectives by proposing more specific military options to accomplish our national goals. The President proposes objectives and what is needed to accomplish those objectives, and the Congress reviews, debates, and modifies the objectives and proposals to meet those objectives, and appropriates the resources it decides necessary to meet what it decides best serves the nation’s military objectives.

Most of the world’s democracies (and particularly those with a U.S. military presence) have, however, come to rely on the assumption that the U.S. would ultimately defend them. Often, though not always, this is through formal alliances. This ultimate reliance on the U.S. military has resulted in these nations not allocating what would otherwise be substantial portions of their real wealth to their national defense. One option for addressing this issue would be to meet with the world’s democracies and establish what a “fair contribution” to the U.S. defense effort would be for these nations, and then go so far as to publish a “non-defense” pledge for those who refuse to contribute their fair share of real goods and services to
the common defense.

The ‘right sized’ defense has everything to do with actual defense needs, and nothing to do with the total expenditures of dollars necessary to meet the nation’s defense needs. Nor need there any mention of “how are we going to pay for it” as taxes function to regulate aggregate demand and not to raise revenue per se. The way we, the current generation, always “pay for I”’ is by the real resources—goods and services—that are allocated to the military that could have remained in the private sector for private consumption. That real cost includes all the people serving in the military who could have been working and producing goods and services in the private sector for private consumption. That includes everything from auto
workers to tennis instructors, lawyers, doctors, and stock brokers.

The “right size” and “right type” of defense can change dramatically over relatively short periods of time. China’s capability of shooting down satellites and Iranian medium range nuclear missiles that could threaten our shipping are but two examples of how the advance of military technology can very quickly make prior technologies instantly obsolete. Both objectives and options must be under continuous review, and there can be no let up in advancing new technologies to do all we can to stay on the leading edge of military effectiveness.

About 10 years ago I was discussing the military with a member of the Pentagon. He said that we needed to increase the size of the military. I said that if we wanted to do that we should have done it ten years ago (1990) when we were in a recession with high unemployment and excess capacity in general. Back then, with all that excess capacity, a buildup of the military would not have been taking as many productive resources away from the private sector as it would have done during a period of full employment. He
responded, “Yes, but back then we couldn’t afford it, the nation was running a budget deficit; while today with a budget surplus, we can afford it’. This is completely backwards! The government never has nor doesn’t have any dollars. The right amount of spending has nothing to do with whether the budget is in surplus or deficit. They use the monetary system which provides no information for all their information.

Inflation!

OK, so the risk of running a deficit that is too large is not insolvency—the government can’t go broke—but excess aggregate demand (spending power) that can be inflationary. While this is something I’ve never seen in the U.S. in my 60- year lifetime, it is theoretically possible. But then again, this can only happen if the government doesn’t limit its spending by the prices it is willing to pay, and, instead, is willing to pay ever higher prices even as it’s spending drives up those prices, as would probably the case.

And now here is a good place to review what I first wrote back in 1992 for Soft Currency Economics which came out in 1993:

Inflation vs. Price Increases

Bottom line, the currency itself is a public monopoly, which means the price level is necessarily a function of prices paid by the government when it spends, and/or collateral demanded when it lends. The last part means that if the Fed simply lent without limit and without demanding collateral we would all borrow like crazy and drive prices to the moon. Hence, bank assets need to be regulated because otherwise, with FDIC-insured deposits, bankers could and probably would borrow like crazy to pay themselves unlimited salaries at taxpayer expense. And that’s pretty much what happened in the S & L crisis of the 1980’s, which also helped drive the Reagan boom until it was discovered. Much like the subprime boom drove the Bush expansion until it was discovered. So it now goes without saying that bank assets and capital ratios need to be regulated.

But let’s return to the first part of the statement—“the price level is a function of prices paid by govt. when it spends.” What does this mean? It means that since the economy needs the government spending to get the dollars it needs to pay taxes, the government can, as a point of logic decide what it wants to pay for things, and the economy has no choice but to sell to the government at the prices set by government in order to get the dollars it needs to pay taxes, and save however many dollar financial assets it wants to. Let me give you an extreme example of how this works: Suppose the government said it wasn’t going to pay a penny more for anything this year than it paid last year, and was going to leave taxes as they are in any case.

