The Weiner Component Vol.#2 – President Trump, the Mighty Warrior

On Friday, April 8, 2017, President Trump ordered the bombing of a Syrian military airport from where he believed planes, on April 4th  originated, that dropped poison sarin gas upon onto a Damascus suburb killing up to 1,423 people, mostly civilian adults and a large number of children.

 

Trump commented at a news conference about watching television and seeing the results of the raid upon young children.  “I will tell you that attack on children yesterday had a big impact.  That was a horrible, horrible thing.  And I’ve been watching it, and seeing it, and it doesn’t get any worse than that.”  He spoke about the “beautiful little babies” that had been killed with poison gas.  “It crossed a lot of lines for me.  When you kill innocent children, innocent babies, little babies with a chemical gas that is so lethal.  That crosses many, many lines.  Beyond a red line, many, many lines.”

 

On Friday when he met with the Chinese President at his resort in Florida he had ordered as Commander and Chief of the U.S. Military fifty-nine Tomahawk missiles to be sent to the Shayrat Air Base, where the Syrian planes carrying the poison gas had presumably originated.  In doing this Trump changed his “America First” policy.

******************************

To understand both Syria and the Middle East it is necessary to look at this region historically.  The Ottoman or Turkish Empire began toward the end of the 13th Century, when it conquered most of what is today the Middle East.  After 1354 it crossed into Europe conquering the Balkans.  During the 16th and 17th Centuries it became a multinational, multilingual Empire, consisting of Southeast Europe, parts of Central Europe, Western Asia, the Caucasus, North Africa and the Horn of Africa.  For various reasons the Ottomans suffered severe military defeats in the late 18th and 19th Centuries.  In the early 20th Century they allied with the Central Powers during World War I.  Its defeat in that war led to the occupation of parts of its territories by some of the Allied Powers.  This resulted in the loss of itsremaining empire.  The Middle East territories were divided between England and France.  A successful revolt against the occupying allies led to the emergence of the Republic of Turkey, which is today modern Turkey.

 

The Middle East was split-up by the two Allied Nations in such a way as to accommodate their new possessions as colonies and protectorates.  The indigenous needs, religions, and otherwise of the people were ignored.  The divisions were decided totally upon requirements or whims of the victorious European nations that took them over as possessions that would be used for essentially economic purposes.

 

After World War II these colonies began revolting in order to gain their independence.  When it was realized that it would be cheaper to grant them independence and trade with them rather than continue to hold them in line militarily the Middle East nations gained their freedom and the Age of Imperialism ended.

 

The boundary lines that were set at the end of the First World War are the same boundary lines that exist today.  The Middle East nations are essentially conglomerates of different groups of peoples.  In a few cases there is a majority but in most instances the countries are made up of many minorities, usually with one of them ruling the country.  Such is the case in Syria.

 

In 2011 the Arab Spring occurred.  It was a movement of a number of Middle East nations attempted to move in the direction of democracy.  In most cases these countries ended up with a new minority ruling and the rest of the population being more or less repressed as they were before 2011.

 

In Syria the Arab Spring generated a conflict between Bashar al-Assad’s regime that represents a minority of its citizens and a majority of different groups that wanted it gone.  Assad is supported by about one third of the population and the army.  Over the last six years the situation has spiraled into an immensely complicated international war.  On the one side there is the government of the country headed by President al-Assad, who is supported by Iran, Hezbollah, and Russia and on the other side innumerable groups, supported by Saudi Arabia and to some extent by the U.S., fighting Assad’s government and each other at times.  Some of the groups are extremely reactionary or radical and some are more moderate but the political positions the groups adhere to changes at times, putting the U.S. in an impossible position as to whom to support militarily.

 

In addition ISIS or ISIL has set up what it calls a Worldwide Caliphate (world state) which it claims has religious, political, and military authority over all Muslims worldwide.  ISIS has controlled a large section in western Iraq and eastern Syria containing an estimated 2.8 to 8 million people.  In addition to warfare they have conducted televised mass beheadings of prisoners and civilians, which have included two American newsmen.

 

In the constant six years of civil war over 4 ½ million people in Syria have been displaced.  This has led to a constant stream of refugees leaving or trying to leave the country.  The mass of refugees have caused strains in other Middle East countries, in Europe, and even in the United States, where   President Donald Trump has unsuccessfully attempted to keep, among others, all Syrian refugees from entering the country, calling them potential terrorists.

 

While earlier the United States under President Barack Obama wanted Assad gone they had largely participated in arming the Kurds, a group situated in a region in both Iraq and Syria, whose agenda is mainly to set up their own Kurd state.  The U.S. is mainly bombing ISIS in both countries while the Kurds are fighting them on the ground.  Largely but not completely the United States had, has avoided specifically supporting anyone in the Syrian Civil War.  But they are continuing to fight ISIS, mainly from the air.

***************************

In 2013, after a chemical poison gas attack by President Bashar al-Assad’s government, Russia had supposedly removed all poison gas chemicals from Syria after it they were initially used by them.  President Obama, at that time had drawn a red line, the United States would not allow the use of chemical warfare.  Presumably he was stopped from taking any actions by the Republican Congress.  But Assad did agree to give up all his chemical weapons, which were removed by Russia and presumably destroyed.  But it would seem that Assad held back some of the poison gas and this was used in the early April 2017 bombing in the rebel held area of Khan Sheikhoun.

 

The raiders dropped barrel bombs, which in this case were canisters of sarin poison gas. In addition to be breathed in the gas can enter the body through the pores in the skin.  There were some very dramatic television pictures of people trying to wash the poison off the bodies and clothing of young children by hosing them with water.  There were also pictures of children and adults undergoing great torment painfully trying to breathe.  This apparently is what caused Trump’s reaction.

 

Assad claims that he is not responsible, that he gave up his supply of poison gas in 2013.  Putin and Russia support his claim.  The United States and President Trump blame the Assad regime.  Not too long ago Chlorine gas was used against one of the rebelling groups in Syria by Assad.  Apparently chlorine, which is used to etch glass, in not a poison gas!  The situation in Syria is complicated, particularly with issuing blame.

*************************************

My last point concerns President Donald J. Trump.  How sincere is he?  He has stated that he doesn’t like to read, that he gets his information by watching television.  His reaction to the chemical poison gas attack in Syria has been shock, watching young children suffering from poison gas.  His reaction to the sight was to punish the perpetrators of the bombing.

 

There was no investigation of who had dropped the gas bombs.  It was broadly assumed that only al-Assad was capable of doing it.  Assad, backed by Russia, claimed that he did not order it or even that he had any poison gas.  He claimed that his government had turned over their supply of poison gas to Russia in 2013, who had destroyed the supply.

 

Would Assad order the dropping of the poison gas?  I suspect the answer is, yes, if he had a reason to do so.

 

Trump seems to change his attitudes as quickly as a chameleon changes its color.  He has claimed that he wasn’t interested in what was happening overseas, that his basic policy is America first.  Yet, after watching some television newsreel about children suffering and dying from being gassed in Syria he ordered the bombing of the Syrian airfield where the planes are supposed to have come from.  He was emotionally moved and reacted to the sight of the atrocity.

*******************************

It should also be noted that President Trump likes to change the topic at times that the media is using when it is negative.  This is particularly true in terms of him and his staff being associated with Russia during the Presidential Campaign and earlier.

 

In doing this he’s come up with real nonsense, such as President Obama illegally bugging his facilities during the Presidential campaign.  There is no proof of this and it has been emphatically disclaimed by all the government agencies like the FBI, but still Trump persists in this bit of alternate reality.  I get the impression that Trump’s version of a fact is whether, if he were in the other President’s position then it is something he would do.  Apparently, to him, everyone else has the same low code of honor Trump has!

 

One of Trump’s former aids is registering retrogressively as a foreign agent.  Another was fired after lying to the Vice President.  Numerous others have associations with foreign countries.  Trump has stated in different speeches that he both personally knows and that he has never met Vladimir Putin, the Russian premier.

 

It has been suggested that the American bombing of the Syrian air force base was arranged by Trump with Putin’s support and that Assad’s government knew about it in advance.  From what I understand only six Syrians died from the exploding 59 million dollars’ worth of Tomahawk missiles, that is 59 separate tomahawk missiles each costing one million dollars.  Is this true?  I have no idea.  Could it be true?  There were no Russians anywhere in or near the airbase.

 

Will Trump do it again?  President Putin has stated that there will be serious consequences if he does.

 

Looking at what’s happening in Syria from President Trump’s prospective, it’s alright to kill people and children as long as poison gas is not used.  There seems to be something wrong with that attitude.

 

If this is the only effort made against Assad and his government then what was the real point of the 59 million dollars’ worth of Tomahawk missiles dropped on the Syrian air base?  Or was this a message being sent to North Korea, telling them to back down on their atomic bombs and missile development tests?

 

Somehow a lot of what has happen here makes no sense unless it is an outpouring of Trump’s ever-changing emotional states.

The Weiner Component Vol.2 #13 – President Trump, the Mighty Warrior

 

On Friday, April 8, 2017, President Trump ordered the bombing of a Syrian military airport from where he believed planes, on April 4th  originated, that dropped poison sarin gas upon onto a Damascus suburb killing up to 1,423 people, mostly civilian adults and a large number of children.

 

Trump commented at a news conference about watching television and seeing the results of the raid upon young children.  “I will tell you that attack on children yesterday had a big impact.  That was a horrible, horrible thing.  And I’ve been watching it, and seeing it, and it doesn’t get any worse than that.”  He spoke about the “beautiful little babies” that had been killed with poison gas.  “It crossed a lot of lines for me.  When you kill innocent children, innocent babies, little babies with a chemical gas that is so lethal.  That crosses many, many lines.  Beyond a red line, many, many lines.”

 

On Friday when he met with the Chinese President at his resort in Florida he had ordered as Commander and Chief of the U.S. Military fifty-nine Tomahawk missiles to be sent to the Shayrat Air Base, where the Syrian planes carrying the poison gas had presumably originated.  In doing this Trump changed his “America First” policy.

******************************

To understand both Syria and the Middle East it is necessary to look at this region historically.  The Ottoman or Turkish Empire began toward the end of the 13th Century, when it conquered most of what is today the Middle East.  After 1354 it crossed into Europe conquering the Balkans.  During the 16th and 17th Centuries it became a multinational, multilingual Empire, consisting of Southeast Europe, parts of Central Europe, Western Asia, the Caucasus, North Africa and the Horn of Africa.  For various reasons the Ottomans suffered severe military defeats in the late 18th and 19th Centuries.  In the early 20th Century they allied with the Central Powers during World War I.  Its defeat in that war led to the occupation of parts of its territories by some of the Allied Powers.  This resulted in the loss of itsremaining empire.  The Middle East territories were divided between England and France.  A successful revolt against the occupying allies led to the emergence of the Republic of Turkey, which is today modern Turkey.

 

The Middle East was split-up by the two Allied Nations in such a way as to accommodate their new possessions as colonies and protectorates.  The indigenous needs, religions, and otherwise of the people were ignored.  The divisions were decided totally upon requirements or whims of the victorious European nations that took them over as possessions that would be used for essentially economic purposes.

 

After World War II these colonies began revolting in order to gain their independence.  When it was realized that it would be cheaper to grant them independence and trade with them rather than continue to hold them in line militarily the Middle East nations gained their freedom and the Age of Imperialism ended.

 

The boundary lines that were set at the end of the First World War are the same boundary lines that exist today.  The Middle East nations are essentially conglomerates of different groups of peoples.  In a few cases there is a majority but in most instances the countries are made up of many minorities, usually with one of them ruling the country.  Such is the case in Syria.

 

In 2011 the Arab Spring occurred.  It was a movement of a number of Middle East nations attempted to move in the direction of democracy.  In most cases these countries ended up with a new minority ruling and the rest of the population being more or less repressed as they were before 2011.

 

In Syria the Arab Spring generated a conflict between Bashar al-Assad’s regime that represents a minority of its citizens and a majority of different groups that wanted it gone.  Assad is supported by about one third of the population and the army.  Over the last six years the situation has spiraled into an immensely complicated international war.  On the one side there is the government of the country headed by President al-Assad, who is supported by Iran, Hezbollah, and Russia and on the other side innumerable groups, supported by Saudi Arabia and to some extent by the U.S., fighting Assad’s government and each other at times.  Some of the groups are extremely reactionary or radical and some are more moderate but the political positions the groups adhere to changes at times, putting the U.S. in an impossible position as to whom to support militarily.

