The Weiner Component #73 – The Problem of the Distribution of the National Income

Manhattan Panoramic View, NYC

One of the greatest misnomers to come out of the 2008 Real Estate Debacle was that the CEOs’ large compensation packages and the massive spending by the general public were closely interrelated.  The spending affected the extent of the salaries but it was separate from them.  The bundling of mortgages caused the Real Estate Bubble.  Going back to the last two decades of the 20th Century many individuals and families began to add their home equity to their incomes in order to enjoy all the comforts possible.  With the continual rise of real estate values over a thirty plus year period this seemed infinitely possible.  With the ever-growing demand for major and minor items by the general property owning public the country was in a period of immense profit for all types of retail concerns.  People bought cars, boats, bigger houses in better neighborhoods.  They frequented restaurants, bought new clothing, TVs, almost anything.  As corporate profits increased CEOs demanded and got greater and greater bonuses and overall compensation packages.  There was full employment; banks were earning greater and greater profits.  The country, the world was living in a sort of fairyland that would presumably go on forever.

And then, at the tail end of 2008, the bubble burst and hard reality set in.  Property values dropped, in many cases, well over fifty percent.  Demand for products fell and there was massive unemployment.  People could not meet their bills.  Many owed far more on their homes than they were worth.  Everyone, including the CEOs faced disaster.  Then the government jumped in with $900 billion worth of loans and saved both the banking industry and the country from a massive depression.

The CEOs were very frustrated.  They had gotten these phenomenal salaries and now they were gone or practically gone.  For some bonuses had been cut in half.  The CEO of Bank of America was very upset particularly after President Obama had insisted that no bailout money be used to pay bonuses.

In addition corporate profits dropped significantly at the end of 2008.  The country was in unbelievable economic pain.  By 2010 the economy was expanding again.  This continued through 2011, 2012, 2013, and 2014.  During 2011 Congress slowed growth with the Debt Ceiling crises.  The next year the fiscal cliff held the economy hostage, again reducing job growth.  By 2013 many workers had left the labor force, because of constant inability to find almost any kind of work, supposedly reducing the unemployment rate.

In 2008, with the crash, the Gross Domestic Product was $14,720.3 trillion.  The GDP per capita was $48,951.  The following year it dropped to $14,417.9 trillion with the per capita level at $47,041.  In 2010 it slightly exceeded the 2008 level and in 2011 it was $15,533.8 trillion with the per capita rate at $48,282.  By 2012 the country was in the $16 trillion level and by 2914 it has reached $17 trillion with the per capita level also rising.

The unemployment level increased significantly from the end of 2008 on rising to 9.9% of the workforce and then gradually dropping by 2013 to about 6.7%.  Keep in mind that this percentage does not include those that are underemployed or who have given up looking for work.  We can only guess at these numbers.

Of course the irony of all this is the level of the per capita income which would give a family of four if it existed in real life a little under two hundred thousand dollars a year.  What exists is a wide distribution of incomes with the bulk of the $17 trillion going to a very small percentage of the population.  For example a person working at Wal-Mart for $7.25 an hour with a family of four would have to apply for food stamps and other government aid in order to survive while the CEO of any giant corporation would be earning about a million dollars a month or more.  If I remember correctly the CEO of Hewlett Packard received about $15 million in 2013.  The general compensation for CEOs could be more or slightly less.

Interestingly in cases like that of Wal-Mart it is the taxpayer, who generally is earning a lot less than the per capita level of income, that pick up the difference needed for the Wal-Mart worker’s family to survive through the various entitlement programs the federal and state governments provide.

Wages, salaries, compensation packages vary greatly.  Only a very small percentage would reach the actual level of the per capita income.  And a much smaller percentage would be above it.  And still a much smaller number, perhaps a hand-full, would have their income in the millions of dollars.  There are even a few in the billion dollar category.

President Franklin Delano Roosevelt, during the Great Depression and again during World War II, stated that a person could only spend so much during a year or during a lifetime.  There was no need for them to earn that much more.  He wanted to tax excess profits.  Congress in neither case would go completely along with him.