And then suppose this year all prices went up by more than that. In that case, with its policy of not paying a penny more for anything, government would decide that spending would go from last year’s $3.5 trillion to 0.

That would leave the private sector trillions of dollars short of the funds it needs to pay the taxes. To get the funds needed to pay its taxes, prices would start falling in the economy as people offered their unsold goods and services at lower and lower prices until they got back to last year’s prices and the government then bought them. While that’s a completely impractical way to keep prices going up, in a market economy, the government would only have to do that with one price, and let market forces adjust all other prices to reflect relative values. Historically, this type of arrangement has been applied in what are called “buffer stock” policies, and were mainly done with agricultural products, whereby the government
might set a prices for wheat at which it will buy or sell. The gold standard is also an example of a buffer stock policy.

Today’s governments unofficially use unemployment as their buffer stock policy. The theory is that the price level in general is a function of the level of unemployment, and the way to control inflation is through the employment rate. The tradeoff becomes higher unemployment vs. higher inflation. To say this policy is problematic is a gross understatement, but no one seems to have any alternative that’s worthy of debate.

All the problematic inflation I’ve seen has been caused by rising energy prices, which begins as a relative value story but soon gets passed through to most everything and turns into an inflation story. The “pass through” mechanism, the way I see it, comes from government paying higher prices for what it buys, including indexing government wages to the CPI (Consumer Price Index), which is how we as a nation have chosen to define inflation. And every time the government pays more for the same thing, it is redefining its currency downward.

It is like the parents with the kids who need to do chores to earn the coupons they need to pay the monthly tax to their parents. What is the value of those coupons? If the parents pay one coupon for an hour’s worth of work (and all the work is about equally difficult and equally “unpleasant”), then one coupon will be worth an hour’s worth of child labor. And if the children were to exchange coupons with each other, that’s how they would value them. Now suppose that the parents paid two coupons for an hour’s worth of work. In that case, each coupon is only worth a half hour’s worth of work. By paying twice as many coupons for the same amount of work, the parents caused the value of the coupons to drop in half. 

But what we have is a government that doesn’t understand its own monetary operations, so, in America, the seven deadly innocent frauds rule. Our leaders think they need to tax to get the dollars to spend, and what they don’t tax they have to borrow from the likes of China and stick our children with the tab. And they think they have to pay market prices. So from there the policy becomes one of not letting the economy get too good, not letting unemployment get too low, or else we risk a sudden hyperinflation like the Weimar Republic in Germany 100 years or so ago. Sad but true. So today, we sit with unemployment pushing 20% if you count people who can’t find full-time work, maybe 1/3 of our productive capacity going idle, and with a bit of very modest GDP growth—barely enough to keep unemployment from going up. And no one in Washington thinks it’s unreasonable for the Fed to be on guard over inflation and ready to hike rates to keep things from overheating (not that rate hikes do that, but that’s another story).

And what is the mainstream theory about inflation? It’s called “expectations theory.” For all but a few of us, inflation is caused entirely by rising inflation expectations. It works this way: when people think there is going to be inflation, they demand pay increases and rush out to buy things before the price goes up. And that’s what causes inflation. What’s called a “falling output gap,” which means falling unemployment for all practical purposes, is what causes inflation expectations to rise. And foreign monopolists hiking oil prices can make inflation expectations rise, as can people getting scared over budget deficits, or getting scared by the Fed getting scared. So the job of the Fed regarding inflation control becomes managing inflation expectations. That’s why with every Fed speech there’s a section about how they are working hard to control inflation, and how important that is. They also believe that the direction of the economy is dependent on expectations, so they will always forecast “modest growth” or better, which they believe helps to cause that outcome. And they will never publicly forecast a collapse, because they believe that that could cause a collapse all by itself.
 

So for me, our biggest inflation risk now, as in the 1970’s, is energy prices (particularly gasoline). Inflation will come through the cost side, from a price-setting group of producers, and not from market forces or excess demand. Strictly speaking, it’s a relative value story and not an inflation story, at least initially, which then becomes an inflation story as the higher imported costs work their way through our price structure with government doing more than its share of paying those higher prices and
thereby redefining its currency downward in the process.