 

In addition ISIS or ISIL has set up what it calls a Worldwide Caliphate (world state) which it claims has religious, political, and military authority over all Muslims worldwide.  ISIS has controlled a large section in western Iraq and eastern Syria containing an estimated 2.8 to 8 million people.  In addition to warfare they have conducted televised mass beheadings of prisoners and civilians, which have included two American newsmen.

 

In the constant six years of civil war over 4 ½ million people in Syria have been displaced.  This has led to a constant stream of refugees leaving or trying to leave the country.  The mass of refugees have caused strains in other Middle East countries, in Europe, and even in the United States, where   President Donald Trump has unsuccessfully attempted to keep, among others, all Syrian refugees from entering the country, calling them potential terrorists.

 

While earlier the United States under President Barack Obama wanted Assad gone they had largely participated in arming the Kurds, a group situated in a region in both Iraq and Syria, whose agenda is mainly to set up their own Kurd state.  The U.S. is mainly bombing ISIS in both countries while the Kurds are fighting them on the ground.  Largely but not completely the United States had, has avoided specifically supporting anyone in the Syrian Civil War.  But they are continuing to fight ISIS, mainly from the air.

***************************

In 2013, after a chemical poison gas attack by President Bashar al-Assad’s government, Russia had supposedly removed all poison gas chemicals from Syria after it they were initially used by them.  President Obama, at that time had drawn a red line, the United States would not allow the use of chemical warfare.  Presumably he was stopped from taking any actions by the Republican Congress.  But Assad did agree to give up all his chemical weapons, which were removed by Russia and presumably destroyed.  But it would seem that Assad held back some of the poison gas and this was used in the early April 2017 bombing in the rebel held area of Khan Sheikhoun.

 

The raiders dropped barrel bombs, which in this case were canisters of sarin poison gas. In addition to be breathed in the gas can enter the body through the pores in the skin.  There were some very dramatic television pictures of people trying to wash the poison off the bodies and clothing of young children by hosing them with water.  There were also pictures of children and adults undergoing great torment painfully trying to breathe.  This apparently is what caused Trump’s reaction.

 

Assad claims that he is not responsible, that he gave up his supply of poison gas in 2013.  Putin and Russia support his claim.  The United States and President Trump blame the Assad regime.  Not too long ago Chlorine gas was used against one of the rebelling groups in Syria by Assad.  Apparently chlorine, which is used to etch glass, in not a poison gas!  The situation in Syria is complicated, particularly with issuing blame.

*************************************

My last point concerns President Donald J. Trump.  How sincere is he?  He has stated that he doesn’t like to read, that he gets his information by watching television.  His reaction to the chemical poison gas attack in Syria has been shock, watching young children suffering from poison gas.  His reaction to the sight was to punish the perpetrators of the bombing.

 

There was no investigation of who had dropped the gas bombs.  It was broadly assumed that only al-Assad was capable of doing it.  Assad, backed by Russia, claimed that he did not order it or even that he had any poison gas.  He claimed that his government had turned over their supply of poison gas to Russia in 2013, who had destroyed the supply.

 

Would Assad order the dropping of the poison gas?  I suspect the answer is, yes, if he had a reason to do so.

 

Trump seems to change his attitudes as quickly as a chameleon changes its color.  He has claimed that he wasn’t interested in what was happening overseas, that his basic policy is America first.  Yet, after watching some television newsreel about children suffering and dying from being gassed in Syria he ordered the bombing of the Syrian airfield where the planes are supposed to have come from.  He was emotionally moved and reacted to the sight of the atrocity.

*******************************

It should also be noted that President Trump likes to change the topic at times that the media is using when it is negative.  This is particularly true in terms of him and his staff being associated with Russia during the Presidential Campaign and earlier.

 

In doing this he’s come up with real nonsense, such as President Obama illegally bugging his facilities during the Presidential campaign.  There is no proof of this and it has been emphatically disclaimed by all the government agencies like the FBI, but still Trump persists in this bit of alternate reality.  I get the impression that Trump’s version of a fact is whether, if he were in the other President’s position then it is something he would do.  Apparently, to him, everyone else has the same low code of honor Trump has!

 

One of Trump’s former aids is registering retrogressively as a foreign agent.  Another was fired after lying to the Vice President.  Numerous others have associations with foreign countries.  Trump has stated in different speeches that he both personally knows and that he has never met Vladimir Putin, the Russian premier.

 

It has been suggested that the American bombing of the Syrian air force base was arranged by Trump with Putin’s support and that Assad’s government knew about it in advance.  From what I understand only six Syrians died from the exploding 59 million dollars’ worth of Tomahawk missiles, that is 59 separate tomahawk missiles each costing one million dollars.  Is this true?  I have no idea.  Could it be true?  There were no Russians anywhere in or near the airbase.

 

Will Trump do it again?  President Putin has stated that there will be serious consequences if he does.

 

Looking at what’s happening in Syria from President Trump’s prospective, it’s alright to kill people and children as long as poison gas is not used.  There seems to be something wrong with that attitude.

 

If this is the only effort made against Assad and his government then what was the real point of the 59 million dollars’ worth of Tomahawk missiles dropped on the Syrian air base?  Or was this a message being sent to North Korea, telling them to back down on their atomic bombs and missile development tests?

 

Somehow a lot of what has happen here makes no sense unless it is an outpouring of Trump’s ever-changing emotional states.

The Weiner Component Vol.2 #12 – Trump & Taxes

speaking at CPAC in Washington D.C. on Februar...

Donald J. Trump, the candidate, made assorted promises to assorted groups about what he would do with taxes. At a rally in Scranton, Pa. he promised to “massively cut taxes for the middle class, the forgotten people, the forgotten men and women of this country who built our country.” At a town hall meeting on NBC’s Today Show, Trump said he believes in raising taxes for the wealthy. He has also promised to lower taxes for the wealthy and for corporations. The last part, he said, will bring jobs back into the United States. According to one survey taken after the last debate he had with Hillary Clinton, 51 percent of the people intending to vote for him supported increasing taxes on high earning individuals.

 

Trump, the President, has come out with his tax plan. Under it the top one percent, people like himself, will get about half of the benefits of his tax cuts. A millionaire would get an average tax cut of $317,000 up, depending upon how many millions he earned over the year.

 

Trump reduces the current seven tax brackets down to three distinct categories. He does away or repeals the head of household tax filing category. He raises the standard deduction for married couples filing jointly from $12,000 to $30,000 and for single individuals with or without children from $6,300 currently for those with no dependents to $15,000. Those who are currently single heads of households, like divorced women with children, would actually have their income taxes increased.

 

A family earning between $40,000 and $50,000 a year would get a tax cut of $560. But millions of middle class working families will have their tax bills rise under Trump’s plan. This is especially true for single-parent families because of the repeal of the head of household filing status as well as that of personal exceptions. Under Trump’s plan a single parent with $75,000 in earnings, two school age children and no child care costs would pay an additional $2,440 in income taxes. While a single parent with an income of $50,000, three teen-aged school children would be taxed an additional $1,186. A married couple with $50,000 in earnings and two school age would see a tax increase of $159. Many married couples would see no benefit from his so-called tax reform.

 

Presumably Trump’s proposal to cut the corporate tax rate from thirty-five percent to fifteen percent will help all taxpayers by boosting economic growth. He would also eliminate the Federal Estate Tax completely. This tax is paid by only the wealthiest taxpayers, by less than the top one percent. It’s a good way to keep wealth in the hands of the few. And, of course, he will do nothing to raise the federal level of minimum pay beyond $7.25 an hour.

 

President Trump’s Tax Plan does not deal with the needs of the Middle Class nor with single individuals raising families but is basically a give-away to the wealthy and the large corporations. He seems to be satisfying the economic group to which he belongs rather than dealing with the needs of the many.

********************************

The United States is a Federal Republic consisting of federal, state, and local governments. Taxes are imposed on each of these levels. These include taxes on income, payroll, property, sales, capital gains, dividends, interest, imports, estates, school districts, and gifts. There are also various fees and licenses. These are imposed on net income of individuals, businesses, and corporations by the federal and some local governments.

 

Most business expenses and some living costs reduce taxable income. Among these are mortgage interest, if you own a house, state and local taxes, charitable contributions, and medical costs. Payroll taxes are paid by both the employer and the employee, as are Social Security and Medicare. An unemployment tax is an expense only to the employer.

 

Property taxes are imposed by most local governments and many special purpose authorities like school districts. These are based upon the appraised value of the property and more than one such tax can be imposed upon a single property.

***********************************

There are two types of taxation in the United States. One type is Progressive Taxation and all the others are Regressive Taxation. The Progressive is the Income Tax, as utilized by the Federal Government and a number of states. Here the more one earns the larger is the percent of their income they pay in taxes. In terms of Regressive Taxation, here everyone pays the same amount of their income regardless of how large or small it is.

 

A Regressive Tax would be a sales tax, value added taxes as in the purchase of gasoline or liquor, both of which would also include sales tax. It would be on imports, licenses for anything. It is a fixed amount that everyone would pay equally, regardless of how much or little they earn.

 

The problem with the progressive tax in America is that it is progressive up to a point and then it becomes regressive. Currently there are seven levels going from 10 to 40 percent of the taxed incomes after deductions are subtracted from the income. Progressive taxes go from $9,275 for a single person to $466,950 for a married couple filing jointly. In between these two there is another category called head of household, which is more than a single person pays and less than a married couple is taxed. After the income reaches $466,950, no matter how high it goes, the amount paid remains at 40 percent. Percentage wise the amount paid in taxes actually decreases.

 

Mitt Romney, when he was running for President in 2012 released his taxes for that year. The amount he paid was eleven or twelve percent of his annual income. The average family with an income well under $100,000 will pay 25 to 35 percent in income taxes.

 

The CEO of Hewlett Packard earns 15 million a year, which is over one million a month. Her taxes increase as her income rises in January, the first month of the year, until she reaches $466,950, then for the remaining eleven months of the year she will pay a fixed 40 percent of her income in taxes.

 

Donald Trump, who claims to have ten billion dollars, which he has never proven, has at least multi-millions. He pays the same 40 percent of his income in income taxes; but when eating at a restaurant would pay the same rate of sales tax as a man who could only afford to take his wife to a fancy dinner once a year.

 

Trump would reduce the current seven stages of income taxes to three levels: 12%, 26%, and 33%. His maximum income tax would be at 33 percent. A married couple filing jointly would pay $225,000. No one would pay a larger amount than the person earning a little under ¼ of a million dollars and heads of households would pay the single rate. Under Trump’s plan the system becomes far more regressive and the government collects far less in taxes during a period when the National Debt is over 19 trillion dollars. It could conceivably double under Trump.

*******************************

Trump also wants to reduce the corporate tax rate from 35% to 15%. He argues that this will bring industry back to the United States. The actual corporate tax that the government collects is lower than that of Germany, Canada, Japan, and China, among others. The reason for this is called tax expenditures, which is a term designed to legitimize special interest tax breaks and loopholes.

 

The 35% tax rate for most large corporations is a joke. Some of the largest corporations in the United States pay no taxes at all. Two examples would be General Electric and Wells Fargo. These and many other major corporations pay no income tax because the Tax Code is riddled with exemptions and loopholes. These were essentially created by lobbyists. The Tax Code is 71,000 pages long. It has been constantly added to over the years.

 

From 2008 to 2010 at least 30 Fortune 500 Companies, such as Pepsi Cola, Verizon, Wells Fargo, and DuPont, paid more to lobbyists than they did in taxes. They spent $476 million pressuring Congress for tax break loopholes and special subsidies. They kept $164 billion in profits and received $10.6 billion in rebates.

 

In a sense it can be said that Congress sells loopholes and subsidies. Monsanto paid 22 instead of 35%, while DuPont received a 72 million dollar rebate when it made a profit of 2.1 billion dollars. Basically the Tax Code is a mess.