Currently the tax system is set up so that anyone earning over $140,000 a year pays a fixed rate on everything earned over this amount.  The more he earns over this the smaller is the percentage of his income that he pays in taxes.  This means that the average family earning under $140,000 a year, which is most of us, pays a greater percentage of their income in federal taxes.  In essence the rich can store endless barrels of money for countless future generations or use some of the money to buy elections while everyone else can do without and just generally survive, with some people not even really surviving.  In the case of corporate subsidies, this money can be used for lobbying and political campaigns to buy influence in the federal and state governments even though it is indirectly paid by the taxpayer.

Obviously there is something wrong with this system.  Something in the way of reform has to be brought about or eventually tragedy will occur.  People will accept a lot of inequities but eventually these inequities become so blatant and their misery so great that they will violently be objected to.

The rich seemingly have endless amounts of money.  They are using some of it to influence the general public in elections.  In essence they are buying influence in government which is being used for their own benefits.

 

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The Weiner Component #72 – Economics: 2008 & 2013

The western front of the United States Capitol...

Prior to the housing bubble bursting or the Real Estate Debacle of 2008 it seemed that everyone was living well.  Many middle-class families were implementing their incomes by continually drawing the equity out of their homes that had been constantly increasing in value over the last 30 years.  Corporate profits and executive compensation were also rapidly increasing.  Employment was high with jobs readily available.  Everyone or at least everyone who supposedly counted was doing well, spending freely, and expecting to do better in the future.

And then toward the end of 2008 the bubble burst.  To quote a real estate agent: “Everything went down the toilet.”  Real Estate values dropped like lead weights out of a tall building.  Orders for goods or services were cancelled on a massive level.  Unemployment became rife and growing.  The country was in a massive recession heading toward a giant depression, one far greater than 1929.

As of 2009, 18.5% of families had no liquid assets; they had essentially maxed out their credit cards and spent whatever equity they had had in their homes.  By 2011 this had grown to 23.4% of families.  By July 2008 housing  prices had declined in 24 out of 25 major cities, with California and the southwest experiencing the greatest price declines.  In the year 2008 the U.S. Government allocated over 900 billion dollars to special loans and rescues related to the housing bubble.  On December 24, 2009 the Treasury Department made an unprecedented announcement that it would be providing unlimited financial support to Fannie Mae and Freddie Mac for the next three years.  It did this despite acknowledging losses of 400 billion so far.

The GDP for the first three quarters of 2008 came in at positive rates of growth.  But the Fourth Quarter was at a 6.3% decline, a drop of 2.5% below advance estimates.  This was the rate that the output of goods and services, produced by labor and property located in the United States, decreased, and decreased virtually overnight.

The decrease reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment.  This was partly offset by a positive contribution from federal government spending.  Imports decreased significantly.   The market value of the nation’s output of goods and services decreased 5.8% or $212.5 billion in the fourth quarter to a level of $14,200.3 billion.  In the third quarter the GDP had increased 3.4% or $118.3 billion.

The slowdown in GDP toward the end of 2008 reflects a sharp deceleration in equipment and software and large decreases in export and in state and local government spending.  There was a sharp downturn in imports, and an acceleration in federal government spending.  Corporate profits decreased $250.3 billion.  The internal funds available to corporations for investment decreased $97 billion.  Taxes on corporate income decreased $130.3 billion.  Dividends decreased $32.8 billion.

What happened was that the profit motif and spending by homeowners had finally gone berserk and many homeowners could no longer afford either their many purchases or their monthly payments on their properties.  Toward the end of 2008 the entire economy faced collapse.  The banks, which in many cases were refinancing properties at 125% of their appraised value, faced bankruptcy.  Some did go under; others eventually were bailed out by the federal government.  It looked like the entire United States banking system might collapse.  This was also true for Europe and Asia.  It did collapse in Iceland.

In the U.S. the federal government bailed out the financial institutions with loans of 900 billion dollars.  This type of action also happened in Europe and Asia.

Toward the end of 2008 the U.S. had a massive economic contraction bringing the country to the point of a major catastrophe.  In 2009 the contraction continued until June, when it reached a trough, and then the economy began to slowly expand.  By 2010 the GDP had gone from -2.8% in 2009 to +2.5%, an increase of almost 5%.  The expansions for the years: 2011, 2012, and 2013 were not as impressive.  But then there was the sequester largely brought about by the Republicans who also held the budget hostage to get federal reductions in spending, which actually slowed-down economic growth and kept unemployment high.