 

In the United States elections are expensive. The Congressmen from both parties accept contributions, particularly in the House of Representatives when they run for office every two years. In addition Congressmen accept benefices from lobbyists but, here, the Republicans are the worst of the two. They prattle on about free markets while protecting just about any market-distorting loophole. Essentially their campaigns are largely funded by the Pharmaceutical Companies who they allow a very large return on what they sell.

*******************************

Legal tax scams do and have abounded in the United States; but will President Trump improve or worsen the situation? The high probability is that if Trump gets his way it will be like Christmas for the plutocrats in the country. While they have gotten away with all sorts of scams to date the situation will improve for them by 1,000 percent. The U.S. could well become a country of the rich, for the rich, run by the rich. Trump, who admitted to paying no income taxes for years will legally remain in that position. And so will others like him.

 

But Trump is not a legislator, he is the chief administrator in the country. Congress may not go along with him. As stated earlier the current Tax Code is 71,000 pages long. Trump had a problem with the Health Care Law. It is only 1,000 pages long. He found that group of laws very complicated. The Tax Code is 71 times more complicated. If he tried to simply eradicate the current law there would also be a lot of unhappy lobbyists whose companies would lose their subsidies. Some of these companies would even have to pay some taxes. Life can be very complicated at times!

**************************************

The major problem that Trump seems to be facing with tax relief for corporations and the economically upper one or two percent is that his tax relief program will reduce the Federal Government’s taxable income by over 8 billion dollars. Initially his plan was to reduce the funding for Universal Health Care by about 8 billion dollars. But since every electoral district in the country is vociferously against doing away with Affordable Health Care he has a severe monetary problem. A tax cut of the dimensions he wants could double the National Debt by the end of his presidency. It currently stands at 19 plus trillion dollars. In order to fund his tax cut he has to defund Obamacare.

 

Stay tuned in, after failing the first time, Congress is again talking about “repealing and replacing” Affordable Health Care. Paul Ryan is again talking about a new bill that will make health care available to everyone who can afford it.

 

 

 

The Weiner Component Vol.2 #11 – Trump & the Republicans: “Repeal & Replace”

The United States is now into being well over 60 plus days of Donald Trump as

President and Republican majorities in both the House and Senate. With the exceptions of a new Justice on the Supreme Court and a military raid on a Syrian air base.  Nothing significant has happened in the nation’s capital except that most members of Congress are working a three day week and have taken a two week Easter break.  Trump’s executive orders limiting the movement of Muslims from seven and then six Middle Eastern countries have been put on what looks like a permanent hold by the Federal Courts.

 

The members of the House of Representatives are on a two week vacation or break from the hard work they’ve been doing accomplishing virtually nothing except noisy Town Hall meeting with their constituents.

 

When the Democrats had a majority in both Houses of Congress the Republicans had loudly and persistently decried that they were ruining the Country with their irresponsible legislation like Affordable Health Care or as they like to call it, “Obamacare” and by supporting such national organizations like Planned Parenthood.

 

Also it seemed as far as the Republicans were concerned that nothing worthwhile could come from a Black, Democratic President. Now there is a white Republican President and a Republican dominated House of Representatives and Senate and to date, more than two months since they assumed power, nothing worthwhile has come from them except endless squabbling.

 

Their first major piece of legislative business was to get rid of Obamacare. They have been denouncing it since it first came into existence. It was signed into law on March 23, 2010, a little over seven years ago. Since that day, to hear Republican legislators speak about it, an individual gets the impression that it is worse than leprosy.

**********************************

The problem, as far as President Donald J. Trump is concerned, which he recently discovered, is that the healthcare law is very complicated. Trump’s understanding of a law is of something that can be put on a single sheet of paper with wording that will not even cover the entire page. The Affordable Health Care Law has to be about a thousand pages long. That makes it very complicated. It will take more than the passage of one simple law to be completely done away with.

 

On Thursday, March 23, 2017, the seventh anniversary of the law, the repeal and replace bill was pulled by the Speaker of the House of Representatives because it didn’t have the votes to pass in the House. Trump, presumably in a moment of disgust, outrage, or masterful negotiation, sent some of his aids to sell the bill to the doubting members of the House. Trump wanted the bill voted up or down the next day. He wanted to know who among the Republican Party in the House were his supporters and who “supports Nancy Pelosi,” the Democratic leader. No Democrats are voting for the bill.

 

What is the problem in the House with this bill? It seemed that the members of the far-right Freedom Coalition were against the bill because it was too lenient, while more moderate Republicans were against the bill because it would remove 24 million people from health care coverage. 14 million, according to a non-partisan Congressional Office, will lose their coverage within a year and the additional 10 million will lose it over a longer period of time.

 

House Speaker Paul Ryan’s, who developed the Bill from values he has held for years,  goal was to make health care accessible to everyone while keeping the minimum wage at its present low level. The problem that emerged with this prospective bill was that most people could not afford health care under the new proposed bill.

 

Younger participants will have their premiums reduced while older people would have their premiums massively increased. The Speaker of the House has stated that he will be making Health Care available to everyone. The catch there is if they can afford to pay the premiums. The Federal Government will give tax credits to the needy. But the problem is that most if not all of the needy will not have the money to afford the premiums and may be earning so little that they pay no income taxes.  Consequently the tax credits would be worthless.

 

This is particularly true since the minimum federal wage is seven dollars and twenty-five cents an hour. This means that a fair percentage of the population, particularly in red states where people believed in and voted for Trump, are earning $290 a week before unemployment and Social Security is taken out of their earnings. A goodly number of these people, who currently have Obamacare would lose it and be forced to go to ER, emergency rooms at hospitals. Under the proposed bill they will probably die prematurely. Many will face a choice between medication, food, or rent. This apparently is Paul Ryan and Donald Trump’s solution to Universal Medical Care. It is also a way of having the government significantly reduce its spending and being able to cut taxes for the rich and the corporations.

*****************************

According to one pole 17% of the population supports the Republican Health Care Bill, which has been labeled Trumpcare or Ryan-care. 56% oppose it. Virtually every Congressional District in the United States opposes the bill. If it passes in the House it should make for interesting voting in November of 2018.

 

On Friday, March 24, 2017 Trump and Ryan’s health care bill was pulled just minutes before it was supposed to come up for a vote. The Republicans, who have a wide majority in the House of Representatives, did not have enough votes to pass it. Presumably this was done on orders from Trump. Obamacare will continue to exist. The people of the United States in mass rallies throughout the country have demanded it. The Republicans have buckled down to the will of the majority. I suspect mainly because they don’t want to lose their seats in the House of Representatives.

 

Interestingly, Benjamin Franklin wrote toward the end of his career, “In free governments the rulers are the servants and the people their superiors and sovereigns.” It took massive protest movements for this point to be made throughout the country.

 

After a period of silence on the subject Paul Ryan is now talking about a new and better version of the Health Care Bill. They are again talking about it and will continue to work on developing it after their two week break.

*****************************

Listening to the President one got the impression that Trump never really examined the Affordable Health Care Law. It seems that he doesn’t like to read; that he gets most of his information from watching television. Trump promised to expand the plan and lower the cost when he was a candidate without really being aware of what he was talking about. I would suppose he is a 70 year old attention deficit adult. I would guess he knows things by instinct rather than by investigation.

 

Many of the House Republican legislators were announcing on the floor of the House on Friday how many of their constituents would lose health coverage if the bill were passed. The numbers were staggering. One could see what would probably happen in votes for the Democrats in the Midterm Election of 2018.

 

Ryan’s plan, had it passed would have decimated the current system. Again Trump probably had not bothered to examine the bill. It would have cut out the lowest rungs of society, all 14 million of them. This bill was rushed through the House without hearings or anything. It was supposed to be the fulfillment of the Republican dream of getting rid of Obamacare, after seven years of its existence and the Republican dominated House of Representative passing over 60 bills over the last seven years repealing Obamacare. None of these bills ever reached the Senate.

 

Ryan’s bill would have transferred much of the payment for medical treatment from the Federal Government back to the recipients of that medical treatment. Somehow the reduction in Federal costs would generally match Trump’s tax cuts, a little over 8 billion dollars.

 

This would have been very helpful to the Republicans in getting their tax cuts through Congress. It would be the reverse of Robin Hood’s behavior which was taking from the rich to help the poor. Instead Ryan-care was to take from the poor in order to help the rich.

 

Trump then spoke of moving on to his next legislative project, what he calls tax reform. This is mainly tax relief for both the top two percent of the population and for lowering the cooperate taxes. It would seem that they can’t afford to cut taxes without lowering medical costs

***********************************

The ultimate irony here is that Affordable Health Care was a Republican generated plan which, if I remember correctly, was generated for Mitt Romney when he was Governor of Massachusetts by Citizens United, a far-right Think Tank.

 

The plan worked well in that state and Romney got and took the credit for it.  In 2012, when Romney ran against Barack Obama as the Republican candidate for the presidency he denounced the plan for which he had been responsible.

 

The plan utilizes private enterprise to develop a Universal Health Care System. It follows Republican principles about private ownership. President Obama and the Democrats used it because they thought it would get Republican support in Congress. Not one Republican Party member voted for the bill.

 

It would have been far more practical and much cheaper for the Federal Government to become the insurer and set up a single payer plan throughout the United States. Virtually every single government that has universal health coverage for its people has done this and their overall costs are half or less than the U.S. pays for both medical care and pharmaceuticals. The Republican problem in “repealing and replacing” Obamacare is that they’re trying to improve upon their own plan and it’s not going to happen.

*************************************

The commitment to Socialized Medicine for the entire population requires much more than the Federal Government has been able or willing to do so far. What we have seen is a semi-voluntary Republican plan that includes the private sector. What we need is a plan that also supplies doctors and cuts out the profits of the middle men.

 

Becoming a medical person is a long and expensive process. There are many individuals who would go into this but cannot afford the time without earning anything or the expense of the process. What is needed first is a single provider who operates on a non-profit basis, and that would be the Federal Government. The Government Agency that would handle this then needs to be able to deal directly with the medical and pharmaceutical facilities that provide both the doctors and the medicines for the public. This could be done by having the Federal Government set up medical learning facilities or contract to pay the costs of becoming a doctor at the existing medical universities or both. The Government also has to control the costs of the medicines.

 

This requires a major monetary investment over a goodly period of time. The Federal Government would also have to set up a scholarship system where worthy candidates would have their tuition and possibly their living costs paid

 

Also right now the pharmaceutical companies are free to charge what they will. This is currently true because they are protected by Congress. Today the major contributor to the Republican Party are the Pharmaceutical Companies. The cost of medical treatment in other industrial countries is less than half of that in the United States. Also medicines cost a fraction of what they do in the U.S. Medical Care should be a right that everyone has. The cost of it could be easily added to the income tax with everyone paying their fair share.

English: Nations with Universal health care sy...

English: Nations with Universal health care systems. Nations with some type of universal health care system. Nations attempting to obtain universal health care. Health care coverage provided by the United States war funding. Nations with no universal health care. (Photo credit: Wikipedia)

The Weiner Component Vol.2 #10 – The Fed: Saving the Country & the Future

English: Janet Yellen being sworn in by Fed Ch...

English: Janet Yellen being sworn in by Fed Chair Ben Bernanke (Photo credit: Wikipedia)

Ben Bernanke, the Federal Reserve Chairman from 2006 to 2014, had developed the Bernanke thesis based upon his conclusions about the reasons for the Great Depression of 1929.

 

Official portrait of Federal Reserve Chairman ...

He found that the financial disruptions of 1930 to 1933 reduced the efficiency of the credit allocation process. The Fed had raised interest rates and made borrowing money more expensive. This resulted in higher costs and reduced availability of credit, which acted to depress aggregate demand. When banks face a mild downturn they are likely to significantly cut back on lending and other risky ventures. This further hurts the economy and creates a vicious cycle turning a mild recession into a major depression. When the Federal Reserve did that it far worsened conditions during the 1929 Depression.

 

Or to state the above simply: fear of a depression can turn a mild recession into a giant depression. Seemingly this is what occurred again in 2008. It would seem that Ben Bernanke was in the right place at the right time. He was able to utilize his principles and bring about a softening of the 2008 Crash from a major depression into a Great Recession.

 

What he did was drop the interest rate that the Fed charges banks to 0 and in his last two years as Fed Chairman he added 80.5 billion dollars a month to the National Cash Flow.

********************************

There were two major problems that emerged from the 2008 Housing Disaster. One dealt with the billions of pieces of mortgage paper that the banks had created from the mortgages. Left to itself it would take decades for this problem to be resolved. No one really owned the mortgages that had been broken up into hundreds of pieces and applied to multitudinous Hedge Funds. There were not even real records of their existence. The assorted houses would eventually go to foreclosure for none payment of property taxes. And no one knew when that could occur for the majority of them. They then would or could be sold for the price of the back taxes. The deserted homes would go first, after three of so years. The others, several years after people stopped paying property taxes on them. It was an impossible mess.

 

The second problem was that there was not enough money in circulation and the banks did not consider home loans safe investments. Money had to be loosened up.

 

What Bernanke did during his last two years in office was to add 85 billion dollars a month to the economy, an additional 40 billion was deposited in the banks, causing them to loosen up with financing new homes and refinancing old ones and 45 billion was spent buying up the multitudinous mortgage pieces.

 

The program was ended in 2014 by reducing the amount spent each month until 0 was reached in both categories. In February 2014, when Janet Yellen became the new Chairperson in charge of the Federal Reserve, she spent the first two months of her four year tenure ending the program. She also gave herself the option of renewing the program if she and the Fed Board felt it was necessary.

 

The mortgage pieces were at some point or points destroyed by the Fed. The Federal Government did not want to go into the real estate business, it wanted to get rid of this quagmire that was hanging over real estate in the U.S. After a little over two years this problem largely disappeared. Two years after that when Donald J. Trump became President no one seemed to remember it.

 

In essence while the Federal Reserve spent about six trillion, three hundred billion dollars straightening out the mortgage debacle a good percentage of that money came back in taxes. It was spent within the country on goods and services indirectly creating jobs and increasing the GDP. The Government did not waste the money; they expanded a shrinking economy.

 

The same can be said for the 40 billion a month being deposited in banks across the country. The approximately five trillion six hundred million dollars spent here tended to loosen up the banking attitude toward housing and got that industry growing again. It also added positively to the economy. In addition it also did not stir up any real inflation in the economy. Neither policy did.

 

This was the application of the Bernanke economic principle. It prevented the economy of the United States from collapsing and similar actions did the same thing for foreign economies. This action also made use of money as a tool to keep countries functioning and avoiding major depressions. Money was no longer an object of value for governments. Each government could produce it at will. It now became a means that could be used to control economic conditions. This action became Bernanke’s contribution to the principles of economics.

*******************************

Janet Louise Yellen assumed office as the Chair of the Federal Reserve on February 3, 2014. She had been the Vice Chair from October 4, 2010 to February 3, 2014. Prior to that she was President of the Federal Reserve Bank of San Francisco from January 11, 2004 to October 4, 2010.

 

Dr. Yellen is married to George Akenlof, a Noble prize-winning economist who is a professor at Georgetown University. Their son, Robert Akenlof teaches economics at the University of Warwick.

 

During her nomination hearings on November 14, 2013 Janet Yellen defended the more than three trillion dollars in stimulus funds that the Fed had been injecting into the U.S. economy. She also testified that U.S. Monetary Policy would revert toward more traditional monetary policy once the economy returned to normal.

 

Yellen is the first woman to hold the position of Chairperson of the Federal Reserve. On December 16, 2015, with Yellen as Chairperson, the Federal Reserve raised its key interest rate from 0% to ¼ of one percent. Since that time the interest rate has been raised twice, each time by ¼ of one percent. It now stands at ¾ of one percent. It has been announced by the Fed that there will be additional increases over the year 2017.

 

My overall impression of the Chairlady is that she is very caucus in all her actions. She initially misinterpreted the overall effects of the 2008 Housing Debacle feeling that it would not be that serious. She doesn’t want to make another mistake.

 

While the cost of a non-existent or very low interest rate has kept the cost of borrowing money down and has led to a resurgence in home buying it has also kept down the cost of interest the banks pay their depositors from whom they get the funds to lend out. Banks have and are paying as little as 1/10 of one percent interest to many of their depositors. In essence interest that the banks pay to their depositors is so low that the financial institutions are just about getting their money for free.

********************************

After the Presidential Election in 2016 of Donald J. Trump to the presidency Dr. Yellen vowed to protect Dodd-Frank, the law that limited the actions of the banks that was passed after the Housing Debacle of 2008.

 

Trump had denounced Dodd-Frank, stating that he will do away with it. Trump has also stated that he will not reappoint Janet Yellen in 2018, when her current term ends.

 

Janet Yellen is a Keynesian economist and advocated the use of Monetary Policy in stabilizing the economic activity of the business cycle. She has also stated that occasionally letting inflation rise could be a “wise” and humane policy if it increases output. She has stated that each percentage point drop in inflation results in a 4.4% loss of the Gross Domestic Product (GDP).

*************************************

Dr. Janet Yellen’s term ends in 2018. It is then up to the President to reappoint her or to appoint someone else as Chair of the Federal Reserve. President Donald Trump, if he is still President and if he follows his pattern of appointments, will probably appoint a non-economist to that position. It might even be a banker. What will the result be both to the country and to the Federal Reserve?

The Weiner Component Vol.2 #10 – Part 9: The Fed: Saving the Country & the Future

 

Ben Bernanke, the Federal Reserve Chairman from 2006 to 2014, had developed the Bernanke thesis based upon his conclusions about the reasons for the Great Depression of 1929.

 

He found that the financial disruptions of 1930 to 1933 reduced the efficiency of the credit allocation process. The Fed had raised interest rates and made borrowing money more expensive. This resulted in higher costs and reduced availability of credit, which acted to depress aggregate demand. When banks face a mild downturn they are likely to significantly cut back on lending and other risky ventures. This further hurts the economy and creates a vicious cycle turning a mild recession into a major depression. When the Federal Reserve did that it far worsened conditions during the 1929 Depression.

 

Or to state the above simply: fear of a depression can turn a mild recession into a giant depression. Seemingly this is what occurred again in 2008. It would seem that Ben Bernanke was in the right place at the right time. He was able to utilize his principles and bring about a softening of the 2008 Crash from a major depression into a Great Recession.

 

What he did was drop the interest rate that the Fed charges banks to 0 and in his last two years as Fed Chairman he added 80.5 billion dollars a month to the National Cash Flow.

********************************

There were two major problems that emerged from the 2008 Housing Disaster. One dealt with the billions of pieces of mortgage paper that the banks had created from the mortgages. Left to itself it would take decades for this problem to be resolved. No one really owned the mortgages that had been broken up into hundreds of pieces and applied to multitudinous Hedge Funds. There were not even real records of their existence. The assorted houses would eventually go to foreclosure for none payment of property taxes. And no one knew when that could occur for the majority of them. They then would or could be sold for the price of the back taxes. The deserted homes would go first, after three of so years. The others, several years after people stopped paying property taxes on them. It was an impossible mess.

 

The second problem was that there was not enough money in circulation and the banks did not consider home loans safe investments. Money had to be loosened up.

 

What Bernanke did during his last two years in office was to add 85 billion dollars a month to the economy, an additional 40 billion was deposited in the banks, causing them to loosen up with financing new homes and refinancing old ones and 45 billion was spent buying up the multitudinous mortgage pieces.

 

The program was ended in 2014 by reducing the amount spent each month until 0 was reached in both categories. In February 2014, when Janet Yellen became the new Chairperson in charge of the Federal Reserve, she spent the first two months of her four year tenure ending the program. She also gave herself the option of renewing the program if she and the Fed Board felt it was necessary.

 

The mortgage pieces were at some point or points destroyed by the Fed. The Federal Government did not want to go into the real estate business, it wanted to get rid of this quagmire that was hanging over real estate in the U.S. After a little over two years this problem largely disappeared. Two years after that when Donald J. Trump became President no one seemed to remember it.

 

In essence while the Federal Reserve spent about six trillion, three hundred billion dollars straightening out the mortgage debacle a good percentage of that money came back in taxes. It was spent within the country on goods and services indirectly creating jobs and increasing the GDP. The Government did not waste the money; they expanded a shrinking economy.

 

The same can be said for the 40 billion a month being deposited in banks across the country. The approximately five trillion six hundred million dollars spent here tended to loosen up the banking attitude toward housing and got that industry growing again. It also added positively to the economy. In addition it also did not stir up any real inflation in the economy. Neither policy did.

 

This was the application of the Bernanke economic principle. It prevented the economy of the United States from collapsing and similar actions did the same thing for foreign economies. This action also made use of money as a tool to keep countries functioning and avoiding major depressions. Money was no longer an object of value for governments. Each government could produce it at will. It now became a means that could be used to control economic conditions. This action became Bernanke’s contribution to the principles of economics.

*******************************

Janet Louise Yellen assumed office as the Chair of the Federal Reserve on February 3, 2014. She had been the Vice Chair from October 4, 2010 to February 3, 2014. Prior to that she was President of the Federal Reserve Bank of San Francisco from January 11, 2004 to October 4, 2010.

 

Dr. Yellen is married to George Akenlof, a Noble prize-winning economist who is a professor at Georgetown University. Their son, Robert Akenlof teaches economics at the University of Warwick.

 

During her nomination hearings on November 14, 2013 Janet Yellen defended the more than three trillion dollars in stimulus funds that the Fed had been injecting into the U.S. economy. She also testified that U.S. Monetary Policy would revert toward more traditional monetary policy once the economy returned to normal.

 

Yellen is the first woman to hold the position of Chairperson of the Federal Reserve. On December 16, 2015, with Yellen as Chairperson, the Federal Reserve raised its key interest rate from 0% to ¼ of one percent. Since that time the interest rate has been raised twice, each time by ¼ of one percent. It now stands at ¾ of one percent. It has been announced by the Fed that there will be additional increases over the year 2017.

 

My overall impression of the Chairlady is that she is very caucus in all her actions. She initially misinterpreted the overall effects of the 2008 Housing Debacle feeling that it would not be that serious. She doesn’t want to make another mistake.

 

While the cost of a non-existent or very low interest rate has kept the cost of borrowing money down and has led to a resurgence in home buying it has also kept down the cost of interest the banks pay their depositors from whom they get the funds to lend out. Banks have and are paying as little as 1/10 of one percent interest to many of their depositors. In essence interest that the banks pay to their depositors is so low that the financial institutions are just about getting their money for free.

********************************

After the Presidential Election in 2016 of Donald J. Trump to the presidency Dr. Yellen vowed to protect Dodd-Frank, the law that limited the actions of the banks that was passed after the Housing Debacle of 2008.

 

Trump had denounced Dodd-Frank, stating that he will do away with it. Trump has also stated that he will not reappoint Janet Yellen in 2018, when her current term ends.

 

Janet Yellen is a Keynesian economist and advocated the use of Monetary Policy in stabilizing the economic activity of the business cycle. She has also stated that occasionally letting inflation rise could be a “wise” and humane policy if it increases output. She has stated that each percentage point drop in inflation results in a 4.4% loss of the Gross Domestic Product (GDP).

*************************************

Dr. Janet Yellen’s term ends in 2018. It is then up to the President to reappoint her or to appoint someone else as Chair of the Federal Reserve. President Donald Trump, if he is still President and if he follows his pattern of appointments, will probably appoint a non-economist to that position. It might even be a banker. What will the result be both to the country and to the Federal Reserve?

The Weiner Component Vol.2 #8 – The Federal Reserve During the Bernanke Years: 2006 – 2014

English: President Barack Obama confers with F...

English: President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia)

In 1935, Cret designed the Seal of the Board o...

In 1935, Cret designed the Seal of the Board of Governors of the Federal Reserve System. (Photo credit: Wikipedia)

On January 31, 2006, Alan Greenspan retired or resigned as Chairman of the Federal Reserve and on February 1, 2006, Ben Bernanke became the new Chairman. He served two four year terms, initially being nominated by George W. Bush and being re-nominated the second time by President Barack Obama. Chairman Bernanke would find, among other things, the means to avoid a depression far greater than that of 1929. He would do this through the use of Creative Monetary Policy; that is, essentially by flooding the economy of the United States with money.