By 2013 the world had largely recovered from the Debacle of 2008.  If we look at what happened it is an interesting note of irony that what led up to this crisis were laws passed and actions taken when the Republicans had control of the government.  Seemingly the blame for all this has been placed upon the back of President Obama by the Republicans.  It’s like causing a mess and then blaming the person cleaning it up for the mess.

There is an unhealthy economic pattern here that needs to be considered.  The so-called prosperity that existed before the Crash of 2008 was on two levels, of which one was false.  The massive spending by the middle-class was based upon their ownership of homes from which they were constantly taking out their equity.  It was a condition whose duration was limited by the amount of the equity and their desire to spend.  This brought about a false state of euphoria among the group.  This bubble, at some point, had to burst.

The second aspect of this pattern was not of limited duration.  This was the continuing rapid growing compensation packages (pay) for the CEO’s and upper echelon of the society.  Their yearly earnings go, in many cases, into the multi-millions of dollars.  For example the CEO of Corning received $11,213,864 million for 2013.  American Electric Power, an eastern utility holding company paid its CEO $10,612,588 million.  Schlumberger, an international company that manufactures and operates drills for oil drilling, paid its CEO $44 million out of a profit of 45 billion dollars.  Its vice presidents received about $8 million each.  This process was speeded up by all the spending that ended in 2008.

We could go on and on naming numerous companies but the point has been made.  The minimum wage is $7.25 an hour; and the House of Representatives is reluctant to raise that.  If we do a careful study of wages, salaries, compensation packages in the United States we find that the divisions become more and more unequal year by year.  The rich are getting much richer and everyone else is getting much poorer.

Overall economic recovery would have been a simple thing with strategic use of both monetary and fiscal policy by the Federal Government.  Monetary policy was applied, in fact it was applied in a new creative fashion.  But from 2011 on when the Republicans took control of the House of Representatives they did not pass one single law that would have helped create jobs.  Actually they did the reverse, limiting federal spending to the point of creating more unemployment directly on the federal level and indirectly on the state level.

Fiscal policy would have upgraded the infrastructure of the United States, brought the country into the 21st Century by creating and replacing the half-century or older bridges, electrical grid, ports, and other necessary parts of this country that will have to eventually be replaced or renewed for the nation to function and compete with the rest of the world.  President Obama proposed some of this in 2011 but it was not even discussed in the House of Representatives.

All of this would have brought unemployment down to 3 or 3 ½%, the level that is considered full employment.  We would be far away from any large-scale unemployment and the GDP would be far higher than it is today.  Our homeless and hunger problems would be essentially gone and virtually everyone, including the upper few percentage of the population, would be doing better economically than they are currently.

While the bubble will eventually be solved with different levels of unpleasantness to many people the distribution of the National Income will not.  It is not only happening in the U.S. it is also happening in many of the industrial nations of the world.  Unless national action is taken to mitigate this problem there will be dire consequences later in this century.

 

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The Weiner Component #71 – Income Inequality

Income inequality and mortality in 282 metropo...

On Friday, March 14, 2014, in the Business Section of the LA Times, there was an article dealing with the changing levels of income across the United States and in particular in Orange County, California.  This is according to a report from the real estate website Trulia.  The institute demonstrated that the percentage of income was decreasing for the lower echelon of society while growing rapidly for the upper percentage throughout the country; this was particularly true for Orange County, California.

The Gross National (GDP) consists of all the goods and services produced and used in one fiscal (twelve month financial) year, stated in terms of dollars and cents.  In essence it is the amount of the National Cash Flow for one year.  The National Cash Flow consists of all the money circulated in the economy in cash and credit, being actual dollars, credit card expenditures, all bank credit and loans issued and government expenditures.

By ascertaining this amount and comparing it with similar data for other years the Federal Reserve (FED) can see the rate of growth or contraction and determine what needs to be done to allow the economy to properly grow.  These measures are determined quarterly and then summarized yearly.

The FED utilizes Monetary Policy, adjusting interest rates, while Congress and the President use Fiscal Policy, passing laws to allow the economy to expand or contract.  The process is not automatic; it takes both intelligence and action to bring about change.   There has been no Fiscal Policy change since the Republicans took over the leadership of the House of Representatives in 2011.