 

To understand in detail what he did one has to read his 2015 book, The Courage to Act. In this work he explained how the world’s economies came close to collapse in 2007 and 2008. Bernanke explained how it was the efforts of the Federal Reserve utilizing Monetary Policy and cooperating with other national agencies of the U.S. and agencies of foreign governments that prevented an economic catastrophe far greater than the Great Depression of 1929 which lasted for over ten years.

*******************************

Generally speaking: in 2008 the Housing Crash came. It had gradually been developing since the 1980s. While President George W. Bush and his Secretary of the Treasury, Hank Paulson, made large loans to banking houses to keep them from failing Bernanke bailed out AIG, the largest insurance company throughout the United States.

 

If AIG went bankrupt millions of people would have lost their insurance coverage and the premiums they had paid over the years. AIG had also insured some of the Hedge Funds that went under. They had wanted some of the profits that the banks were making from the Housing Market and their actuaries had no experience in dealing with Hedge Funds. I assume that Bernanke wanted to avoid the misery this would cause nationwide.

*********************************

It is important to keep in mind that the Federal Government under Presidents Bush and Obama were making loans to the banks, AIG and to the auto industry. These loans were repaid by all three groups with interest.

 

President Obama set a condition on the loans that Bush did not. That was to limit compensation packages for the executives of these struggling institutions. To the President it seem ridiculous that CEOs and other bank executives should continue to receive salaries of over a million dollars after bring the banking houses to the point of bankruptcy.

 

The CEO of the Bank of America complained bitterly about this. He wanted to pay off the Government loan quickly so the leading executives could go back to salaries in the multi-millions. Today in 2017, and for a number of prior years, their remunerations go from about four million up.

 

It should also be noted that the banks, taken together, have paid multimillions in fines for illegal practices. And no one has ever gone to jail but the banks have paid at times massive fines.

***************************************

The Housing Debacle and the increase in unemployment (up to 10%) that accompanied it should have been handled by both the Federal Reserve applying Monetary Policy and the Congress and the President applying Fiscal Policy, Congress passing spending bills and the President signing them. From 2011 on, when the Republicans gained control of the House of Representatives there were no Fiscal Policy Bills passed through Congress.

 

The year 2011 on was an ideal time to begin rebuilding the infrastructure of the United States. Most of the infrastructure had been built in the late 19th and the first half of the 20th Century. The population had practically doubled since then and a good part of the infrastructure of the country was well out of date.

 

The National Highway System had been built by President Eisenhower in the 1950s. By 2009 most of the airports, railroads, government buildings, the electric grid, many public schools, even the education system was/is grossly out of date. In fact, for what it’s worth, President Donald Trump has defined the infrastructure of the country as a “disaster.”

*****************************

After the bank bailouts the Obama Administration expected the banks to return to a reasonable level of what they had been doing before the crash. This did not happen. The banks became ultra conservative in their lending policy. People buying new homes had to have a fairly large percentage of the cost of the new home. Chairman Bernanke lowered the interest rate the Fed charges banks to 0% giving them free money.

 

From this point on in approximately 2010 the banking houses looked for new way to make profits with their funds. What they came up with, among other things, was the Futures Market.

 

Future Markets are exchanges that buy and sell future contracts. A future contract gives the buyer an obligation to purchase an asset and the seller an obligation to sell an asset at a set price which is to be delivered at a future point in time. The purchasers are interested in selling the asset the future time at a profit. They are often blamed for big price swings in the Futures Market.

 

The assets underlying future contracts include food commodities, stocks and bonds, grain, precious metals, electricity, oil, beef, orange juice and natural gas to name a few. They are bets that the price of the product at the eventual delivery price will far exceed the earlier purchase price.

 

It can be assumed that the rise in food and gasoline prices after 2010 exceeded what they would have been if the banks had not been involved. In essence the banks exploited the general homeowner up until 2008 and from 2010 on they exploited the general public whose tax dollars had bailed them out of the economic disaster which they had caused in their perennial search for more and more profits.

********************************

In the year 2010 the American public elected a Republican majority to the House of Representatives. With their ascension to the House in 2011 all possibilities of Fiscal Policy Bills ceased. The Republicans wanted to reduce government spending and make President Obama a one term president by not allowing him to succeed in anything. In fact what the House of Representatives did was to worsen the Housing Debacle by reducing, forcibly at the time, government spending. They even shut the government down by not funding it.

 

President Obama offered an Infrastructure Bill that never even came up in the House of Representatives. The fact that President Obama and Chairman Bernanke were able to turn the Housing Crash and limit initial unemployment to only 10% with actual opposition from the Republican House of Representatives was itself miraculous. What the Fed and the President did was to turn a possible depression into the Great Recession. Even though economic conditions were far from ideal this was truly an act of wonderment.

********************************

What happened with the Housing Crash was a situation that looked like it might take decades to straighten out. Virtually overnight the value of homes deflated at the speed of an exploding balloon. Many people who had financed and refinanced their property more than once suddenly discovered that they were underwater, that is, that they owed more on their homes than they were worth. A percentage of these people just walked away from their property, leaving it deserted.

 

This raised an interesting problem both for these properties and for those in which the people continued living. Who owned these mortgages? Remember the mortgages had been divided up into innumerable fractional pieces. In order to control any one of these property mortgages one needed to own over 50% of it. No Hedge Fund owned that much of any one property. The records of mortgage ownership were highly inaccurate. Consequently in point of fact no one really owned these properties.

 

Most of the banks that had been charging endless fees to administer these mortgage loans felt that they could foreclose on these properties, either because they were deserted empty houses or because the inhabitants could, for one reason or another, no longer afford to make their monthly payments. A goodly number of these people had lost their jobs.

 

The banks used their computers to generate the needed documents since no real records of ownership existed. The banks had earlier been in too great a hurry to generate loans than to keep accurate records.

 

Some of these cases went to court and initially the judges felt that a solid institution like a bank would do nothing illegal. Some of the attorneys who made this point were declared to be in “contempt,” and were disbarred. Eventually after a large number of cases were determined in favor of the banks the evidence of their wrongdoing was acknowledged by the Courts. Whether the disbarred lawyers got their licenses back I don’t know, but the banks were severely fined for wrongdoing and the illegal foreclosing ended leaving a lot of people living in homes for which they were not paying.

 

The problem was left up in the air. As long as the people living in these homes paid their property taxes no one could legally disposes them even if they never made another house payment on the mortgage. Most of the Hedge Funds had gone bankrupt; they didn’t own enough of any property to foreclose on it. Of course no one knew which properties these were and which actually had owners of the mortgages. Some of the banks had owned some of the Hedge Funds.

***********************************

What generally happened across the nation from that point in time on was interesting. Numerous individuals, generally not being employed, no longer paid their mortgages. If they were reemployed or eventually got a job they still did not make payments. Why bother? No one had foreclosed on them. In essence these people now had extra cash which they tended to spend. Suddenly, among other things, eating out with their families became very popular. A good part of their housing funds were being spent. The National Cash Flow or the amount of money available in the general society increased with all this spending and it helped keep the level of national unemployment to no higher than ten percent. This was an interesting irony that was initially funded by the banks but ultimately payed by the taxpayers in the bail outs.

 

Had the House and Senate passed the Infrastructure Bill that President Barack Obama suggested then the overall effects of the Great Recession would have disappeared by the end of his first term in office and the country would have dropped to a 2 ½ percent unemployment level which is considered full employment because it is the rate generated by people normally retiring, changing jobs, and first entering employment.

 

The result would have been more taxes being paid which would have largely offset the increased government spending. But the Republicans dominated House of Representatives was penny smart and dollar stupid. By forcing down government expenditure they also cut down the Gross National Product (GDP) and shrank taxable income throughout the United States, keeping unemployment higher.

**********************************

On August 25, 2009, President Barack Obama announced he would nominate Bernanke to a second term as the Chairman of the Federal Reserve. He stated, with Ben Bernanke standing at his side that Bernanke’s background, temperament, courage and creativity helped to prevent another Great Depression in 2008.

The Weiner Component Vol.2 #8 – Part 5: Alan Greenspan & the Federal Reserve

Former Chairman of the Federal Reserve Alan Gr...

Former Chairman of the Federal Reserve Alan Greenspan, receiving a Presidential Medal of Freedom in 2005 (Photo credit: Wikipedia)

In 1935, Cret designed the Seal of the Board o...

In 1935, Cret designed the Seal of the Board of Governors of the Federal Reserve System. (Photo credit: Wikipedia)

On August 11, 1987, Alan Greenspan became the Chairman of the Federal Reserve. He was appointed by President Ronald Reagan and served until January 31, 2006, when he retired from that office. There was a rumor that he had lobbied for the position.

 

After four years in office he was reappointed by President George H. W. Bush who later claimed he lost his reelection bid because of Greenspan’s Monetary Policy. Bill Clinton also reappointed him and so did George W. Bush.

 

Greenspan was a Republican conservative with a classical education in economics, who got his P.H.D. from N.Y.U. He supported privatizing Social Security and tax cuts which, according to the Democrats, would increase the deficit. In fact it has been suggested that the easy money policies of the Fed during Greenspan’s tenure there was a leading cause of the subprime mortgage crisis that occurred in 2008, after he left the Federal Reserve as Chairman.

 

Alan Greenspan was nominated by President Reagan on June 2, 1987 and was confirmed by the Senate on August 11 of that year. To Congress he quickly assumed the role of a seer, generally when he was questioned by Republican members of either House of Congress, they spoke to him with a large degree of reverence, as though his answers to their questions were the absolute ones. He was considered the maestro of economics; his words being gems of economic wisdom. This occurred throughout his entire term as Chairman of the Federal Reserve.

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The issue that Greenspan did not deal with, which, in fact, he stated that the Fed could not control or even really deal with was the amount of money in the National Cash Flow. His successor, Ben Bernanke did not have this problem and he both increased the amount available for over a two year period and solved an economic quagmire that the banks had created in 2008 following Greenspan’s easy money policy.

 

According to the late economist Paul Samuelson the process of splitting mortgages began during the late 1970s. For innumerable reasons banks had traditionally allowed people to take out second mortgages on their homes charging them slightly more in interest than they were paying on their first mortgage. Occasionally the banks would sell these mortgages to individuals in order to get their money back for a more profitable use. In the late 1970s many banks broke these mortgages up into large pieces in order to sell them and sold each one to a multitude of Hedge Funds who then used them as securities.

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In 1981 Ronald Reagan became President of the United States. He and his aids believed in a totally free Market where all economic decisions were made by the Market. The basis by which the Market operated was the profit motive. It had been explained by Adam Smith in his preindustrial revolution book that he published in 1776. The Reagan Administration did away with virtually all government regulation that controlled the form and actions of the banks, giving them a complete free hand in dealing with the public; but they kept the FDIC in which the Federal Government insured all bank deposits up to ½ million dollars.

 

Regulations limiting the form and actions of banks were brought in during and after the Great Depression. Among other things many bankers had abused their positions and used depositor’s money to make individual profits for their executives. When the stock market crashed in 1929 so did numerous banks and multitudes of depositors lost their savings. The Roosevelt Administration from 1933 on brought about legislation to stop this from occurring again. Apparently the Reagan Administration in 1981 on believed this was no longer a problem.

 

During the Reagan Administration the major banking houses in the United States like J. P. Morgan-Chase, Bank of America, Wells Fargo, and others decided to break up the mortgages into fractional shares, split the shares among Hedge Funds, and sell shares in the Hedge Funds. This included both first and second mortgages.

 

This was a good bet since people valued their homes. What happened was that the banks encouraged people to use the equity in their houses as bank accounts, mortgaging and remortgaging their homes. With the constant action, following the economic laws of supply and demand, the value of properties continued to rise like hot air balloons. The value of the homes kept growing, allowing people to take more and more money out of their homes to buy anything they desired. By this action the banks created trillions of dollars of new money and presumably everyone prospered.

 

On the one hand Greenspan stated he could not control the amount of money in circulation but on the other hand the Fed’s low interest rates encouraged this behavior. What the banks did was to issue and reissue mortgages which they, in turn, split into hundreds of pieces, placing them into different Hedge Funds from which these funds paid the banks endless service charges. The banks then used the money for new mortgages but serviced the accounts, charging fees for each action.

 

In essence the banks lent the initial funds, sold the mortgages to innumerable Hedge Funds, got their initial investment back, and lent it out again, endlessly repeating the process and endlessly charging innumerable fees for the continuing processing. Many banks also owned many of the Hedge Funds.

 

The bank and everyone in the bank involved in this process did well financially. As home prices rose the homeowners kept getting their equity back and could afford to remortgage their homes. It seemed like an endless Christmas!

 

Ordinarily every change in any property has to be registered in the city or county where it occurs. This is a fairly slow system. The banks were able to set up their own record keeping agency that they could use quickly. The problem here was that there was endless amounts of information. This system made innumerable errors in their bookkeeping. In 2008, when the system crashed, the records were worthless. There was no reliable information on all the transactions.

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By 2007 it was fairly obvious that the system was tottering and could fail. For the last quarter of a century this had been going on. It spanned the entire career of most bankers. They were in a state of denial that the housing bubble could burst. Some banks offered loans of 125 percent of the appraised value of homes.

 

The Housing Bubble burst late in 2008 while George W. Bush was still President of the United States. Suddenly many banks were on the verge of bankruptcy. President Bush and his Secretary of the Treasury lent some of the banks enough money to keep them solvent.

 

The new Chairman of the Federal Reserve, Ben Bernanke, authorized a loan to AIG, the leading insurance company in the United States. It seems they felt left out of all the money making and wanted their share. They insured a number of loans for high premiums. Their actuaries underestimated the risk involved. When the collapse came they didn’t have the funds to pay off the claims and without additional funds would have gone under costing a large percentage of the American public both the premiums they had paid and the protection these premiums bought.

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It is important to note that the flow of money in the United States and the rest of the industrial world, whether credit or cash, is through the banking system. If the major banks were to go under the flow of currency would be a dribble. In addition every bank account is insured up to ½ million dollars by the Federal Government.  The banks paying a small premium to the Federal Deposit Insurance Corporation (FDIC). If the banks go bankrupt the Government is still liable for those monies.

 

In addition AIG (American International Group) is the major insurance company in the nation, insuring, among many other things, millions of insurance policies throughout the nation. If it were to go under billions in premiums paid for years by countless Americans would suddenly be lost. It would be a major negative catastrophe in the country. AIG was literally too big to fail.

 

The failure of both the banks and the insurance company could easily bring down the economy of the United States. These concerns are necessary for the United States to function. They are not only too big to fail but also too important, in relation to the country.

 

This is the position in which President George W. Bush and Chairman Ben Bernanke found themselves in toward the end of 2008. And this is the position that Barack H. Obama inherited when he became President of the United States on January 20, 2009.

 

As Chairman of the Federal Reserve Alan Greenspan had supported an easy money policy. He retired shortly before the results of this policy exploded. Did he foresee the occurrence?   Was he responsible for it?

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From the 1980s on the American economy needed a greater Cash Flow. There literally wasn’t enough money available throughout the economy. Historically the Federal Reserve had never directly supplied money to the overall country. In fact up until 1933 all monies were comprised of gold and silver. All gold mines in the United States were required to sell all the gold they mined to the Federal Government for $16 an ounce. It was then minted into gold coins. Paper money could be issued: ones and five dollar bills were silver certificates and technically could be exchanged for silver coins at any time. Tens, twenties, fifties, and hundred dollar bills, and higher denominations could be exchanged for gold coins. From 1933 on gold disappeared and from ten dollar bills up money became Federal Reserve Notes. Later the five would also become a Federal Reserve Note. Thereafter the gold was stored in depositories and presumably stood behind the dollar.

 

In 1933 Roosevelt raised the value of money by law from $16 an ounce for gold to $32 an ounce. By doing this he doubled the available money in the United States and easily paid for the New Deal.

 

Consequently from that time on gold being behind the dollar was a fiction. Theoretically any Federal Reserve Chairman and his Board thereafter could have added money to easily to the National Cash Flow. But none did. During World War II the Federal Government spent a lot more than it took in in taxes. But it never just added money to the economy. In fact it used various devices such as War Bonds to attempt to limit the amount of money people could spend.

 

From what he has said and written Alan Greenspan did not believe that the government could just add money to the economy. That power was reserved to banks who could do so through their lending policies. Greenspan tended to understand economics as it was and had been. He ran the Federal Reserve on that basis. He lacked the imagination to do things any other way.

 

Possibly he suspected a crash in 2008 and so he retired before it came. Possibly he did not and felt he had been in that office long enough. Only he can answer that question.

The Weiner Component Vol.2 #7 – Part 4 – The Fed & the Inflationary Spiral

English: Former President Jimmy Carter and his...

English: Former President Jimmy Carter and his wife Rosalynn, wave from the top of the aircraft steps as they depart Andrews Air Force Base at the conclusion of President Ronald Reagan’s inauguration ceremony. (Photo credit: Wikipedia)

English: President Ronald Reagan, the 40th pre...

English: President Ronald Reagan, the 40th president of the United States of America, delivers his inaugural address from the specially built platform in front of the Capitol during Inauguration Day ceremony. (Photo credit: Wikipedia)

The Chairperson of the Federal Reserve heads this bank. Currently Janet Yellen is the chairwoman. She has held this position since 2014 when she was appointed by President Barack Obama. Prior to that Ben Bernanke was chairman from 2006 to 2014. He was appointed by George W. Bush and completed his term under President Obama. Alan Greenspan was the prior Chairman. His term was the second longest in the history of the Federal Reserve going from 1987 to 2006, 19 years. He was preceded by Paul Volcker, who served from August 1979 to August 1987. He was appointed by President Jimmy Carter and left toward the end of the Reagan administration. Paul Volcker served as Chairman for two terms, from August 6, 1979 to August 11, 1987.

 

These are the most recent people to serve as chairpersons on the Federal Reserve. If we go back to the Presidency of John Fitzgerald Kennedy, January 20, 1961 to November 22, 1963, the Fed Chairman was William M. Martin who had been appointed by Harry S Truman and served from April 2, 1951 to February 1, 1970.

 

The problem, when Kennedy became President, was that the country was in a recession cycle. By using fiscal policy President Kennedy was able to turn that economic phase into a recovery phase of the business cycle. At this time unemployment was slowly increasing and consumption was slowly decreasing. The economy needed an impetus. What the President proposed and Congress passed was a tax decrease. The result was that people had more money which they spent and the amount of Federal taxes collected actually increased. This move fairly quickly took the nation from recession to recovery.

 

Since that time, over fifty years ago, almost every Republican President has tried to follow that fiscal policy. In no case has it worked as announced. Instead from the time of President Ronald Reagan on it has allowed the National Debt to mushroom into the trillions of dollars. And during the last year of President George W. Bush’s presidency this tax reduction process led to the bursting of the Housing Bubble or the Great Recession in 2008. In the process of avoiding a Second Great Depression President Barack Obama was forced into excessive spending. It was the President and the Fed Chairman, Ben Bernanke, who enabled the country to squeak through the 2008 and 2009 Housing Crash or bubble bursting.

 

Currently President Donald J. Trump is proposing a massive tax cut for business and the wealthy. It has been suggested that this could bankrupt the U.S. Government. Whether his decrease in taxes and proposed increase in spending for the military comes about, if it does, then to what extent it will do so is still up for debate. Trump and some members of his Cabinet are claiming they can significantly lower taxes and increase production without adding to the National Debt. It should be an interesting experiment.

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President Lyndon B. Johnson, who had been President Kennedy’s Vice-President and succeeded him at his death in 1963, when he was reelected to office in 1965 massively accelerated the war in Viet Nam. He would have America, the strongest nation in existence, force North Viet Nam to accede to the wishes of the United States. And, at the same time, he would not lower the standard of living of any American. The country could both afford to fight a major war and care for its population as though it were still at peace; we would have both guns and butter. His only requirement was a small addition by everyone to their income taxes. This led to the beginnings of an inflationary spiral that would reach fifteen percent by the end of the 1970s. The inflation spiral would be broken by the Fed by taking drastic action in the very early 1980s.

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Paul Volcker was appointed was appointed Federal Reserve Chairman on August 6, 1979 by President Jimmy Carter. He began a process to end the inflationary spiral by making the borrowing of money so expensive that it would cause the percent of interest to rise to where it would cost too much to borrow. This, in turn, would cause the price of interest to drop toward zero.

 

If the inflation rate rises too high, like to 12 or 15 percent or more the way to reduce it is by raising the prime rate, the interest level the Fed charges banks, to a very high level. This forces the banks to raise their interest level to 20 percent or more. Money becomes too expensive to borrow.

 

Unfortunately many businesses have dormant periods during the year when they have to borrow money in order to meet their expenses. If the interest rate on loans is too high they cannot afford to borrow any money and consequently they go bankrupt. This causes an almost instant recession, with massive layoffs throughout the country. But it will end an inflationary spiral.

 

Early in this process President Jimmy Carter received innumerable complains from people around the country about what was happening to them and their businesses. He asked Volcker to back off and Volcker did so. The high inflation continued throughout President Carter’s term in office.

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Paul Volcker served two four year terms as Chairman of the Fed. He retired from that position on August 11, 1987, when Ronald Reagan was President of the United States. Reagan succeeded Carter in 1981 and remained in office for two terms, until 1988. He allowed Volcker to break the back of the inflationary spiral.

 

Under Reagan the monetary policies of the Federal Reserve Board led by Volcker were credited with curbing the rate of inflation and the expectations that inflation would continue. The United States rate of inflation peaked at 14.8 in March of 1980 and fell below 3 percent by 1989. The Fed Board raised the federal funds rate that had averaged 11.2 percent in 1979, to a peak of 20 percent in June of 1981. The prime rate also rose to 21.5 percent in 1981. All of this lead to the 1980-1982 recession, in which the unemployment rate rose to over 10 percent.

 

All of this elicited strong political attacks and wide spread protests. There were high interest rates on construction, farming, and the industrial sectors. U.S. Monetary Policy eased in 1982, leading to a resumption of economic growth.

 

Perhaps the most unfortunate part of this necessary readjustment of the economic base of the United States was the fact that President Ronald Reagan made a presentation on television one weekend in 1981 in which he held up the business section of the Sunday Times and stated that there were twenty full pages of job offers in the Times. If a person lost their job then they should go to where there was jobs available. President Reagan did nothing else. He could or should have set up some federal agency that could offer reliable job information. But he did not do so.

 

What followed was that sections of cities became deserted as people filled their cars with their belongings and followed rumors going from place to place looking for work. Mostly there were no jobs. Temporary agencies did a land-office business that year. I remember reading about an instance where a man with a wife and small child, having stopped for a red light, opened the passenger door, and pushed his wife and child out of the vehicle. When the light changed he drove on.

 

Cars moved from city to city that year, following rumors. While there had been some homeless before 1981 they became very visible from that year on; there were so many of them. The problem is still with us.

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What followed from 1981 on was the Fed’s tight money and the expansive fiscal program of the Reagan Administration: large tax cuts, and a major increase in military spending. While the middle class got some tax relief the tax cuts were essentially for the upper echelon of society who had their taxes reduced substantially. While the inflation rate stayed low, which it still is today, President Reagan’s spending produced large Federal budget deficits.

 

This combination of growing deficits and other economic imbalances led to the growing Federal debt and a substantial rise in Federal costs. Under Reagan’s spending the debt would reach over one trillion dollars for the first time.

 

Presumably Paul Volcker was fired or replaced in August 1987 after serving two four year terms in office because the Reagan Administration didn’t believe he was an adequate deregulator. Volcker was replaced on August 11, 1987, by Alan Greenspan.

The Weiner Component Vol.2 #6 – Part 3: The Purpose of the Federal Reserve

The title page to Keynes' General Theory.

Unemployment rate in the US 1910–1960, with th...

Unemployment rate in the US 1910–1960, with the years of the Great Depression (1929–1939) highlighted. (Photo credit: Wikipedia)

The Federal Reserve was established on December 23, 1913. Its major mission was to avoid panics or major recessions in the future. It would at that time do this by being able to move money quickly anywhere throughout the National Economy. In essence since the nation functioned through its banking system the new Fed would protect its financial institutions from runs or panics where the depositors could all withdraw their funds, generally following a rumor that the bank was on the edge of failing.