There were indications as early as 2005 that we had a housing and land bubble.  This was not recognized until 2007.  Most bankers and homeowners were in a state of denial.  The Housing Boom had developed over the last 30 some years.  It had existed through the economic life of most of the people dealing with the Housing Market.  They did not or refused to see that conditions could change.   Also the profits made by the banking houses were phenomenal.  A goodly percentage of the homeowners were using their homes as bank accounts, continually refinancing.  Many banks were offering loans at 125% of the appraised value of the property.  Toward the end of 2008 both the banks and the home-owners were going crazy in their activities for profit and additional income.

If we examine the GDP for 2007 and 2008 just before the Real Estate Crash that occurred at the end of the year and compare it with the GDP for 2013 we discover that by 2013 the National Cash Flow, amount of currency in existence, is greater in 2013 than it was before the Debacle of 2008.  There is more money available.  Supposedly everyone should be better off, but this is not the case.

What happened in 2008 was that the GDP shrank to .3% and in 2009 the contraction was -2.8%.  Thereafter there was a small increase each year through 2013.  The Federal Government poured billions into the economy to avert a major depression and the economy slowly recovered.  We never did get rid of the recession and a high amount of unemployment.  This was because of the policies of the House of Representatives after 211 which tended to shrink the Federal Government and subsequently the state governments because of reduced taxes.

The private sector has pretty-much recovered, although not as much as it could have with the application of fiscal policy.  This would have increased the GDP and brought unemployment to a negligible percentage of the workforce.

Homeowners could no longer use their properties as bank accounts and most of the consumption of goods and services that they did prior to the Crash ceased.  In fact a goodly number of them were underwater and could no longer afford the houses in which they were living.

In the process of this recovery corporate profits and executive compensation packages have grown substantially but ordinary wages have remained fixed or have barely increased.  With modest inflation this has caused a substantial decrease in the purchasing power of the middle and lower classes.

The overall result has been that the rich have gotten richer and everyone else has gotten much poorer.  Interestingly with the minimum wage at 7.25 an hour a person has to work two hours to buy a little over three gallons of gasoline.  And this is before taxes are taken out of their paycheck.

I suppose that it can be argued that this is inevitable and would have happened even without the bubble; but isn’t that beside the point?  There has to be something wrong with the country’s basic values to allow those conditions to occur.  The United States is currently at it richest historic point in its history.  It can easily produce enough to feed and clothe its population.  Yet we have hunger and all sorts of privation in the nation.  The irony of this, if such a thing is possible, is that the well-to-do could be earning even greater amounts if they changed their attitude toward the rest of the people in the nation.  We are capable of producing more wealth for the rich and more, also, for everyone else.  No one needs go hungry or be food insecure, or for that matter, not have a decent standard of living.  No one need not have employment, if they want to work.  This country is that rich and that capable.  There is definitely something wrong with our current system of values.

 

 

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The Weiner Component #70 – Intentions of the Framers of the Constitution

English: First page of Constitution of the Uni...

One of the major objects, if not the major object, of the framers of the Constitution was to create a government of the majority with protections for the minorities.  A true Democracy is supposed to express the will of the majority.  The major reason for education in our society was to create a population capable of reasoning and therefore able to elect the best people capable of representing them.

Today instead the object of government as applied by the far right and the evangelicals is to create a government where they, the minority, rule and set the standards for the majority.  Through the use of seemingly endless amounts of money in advertising, gerrymandering, and outright prefabrication they have been able sway elections to give themselves the power to impede necessary reforms and cause untold misery in the nation.

The Republican Party has been vociferously attacking Affordable Health Care (Obama Care) since they were able to gain control of the House of Representatives in 2011.  With the upcoming Midterm Election in November of 2014 the leadership of the Party has promised to make that a major issue, destroying Obama Care.

In a March Special Election in Florida, in an overwhelmingly Republican District, the Republican candidate just barely won the election.  Interestingly he treated his victory as one in which he totally trashed the Democratic candidate and the overall bulk of the population in his District voted to get rid of Obama Care.  The reasoning by the candidate and the party seems to be fallacious.  Presumably the new basis of the November Election in 2014 will be to elect Republicans so they can do away with Obama Care.

This seems to be in the opinion of many of that group a way to regain control of Congress.  The concept is fascinating since the entire concept of Obama Care was originally developed by the Heritage Foundation, a Republican Think Tank, and initially set up in Massachusetts under Republican Governor Mitt Romney.  It would seem that the reason for attacking Obama Care is to gain political power In Washington, D.C.

Interestingly, if we take the different parts of Obama Care and discuss them with the general public we find that they like the parts.  For example, keeping a child on their parents medical plan until he or she is 26 if the youngster is going to college, insurance companies not being able to reject people because of a prior condition, overall lower insurance rates for most people, no maximum limit in terms of what the insurance company has to spend on any condition, etc., etc.  But then if you ask them what they think about Obama Care the answer is that they don’t like it.

What seems to have happened is that the Republican prefabrications, like death panels and other nonsensical statements, which the Republicans have repeated over and over again, have, more or less, taken hold.  A good percentage of the people do not associate Affordable Health Care with the benefits it’s so far provided.  It can also be stated that the Democrats have not provided enough positive information to the public compared to the Republicans who have given redundantly endless negative statements.

In addition to using Obama Care as a means of gaining political power the wealthy Republicans like the billionaire Libertarian Koch Brothers have begun, through groups they fund, utilizing television and other forms of advertising as early as March for the oncoming November Election.  The probability is that billions will be spent on the Midterm Election.  And most of this money will be spent by the Republicans attempting to buy power by trying to gain control of the Senate and keeping control of the House of Representatives.  This is also true for state elections.

Will they gain control?  An interesting question!  We’ll have to wait and see.  Can the American voter be bought by propaganda and go against his/her own economic interests?

If the Republicans are successful the country will have total gridlock for 2015 and 2016.  They will not have a supermajority in the Senate and the Democrats will do what they, the Republicans, have done from 2009 on, filibuster the bills they are against and the President will veto the bills he is against.  They might try to impeach him as they did President Clinton; but, I suspect, they will have a problem doing so.  Of course they might be able to push through some strange laws, that the President would consider unconstitutional and break, as they did in 1868 with President Andrew Johnson.  But that did not effectively work then even with supermajorities in both Houses of Congress.

If the Republicans were to gain control of Congress in 2015 they would have to find positive reasons for running the country and they would also have to be able to work with the President.  At this point none of this seems possible.  All they have done since 2011 has been to impede all programs for which Obama could claim credit.  They haven’t been for anything except lowering taxes for corporations and the upper 1%.  The Republicans have done an outstanding job of keeping the country in a recession, attacking woman’s rights, and limiting benefits in entitlement programs for the poor and needy.  Paul Ryan, for example, has defined sloth as a racial thing.  It will be interesting to see what happens.

 

 

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The Weiner Component #69 – Historic Irony: George Orwell’s “Animal Farm” & North Korea

In August 1945 George Orwell published Animal Farm, an allegorical satire dealing with events that led up to the Russian Revolution of 1917 and on into the Stalin Era of the Soviet Union.  He portrayed the Communist Soviet Union as a brutal dictatorship, built upon a cult of personality, and enforced by a reign of terror.  In 2013 news came out of North Korea about the absolute rule or new leadership of Kim Jong-un, his cult of personality, and his treatment of a goodly percentage of his population with the use of terror.  In many respects the satire also mirrors the North Korean Government.

Animal Farm deals with the animals on a farm revolting against the farmer, chasing him off the property, then taking over the farm.  Old Major, an old boar on the Manor Farm, summons the animals together.  He calls the humans parasites living off of the labor of the animals and teaches them a revolutionary song called “Beasts of England”.  After Major dies two young pigs, Snowball and Napoleon assume command and prepare for the rebellion.  The animals revolt and drive the drunken farmer, Mr. Jones, from the farm, renaming it Animal Farm.  They adopt Seven Commandments of Animalism, of which the most important one is, “All animals are equal.”

Snowball teaches the animals to read and write, while Napoleon educates young puppies on the principles of Animalism.  Food is plentiful and the farm runs smoothly.  The pigs elevate themselves to positions of leadership and set aside special foods for their personal health.  Napoleon and Snowball struggle for prominence.  Snowball announces his plans to build a windmill and Napoleon has his dogs chase Snowball off the farm.  He then declares himself leader of Animal Farm.