 

In addition the United States economy had/has systematically gone through regular business cycles of recession, slump or depression, recovery, and boom. Invariably each of these stages of the economy leads to the next stage. During a boom period overproduction is invariably reached, workers are laid off, there is less income available, which accelerates the recession. This, in turn leads to a trough or low economic point which can be a depression with high unemployment. Eventually there is a shortage of goods and the amount of money being spent in the National Cash Flow increases; people are hired; there is more and more money available and recovery begins, continuing until a peak or production boom is reached again. The duration of the cycles can and do vary, going from less than a year to over ten years as the Great Depression did from 1929 to 1940. It was ended by World War II. These depressions can be regional or they can cover the entire nation, if not the world, as it did in 1929. They generally last between the two periods given above.

 

In simple terms this is the economic pattern of every industrial nation. Does it have to continue? That’s an interesting question. The probability is that it can be controlled by the Central Government’s actions.

 

In 1929 the science of economics was generally not understood well enough to determine exactly or why the depression was happening. In 2008 when the country had what is now called the Great Recession, enough was understood to avoid a greater depression than that of 1929. This depression was avoided by actions of the Federal Government.

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Even today economists disagree as to what caused the Great Depression and how it should have been dealt with. There are numerous theories. Probably The Keynesian theory is the most accepted. Keynesian economics deal with the various theories about how in the short run, mainly during recessions, economic output is strongly influence by aggregate demand or total spending. Aggregate demand does not necessarily equal the productive capacity of the economy. Instead it is influenced by a host of factors that can behave erratically, affecting production, employment, and inflation.

 

Keynes theories were first presented during the Great Depression in his 1936 book, The General Theory of Employment, Interest, and Money. Keynes’ approach contrasted with classical economics. Keynesian economists believe that the private sector’s decisions sometimes lead to inefficient economic outcomes which require active policy responses by the public sector (government). It is a combination of the two that stabilize output with the government exercising control over the private sector. Monetary policy actions are needed at times by the Central Bank and fiscal policy actions (Government spending.) in order to stabilize output over the business cycle. Consequently Keynesian economics requires a mixed economy, predominantly private sector with a strong role for government interventions during recessions and depressions.

 

Traditional or classical economics as developed by Adam Smith in his 1776 book, An Enquiry Into The Wealth of Nations, set the Market making all the societal decisions. The motivating force, according to Smith was the “invisible hand,” the profit system. Adam Smith was responding to an economic system called mercantilism, where gold was considered the basic wealth of the nation and the economic decisions were being made by the kings of the various countries.

 

John Maynard Keynes during the world economic disaster called the Great Depression was questioning the validity of this system, saying what was needed to solve this problem was a combination of private enterprise balanced by state control of the marketplace. To him unfettered classical economics had brought about the Great Depression.

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The actual causes of the 1929 Great Depression have been extensively discussed by economists and remains a matter of intense debate. In fact they are part of the larger debate about economic causes. The economic events that took place at that time have been studied thoroughly: a deflation in assets and commodity prices, dramatic drops in demand and credit, disruption of trade, widespread unemployment, over 13 million by 1932 the lowest point of the economic decline, and hectic poverty.

 

There is no consensus as to overall causes other than it started with the initial stock market crash that began on Black Tuesday, October 29, 1929 when panic selling of securities led to a continued dropping of value of the securities until the end of 1932 when it reached its lowest point. The Crash triggered the depression which had reached a high level of deteriorating economic conditions such as rising unemployment, over production, a totally unequal distribution of incomes, under consumption, and extremely high debt.

 

Both the stock market and the economy would slowly improve after 1933 with the new President, Franklin D. Roosevelt. It would rise to new heights after 1939 with the outbreak of World War II in Europe. The stock market and the economy would rise to new heights with a massive infusion of money for goods and services within the United States. War will have brought about its end within the U.S. It is interesting to note that it was the money spent during the war, first by European and Asian nations, then after December 7, 1941 also by the United States that specifically ended the Great Depression.

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Once the Great Depression had started there were massive mistakes made by the Federal Reserve. The Fed actually caused a shrinkage of the money supply and greatly exacerbated the economic situation. Deflation caused people and businesses to owe ever increasing amounts upon money they borrowed actually shrinking the money supply in the U.S. by about 1/3.

 

With the election of Franklin D. Roosevelt to the presidency in 1932 a form of Keynesian economics became the policy of the President from 1933 on when he assumed power. Roosevelt’s policy was the “3 R’s: Relief, Recovery and Reform.” This comprised Roosevelt’s “New Deal;” his attack upon the Great Depression, which essentially lasted from 1933 to about 1938. The Federal Government put itself in a position to help turn the country around. It brought about great improvement but not a complete end to the Great Depression.

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Toward the end of 2007 in the last year of the George W. Bush’s Presidency what is generally called the Great Recession began. The Housing Market in the United States collapsed. A great many people had been using their home as bank or checking accounts generally from the 1980s on, constantly refinancing their home and taking their equity out as property values continually increased. People bought the toys they always wanted: new cars, fancy trucks, boats, expensive vacations; just about anything they felt was desirable.

 

This had been going on for about thirty years, the entire career of many people in banking had taken place during this period. Housing loans or second mortgages were divided into miniscule fractions, put into a multitude of different Hedge Funds and sold to the general public as safe interest paying loans. The process brought the value of the home loans up millions, if not billions of dollars. The banks were earning large amounts in fees as the demand for loans actually forced up the value of the homes. By 2007 the end had been reached, property values had been raised beyond the point of sanity. The bankers were in denial that conditions could possibly change. Some banks were lending out 125% of the appraised value of the properties, working on the premise the housing values would rise endlessly.

 

The economic collapse began during the second week of March, 2008. It tended to be worldwide. In the United States, on Tuesday, with the encouragement of the President, George W. Bush and the Secretary of the Treasury, Hank Paulson, the Chairman of the Federal Reserve, Ben Bernanke injected $236 billion dollars into the American banking system. Citigroup, the world’s largest bank spent one billion dollars bailing out six of its hedge funds. Lehman Brothers, America’s fourth largest bank went under. AIG, the world’s largest insurance company, had moved into the business of insuring leveraged debt right at the time when the financial system was at the point of collapse. When the Housing Bubble burst Ben Bernanke, as chairman of the Fed, announced an $85 billion loan for them. Hank Paulson, the Secretary of the Treasury proposed buying up hundreds of billions of dollars’ worth of toxic assets.

 

With the accession of Barack Obama on January 20, 2009 as President of the United States that country and the rest of the Industrial Nations continued to hover on the point of economic collapse. This would have occurred if the governments had not interceded with masses of cash. They prevented, using taxpayer money, a depression that would have made the Great Depression of 1929 look like a weekend holiday. It would have been the total collapse of the banking systems which, in essence, run the economies of all those nations.

 

(Interestingly Donald Trump’s administration wants to do away with all the regulation in the U.S. which came about to avoid a repeat of this situation. Memories are short!)

 

President Barack Obama continued the bailout, saving the banks from their own stupidities, and he added the American automobile industry which was also on the point of total collapse. The governments of the various countries spent a lot of money saving their economies and returning the world to economic sanity.

 

Recently President Donald Trump commented in one of his speeches that President Barack Obama increased the National Debt more than any other prior President. He did so cleaning up the financial messes that they had helped to create.

 

We have passed beyond Keynesian economics to the point where the Free Market is today a farce. The governments of the United States and of the other industrial nations have assumed responsibility for the welfare of both the rich and the poor within their societies. How long will it take for the populations to understand this?

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In the United States and in most industrial nation there are groups that want to return to the good old days. Whatever they were. Everything is changing. The 21st Century will be completely different from the 20th Century.

 

It should also be noted that it was the Federal Reserve, under Chairman Ben Bernanke, who used creative Monetary Policy in a period of a little over 24 months, with strong encouragement from President Obama, to buy up the toxic mortgage pieces throughout the United States at the rate of 45 billion dollars’ worth a month and also he added another 40 billion dollars a month directly to the National Cash Flow.

 

The Republican dominated House of Representatives from 2011 on did nothing to help the situation. They should have applied Fiscal Policy, creating jobs by spending money on infrastructure modernization. Instead they tended to cut government spending and worsen the Great Recession. Mitch McConnell, the Republican majority leader in the Senate, announced that they would make Obama a one term president by not cooperating with him on anything. To them no price was too high in order to make Obama a one term president. Somehow the needs of the American people were lost.

 

It was the Federal Reserve and the President who saved the country from falling into the worst depression in its history. The Republicans, once they got control of the House of Representatives, refused to pass anything that would make President Obama look good. This was true even if it had a negative effect on the country and hurt the majority of its citizens. President Obama offered a Bill that would engender spending on our decaying infrastructure. It did not even come up for discussion in the House of Representatives.

The Weiner Component Vol.2 #6 – Part 2: The Federal Reserve

Description: Newspaper clipping USA, Woodrow W...

Description: Newspaper clipping USA, Woodrow Wilson signs creation of the Federal Reserve. Source: Date: 24 December 1913 (Photo credit: Wikipedia)

English: A map of the 12 districts of the Unit...

English: A map of the 12 districts of the United States Federal Reserve system. (Photo credit: Wikipedia)

The Federal Reserve System (Fed) was established in December of 1913 as the central banking system of the United States by the passage of the Federal Reserve Act. It came into existence largely in response to a series of financial panics, particularly the Panic of 1907. Its purpose was to establish a semi-independent agency that would control and regulate Monetary Policy within the United States. At that time it meant mainly being able to freely and quickly move currency around as needed in the country.

 

The Fed consists of twelve regional banks that cover the entire nation. They are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Each of the twelve sections has its own Federal Reserve Bank, generally with at least one auxiliary bank. For example: California has the main Fed Bank located in San Francisco and an auxiliary one in Los Angeles. The Federal Reserve Banks are located throughout the United States, with the main branch in Washington, D.C. Each can also handle and make the other branches cognizant of any problems within its region.

 

The Fed was initially establish to devise and implement Monetary Policy. In 1913 this meant to control the supply of currency available throughout the nation. This was and still is its main function. But after 1913 the law establishing it was gradually expanded, generally as the need existed, expanding the definition of Monetary Policy, and giving the Fed numerous other responsibilities.

 

Today Monetary policy remains its primary function but today the Federal Reserve System’s mandate is also to promote economic growth, high levels of employment, stability of prices, to help preserve the stability of the dollar, and to moderate long-term interest rates. We can say that the Fed’s mission is, in addition to regulating Monetary Policy, to foster a sound banking system and a healthy economy throughout the nation. That in order to accomplish this the Fed serves as the banker’s bank, the government’s bank, the regulator of financial institutions, and as the nation’s money manager. We can also say that all of this is the current definition of Monetary Policy.

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The problem here is that economics is not an exact science and that the regulators of the Fed have to continually read and interpret what’s happening in the economy. The different Federal Reserve members do not always agree upon what should be done. The agency is run by consensus with the Fed Chair being in charge.

 

In 1908 Congress enacted the Alrich-Vreeland Act which established the National Monetary Commission to study banking and currency reform. The Bill set up two commissions, one to study the American monetary system in depth and the other to study the European Central Banking system and to report on them. Thereafter Congress took two years to come up with the Federal Reserve Bill. It was passed late in 2013 and signed by President Woodrow Wilson the same day it passed Congress. The Bill was constructed largely by bankers as a necessary reform of the U.S. financial system.. It set up a fairly independent entity, The Federal Reserve.

 

In its initial period it was opposed by agrarian interests. They stated that it favored the mercantile class over the farmers. It has long since passed beyond this period of discontent within the United States. While it is still at times opposed by many Republicans largely for being too independent it has stood the test of time as a necessary entity of the U.S. Federal Government.

 

Interestingly the Republicans who still oppose it feel that it should be under rigid control of the Congress. But Congress is afraid to mess with it. An error on their part could bring about a massive depression. And that would bring about a voter rebellion at the next election.

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As was pointed out even though the Fed has control of the money supply that aspect of the Fed’s power is fairly limited. They cannot always control completely or even handle all the factors that are affecting the economy. It is a very difficult process to predict what is occurring within the nation, virtually from day to day, and to make exact changes that can or will always affect it in a positive fashion.

 

Also Congress, by its actions can strongly affect the economy by, among other things, its spending policies. This is called Fiscal Policy, where Congress can increase or decrease the amount of money it spends upon various programs like decreasing aid to the poor in Affordable Health Care or perceptibly increasing military spending. Decreasing aid programs to the needy takes large amounts of spending out of the overall economy while increased spending on the military will substantially increase the amounts of money that go to the upper class. This can make for a redistribution of income from the poor to the upper class.

 

All these changes, plus others that have not been mentioned, become reasons for differences in the economic flow. They become factors that the Fed has to consider in mapping out its policy. And they are dynamic changes that all always going on. This means that the Fed is in a constant state of studying the economy and continually fine-tuning what is happening in the country. It is a constant process and the changes can take months to come about or not come about. It takes a steady hand to deal with this process.

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The United States Government probably is the largest spender in the world. It has a checking account with the Fed through the U.S. Treasury Department. All revenue generated by Federal taxes, licenses, etc. and all outgoing government payments are handled through this account. In addition the Fed sells and redeems government securities such as savings bonds and Treasury bills, notes, and bonds. It does this to raise money, or to limit the amount of money in the National Cash Flow, and otherwise adjust the economy.

 

The factor that deals with this is the overall rate of inflation in the country. If it starts going up the Fed has to reduce the amount of money in the National Cash Flow. There is too much money chasing too few goods and services, forcing prices up as more and more people bid for the same products and/or services. At this point the Fed sells more bonds and Treasury Bills than it redeems. It does this by raising the interest rate it pays for the money. If, on the other hand, there is not enough money in the National Cash Flow then the Fed will increase the amount by buying back more bonds and Treasury bills than it sells. Or for that matter the Fed can just add money to the National Cash Flow making more cash available for everyone as it did for over two years under the Obama administration.

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The Fed also issues all coins and paper currency. The U.S. Treasury prints and mints the cash and the Fed distributes it to its financial institutions. This includes replacing worn-out and torn bills. In fact if one visits and takes a tour of one of the Federal Reserve Banks, they get a little package a shredded old money as a souvenir.

 

The Federal Reserve Board also has regulatory and supervisory responsibilities that include monitoring banks that are members of the system and the international banking facilities in the U.S., the banking activities of member banks and the U.S. activities of foreign owned banks. In addition the Fed helps to ensure that banks act in the public’s interest by helping to develop federal laws governing consumer credit. Such laws as The Truth in Lending Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, and the Truth in Savings Act are examples of this. The Fed is supposed to be the policeman for banking activities for the U.S. and abroad.

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The Chairperson of the Federal Reserve heads this bank. Currently Janet Yellen is the Chairwoman. She has held this position since 2014 when she was appointed by President Barack Obama. The term of this office is four years. President Trump has stated that he will replace her when her term expires in 2018.

 

Chairperson Yellen tends to be overly cautious in her approach. She gradually ended the policy of the Fed contributing money to the National Cash Flow and has been overly cautious in terms of raising the interest rate that the Fed charges it member banks, bring about two quarter of a percent raised while threatening three further quarter of a percent increases. The Fed has gone from a 0% charge to banks borrowing money from it to one half of one percent which it is at present. This has kept interest rate that the banks charge low but has gotten their depositors a rate of one tenth of one percent interest on the money they have deposited into the banks. Consequently the Commercial and Saving Banks are practically getting free money from their depositors, and feeing their depositors for everything thing they do for them, and while charging a lower interest than they used to still making millions in interest. It would seem that the banks are not operating in the interest of their depositors.

The Weiner Component Vol.2 #6 – The Federal Reserve: Part 1

English: Monthly changes in the currency compo...

English: Monthly changes in the currency component of the U.S. money supply as reported by the Federal Reserve at the St. Louis Fed’s F.R.E.D. website at: http://research.stlouisfed.org/fred2/data/CURRNS.txt The data was copy/pasted into an OpenOffice.org Calc spreadsheet, the monthly changes were calculated using a simple formula, then this image was generated from that data. (Photo credit: Wikipedia)

Every industrial nation or group of countries like the Euro-pact, which uses a common currency, has a Central Bank that largely controls that controls its Monetary Policy, the flow of currency within its borders. In Europe it’s called the Central Bank and in the United States it is called the Federal Reserve System or the Fed.

 

Initially when the United States was founded under the Constitution in 1789 the Secretary of the Treasury, Alexander Hamilton, suggested that a Bank of the United States be established; and it was in 1791. The bank served as a repository for federal funds and as the government’s fiscal agent.

 

The bank was privately owned, as money for it was subscribed by private citizens, but its prime function was to serve the new government. It was granted a twenty year charter by Congress and had branches in eight cities. Consequently in addition to acting for the government the bank also conducted general commercial business. Although it was well managed and profitable critics charged that it was favoring the mercantile class over agrarian interests. This brought about its temporary termination after its charter expired in 1811. In 1816 the Bank of the United States was reestablished because the country had faced financial problems during the War of 1812 and it received a new twenty year charter.

 

The Second Bank of the United States would exist until and through most of the second term of Andrew Jackson’s presidency. It’s President, Nickolas Biddle, attempted to force Jackson to sign a Congressional bill chartering another twenty year extension to the bank. President Jackson reacted to this by moved all new government income to a group of western banks, that became known as his “pet” banks, and spent the funds already deposited in the Bank of the United States before withdrawing funds from his “pet” banks to pay for the needs of the Federal Government. The Second Bank of the United States got a state charter and would eventually go bankrupt. The western “pet” banks went on a lending spree which inflated the sale of western land by hundreds of percent, resulting in a depression, when the bubble burst, that affected the entire United States during the tenure of the next President, Martin Van Buren. In any event the nation no longer had a Central Bank.

 

In 1913, during the Presidency of Woodrow Wilson, a new Central Bank was set up by Congress. It was called the Federal Reserve and was supposed to regulate the flow of currency within the nation in order to avoid the large and regular economic dips of recession and depression.

 

Its initial mission was to control Monetary Policy, the flow of money through the entire economy. Gradually Congress extended it purpose by new legislation. These gradual extensions were a broadening of Monetary Policy.

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Keep in mind that at this point in the history of the United States money or currency was specie; that is, it was gold or silver in the form of coins. Paper money did exist but it was a promissory note that could be exchanged at any bank, theoretically at any time, for gold and silver coins. However if this was done on a massive scale there would be a run on the bank and it would run out of money and go bankrupt. In order for business to properly occur more bank notes were printed than there was gold available.

 

Basically these metals, gold and silver, were purchased by the National Government and then minted into different denominations. The coins denoted the weight of the metal. A one ounce gold coin was a $20 gold piece. A one ounce silver coin was a silver dollar. Money, then, was exchanging value for value. The basic value of the metals was agreed upon international; so money as gold or silver could be used anywhere in the world.

 

In 1929, for various reasons, the Great Depression occurred. Under a Republican administration, that of President Herbert Hoover, the country, and, for that matter, the world, went economically downhill for the next decade. Each industrial nation had to work out its own deliverance from the Great Depression.

 

In 1932, the Democrat, Franklin D. Roosevelt was elected President of the United States. He introduced the “New Deal.” His basic program was the three R’s: relief, recovery, and reform. He attempted to offer employment to many of the unemployed, an end to the reasons for the depression, and reform by legislation or otherwise so it could never happen again.

 

Roosevelt was the longest serving President in the history of the nation. He served for four terms, through the Great Depression and most of World War II, dying in office during his fourth term.

 

Sometime during his first administration he had a bill passed by Congress that changed the use of money, first in the United States and then it was copied throughout the rest of the world. The Federal Government collected all the gold coins, with the exception of a small number that could be kept as souvenirs, issued paper silver certificates for one and five dollar bills and Federal Reserve Notes for any amount above that. The gold coins were melted down into bars of gold and stored in underground depositories like Fort Knox, situated around the country, with gold certificates issued for the gold, which the government kept on deposit to verify the value of the Federal Reserve Notes.

 

In essence money being worth its weight in gold became a myth. The gold certificates were never on display or otherwise available. There was never any record kept of actual gold being added or subtracted from the gold supply in the depositories. Money became paper, a token of no real value; everything else was a fiction.

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Early on in World War II the countries that were to become allies of the United States shipped their gold supplies to the U.S. I don’t believe the gold was ever returned to those nations. They spent the gold on buying supplies with which to fight the war. After the gold was spent the United States used a system called “lend lease” to supply its allies with the necessary food and war materials. Those goods were never really paid for monetarily. But World War II ended the last hangovers of the Great Depression. The United States and later the rest of the world emerged in different levels of economic fitness in 1945. All actual money had become paper tokens that were used to exchange goods and services for goods and services. The basic world currency, upon which all the other national currencies were based, after the war was the American dollar. It is still that today.

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The Federal Reserve came into being because of the depression or panic of 1907 and other extreme downturns in the economy. Attempts had been made during the late 19th and early 20th Centuries, by the moneyed class, mainly bankers, to control the economy mainly for reasons of profit. These, in turn, particularly when they failed, had exacerbated economic shifts within the economy, usually in a downward direction.

 

The Panic of 1907 and 1908 was also known as the 1907 Bankers Panic or Knickerbocker Crisis. Its causes took place initially over a three week period when the New York Stock Exchange fell almost 50% from its peak the previous year. It lasted for slightly over a year.

 

Monetary panics occurred during this time of economic recession and there were numerous runs on banks and trust companies. It spread throughout the nation with many state and local banks and businesses going bankrupt. The primary cause of the run was a retraction of market liquidity by a number of New York City banks and a loss of confidence among depositors, exacerbated by unregulated side bets of bank funds by banking executives.

 

The panic was begun in 1907 by a failed attempt to corner the market on stock of the United Copper Company. When this failed, banks that had lent money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company, New York City’s third largest trust. The collapse spread throughout the city trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew their deposits from regional banks.

 

To simply state what happened was that the object was for a group of investors to gain control of the stock shares of United Copper Company. The group concerned controlled numerous banks and trust companies. They believed that a large number of shares had been borrowed and sold short. (To sell short is to sell a stock at a higher price before one owns it, then when the price drops buy the stock at a lower price, and eventually pocket the profit.)

 

The group believed that a majority of the stock was held by the Heinze family and that a significant number had been borrowed and sold short on the belief that the price would drop considerably. Their aggressive purchasing would drive up the price of the stock. The short sellers would be forced to come to them in order to purchase stocks that they had already sold and they could charge whatever they wished.

 

United Copper rose in one day from $39 to $52 a share. It then went up to nearly $60 a share, but the short sellers were able to able to find United Copper from other sources. The group has misread the Market and the stock price began to collapse. It closed at $30 and then dropped to $10 a share. The manipulators and the banks they represented were ruined. As news of the collapse spread depositors rushed to pull their money out of these banks. The run on banks spread throughout the city. A week later many regional stock exchanges throughout the nation were closing or limiting trading.

 

The hero of the crisis was J.P. Morgan. He coordinated the heads of the banks and trust companies and was able to keep the total economy of the United States from collapsing. The Panic of 2007 was from May 2007 to June 2008, 13 months. While it started and was centered in New York City the entire nation was involved. There was bank panic, runs on banks and trusts with crowds of depositors withdrawing all their funds, and falling stock prices that resulted in massive economic disruption. Production fell 11% in the nation, imports went down by 26%, and unemployment rose to 8% from under 3% two years earlier. Even immigration dropped to 750,000. It had been 1.2 million two years earlier. J. P. Morgan lost about $21 million straightening the situation out.

 

The frequency of economic crises and the severity of the 1907 panic led to a national debate on reform of the system. In May 1908 Congress passed the Aldrich-Vreeland Act that established a National Monetary Commission to investigate the panic and propose legislation to regulate banking.

 

It was discovered that the major difference between European and American banking systems was the existence of a Central Bank which controlled Monetary Policy. They could easily move money to where it was needed. The European nations all had one, the United States did not. The European states were able to extend the supply of currency during periods of low cash reserves. The United States had a great problem doing this.

 

The final report of the National Monetary Commission was on January 11, 1911. For nearly two years Congress debated the proposal. On December 23, 1913 Congress passed the Federal Reserve Act. President Woodrow Wilson signed the bill immediately and the legislation was enacted on the same day, December 23, 1913, creating the Federal Reserve System as the Central Bank within the United States.

 

 

English: Flag of the United States Federal Res...

English: Flag of the United States Federal Reserve Bank (Photo credit: Wikipedia)