The animals work harder with the promise of easier lives.  When Boxer, the workhorse collapses, the pigs secretly sell him to the knacker to be turned into glue.  Years pass and the pigs begin to resemble humans, walking upright, carrying whips, and wearing clothes.  The Seven Commandments are changed to one.  “All animals are equal, but some animals more equal the others.”

In 1945, at the end of World War II, Korea, which had been ruled by Japan, was divided at the 38th parallel into two zones of occupation, American in the Southern half and Russian in the Northern part.  Prior to WW II Korea had been divided into two zones of colonization.  The Russian sphere of influence was in the North above the 38th parallel.  When the division was made the United States didn’t know this or they would have picked another point to divide the country.

The Russians set up a Communist State and the Americans attempt a Democratic Republic in the southern half of Korea.

North Korea is officially the Democratic People’s Republic of Korea (DPRK).  She shares a land border with China to the north and northwest, a short border with Russia to the northeast, and the Demilitarized Zone marks the boundary between DPRK and South Korea.  Both sides, the North and the South claim to be the legitimate government of the entire peninsula.

The DPRK describes itself as a Korean style Socialist Republic and holds elections.  But it is a dictatorship that is considered totalitarian and Stalinist.  There is an elaborate cult of personality: the Kim family, that has ruled North Korea since the end of World War II.  They have destroyed any resistance by the use of force.

The Workers Party of Korea, which is led by a member of the Kim family, holds absolute power in the state.  All political officers are required to be members.  Juche, an ideology of self-reliance, initiated by the country’s first president, Kim ll-sung, is the official state ideology and replaced Marxism-Leninism, when the country adopted a new Constitution in 1972.  In 2009 references to communism were removed from North Korea’s Constitution.

North Korea occupies the northern portion of the Korean Peninsula.  It covers an area of 46,541 square miles, and is about 1/3 the size of California.  The country consists of mountain ranges that crisscross the peninsula.  About 80% of North Korea is composed of mountains and uplands, separated by deep and narrow valleys.  The majority of the population, 24,554,000 people, live in the plains and lowlands.  There is not enough arable land to feed the population.  Even with food imports from China there is still not enough food to adequately feed all the people.

There is no income tax in the country.  The means of production are owned by the state.  All industry is operated state-run enterprises and collectivized farms.  There is no need for private enterprise since the state owns everything and provides, at different levels, all needed goods and services.

In the 1990s North Korea suffered from a famine and still continues to struggle with food production.  In 2013 the U.N. identified North Korea policies as the primary cause of the food shortages and estimated that sixteen million people required food aid.  Amnesty International claims that North Korea suffers from barely functioning hospitals, poor hygiene and epidemics.  By the beginning of the 21st Century the worst of the devastating famine had passed, but the country continues to rely heavily of foreign aid for its food supply.

The country follows the philosophy of songun or a military-first policy and is the world’s most militarized society with a total of 9,495,000 active reserve and paramilitary personnel.  Its active duty army of 1.21 million is the fourth largest in the world after China, the U.S., and India.  It has nuclear weapons and an active space program.

For North Korea to maintain the military establishment it does, even with mostly outdated weapons is absurd.  There is no way she can keep her population in a healthy condition and still keep her military establishment functional.  In a full-fledged war I can see her officers acting in the same way the Russians did in World War I.  There were never enough rifles for all the soldiers.  When they charged the enemy trenches only the first line of running soldiers had rifles.  After these men were shot down by machine-gun bullets the unarmed charging group behind them picked up their rifles and continued the charge.  And when they were killed there was the third line and then the fourth and so on.

In North Korea the population exists for the benefit of the state and the state only has a limited responsibility for them.

On December 13, 2011 the Supreme Leader of North Korea, Kim Jong-l died from a heart attack.  His son Kim Jong-un became his successor.

In the 21st Century the leaders of North Korea bluster and threaten.  North Korea was going to have a preemptive nuclear strike against the United States.  In March of 2013 the North Korean government declared that a state of war existed with South Korea and abrogated all past agreements, but took no military action.  U.S. National Intelligence speculated that Kim Jong-un is mainly trying to assert his control over North Korea and has no endgame other than gaining recognition.  At the start of January 2013, the North Korean government offered to enter into talks with the South Korean government.  They accepted immediately.

North Korea defines herself as a Juche, a self-reliant state.  She is described by outsiders as a de facto absolute monarchy or hereditary dictatorship, with a cult of personality organized around the late Kim ll-sung, the founder of North Korea and the country’s only president, his late son, Kim Jung-l, and his present grandson Kim Jung-un.

Political expression is tightly controlled.  Anyone who deviates from the government line is subject to reeducation in labor camps.  Troublesome political decenters, factionists, and class enemies, who are considered irredeemable are incarcerated together with any close family members in “Total Control Zones” for a life of hard labor.  Those who attempt to escape or violate camp rules are executed or sent to a separate prison within the camp.  The labor camps are reserved for political prisoners, common criminals are jailed in a separate system.

All North Koreans are sorted into groups according to their Songbun, their status system.  It is based upon their individual behavior and the political, social, and economic background of their family for three generations.  It also includes behavior by their relatives.  Songum is used to determine whether a person is trusted with responsibilities and given opportunities.  It even determines if an individual receives adequate food.

Songbun affects access to educational and employment opportunities.  It determines if a person is eligible to join North Korea’s ruling party.  There are three main classifications and about fifty sub classifications.  According to Kim ll-sung in 1953, the loyal “core class” is made up of 25% of the population, the “wavering class” 55%, and the “hostile class” 20%.  The highest status is accorded to those descended from the original participants in the resistance against the Japanese occupation during and before W.W.II.

Many international human rights organizations accuse North Korea of having one of the worst human rights records of any nation.  There are reports of severe restrictions on the freedom of association, expression, and movement, arbitrary detentions, torture and other ill treatment resulting in death and execution; prison camps, where 200.000 political prisoners and their families exist in inhuman conditions.

According to the United Nations Commission of inquiry the crimes against humanity entail extermination, murder, enslavement, torture, imprisonment, rape, forced abortions and other sexual violence, persecution on political, religious, racial and general grounds, the forcible transfer of populations, the enforced disappearance of people and the act of knowingly causing prolonged starvation.

In the 1990s listening to South Korean radio could result in capital punishment.  Singing a South Korean song could result in being sent to a prison camp.  About 200,000 prisoners are held in six large prison camps.  Over 10,000 prisoners die each year.

North Korea is a country where the government owns most of the resources and most of the means of production.  The people exist for the benefit of the leadership, the military, and the state.  What exists is State Capitalism.  Wealth, or the use of the wealth, belongs to the leadership or existing political party.  And among the leadership every member of each family is responsible for the welfare of all the other members of their family.

In this country all men are equal but some men are more equal.  Animal Farm could have served as a syllabus on how to set up the state.  This is a beautiful example of historical irony, where reality followed satirical literature.

The Weiner Component #68 – The Democratic & Republican Parties

When I think of the Democratic & Republican Parties I get very angry.  The Democrats constitute the majority political party by membership in the United States.  In the 2012 Election they cast far more votes than the Republicans, even with the assorted attempts in many states to limit their voting.  They elected the President, had the majority in the Senate, and cast 1.4 million more votes for the election of Democrats in the House of Representatives.  But through gerrymandering in 2010 and restricting the vote in the various states where they controlled both the governor’s office and the legislative body the Republicans were able to gain and keep control of the House of Representatives.  They did this by controlling the electoral districts in the various states where they have a majority.  Here the minority party has been able to dictate to the majority.  And not only have they dictated they have also set the agenda for what needs or should be done in the nation.  And the Democrats have quietly allowed them to do this most of this.

If we look at the legislation that has come out of the House of Representatives since 2011, when the Republicans gained control, there is not one bill that has helped the country recover from the Banking-Real Estate Debacle of 2008.  Most of the bills that have become law since that time have actually shrunk the Federal Government and helped exacerbate the unemployment problem.  It’s taken creative Monetary Policy by the Federal Reserve to bring about a partial recovery from the 2008 Debacle.  But who are the Republicans blaming for the current level of unemployment?  It is the President who cannot administer laws that Congress doesn’t pass.  And the Democrats have quietly let them get away with this blame game.

The Democrats seem docile when it comes to verbally fighting the Republicans.  Whether it’s good manners or reasonableness or just plain inability is a good question.  The Republicans really hold a minority position on most of what they advocate, even though most of the voting population opposes them, but they have taken the position that they are correct and the Democrats have let them.  Is it some sort of fear of direct confrontation?

Basically what the far right and the evangelicals believe would have been realistic in the late 18th Century when people in this country were free to go west, build their own homes and provide their own food.  Society has becoming far more complicated with the government’s position also changing.  People can no longer provide for all their own needs.  They have become interdependent.  Among its other purposes government exists to provide people with services and protections they can no longer provide for themselves.  The Republicans legislators, led by the far right do not see this as one of the nation’s responsibilities.  They have passed or failed to pass legislation needed for whole sections within the country.

Examining their position one gets the impression that they are mean and insensitive, punishing those that cannot properly provide for themselves or their families.  This is a good example of the traditional Protestant Ethic, where God rewards the deserving with success and punishes the sinners with economic failure.  I would think we had grown beyond that nonsense.

The Farm Bill that was recently passed after a long period of negotiation between the legislators from both political parties gives subsidies to some millionaire farmers as well as crop insurance to them and other lesser food producers, and cuts back considerably on needed food-stamp programs to the needy, who are generally food insecure.  An interesting bit of irony here is that the Republicans are also decreasing the size of the farmers market by doing this.

Also around Christmas of 2013 the Republicans in the House have refused to extend unemployment benefits to the long term unemployed even though the bill was passed in the Senate.  The same bit of irony exists here.

As the war in Afghanistan ends Paul Ryan, for example, denounced President Obama’s proposed cut back on the military and defense spending, even though in Ryan’s earlier written budget proposal the military cutback was greater than the one in Obama’s recommendation.  Are the Republicans still against everything President Obama supports just for the sake of being against it?

If this is true, what are the Republicans after with their approach?  What seems to emerge is the simple issue of power.  They want control of both Houses of Congress and of the Presidency.  If they were to achieve this goal, then what will happen?  I don’t think that they really know or that they have thought that far ahead.

If we look at the Republican positions, especially from 2011 on, what emerges would take us right back to the 2008 Banking Debacle.  They would continue to shrink government, taking hundreds of thousands to millions of jobs away from people.  The shrinkage in incomes would force the states to act in a similar fashion because a good part of their incomes from taxes would disappear.  Congress would lower taxes for the large corporation and the rich because they are “the job creators;” but there would be no increase in employment, quite the opposite would occur.  The GDP would shrink and become a fraction of what it is today.  And the country would fall into a very deep depression.  But the Republicans would be in charge, just as they were in 1929.

But, of course, if this were to happen the Republicans would take action to try to avoid the crisis.  They might do what Bush did in 2008.  In addition to bailing out the banks he gave every tax-paying citizen in the United States up to $600 as a tax bonus, hopping they would all spend it and add money to the GDP.  Obama in 2009, in addition to continuing the bank bailout and saving the American Auto Industry, gave every taxpayer an additional $250 tax bonus.

Neither of these actions brought the economy back to where it had been before the 2008 Crash.  Obama also insisted that the bank executives stop paying themselves bonuses out of the bailout money.  This caused the CEO of the Bank of America to complain loudly and other bank executives to complain quietly.  It also encouraged them to pay off their loans as soon as possible so they could bring back their bonuses.

This action will not stop the depression, just as it did not bring recovery in 2008 or 2009.  It will, if anything, help bring about a period of economic confusion.  There will be unbelievable misery for a goodly percentage of the population, many of whom would have voted their prejudices rather than their interests.

Will this situation come about?  Probably not.  But blatant power does seem to be the goal of the Republicans.  And it seems to be power for its own sake.  The Republican have no constructive plan for the benefit of the country.  They just deal in platitudes.

 

The Weiner Component #67 – Monetary & Fiscal Policy & The National Debt

During the late 18th Century, when the United States first came into existence and for the majority of the 19th Century, the U.S. Government followed a policy of laissez faire; with the exception of import duties, used to run the government, they kept hands off all economic activity within the nation.  Toward the end of the 19th Century, with the growth of cities, rapid industrialization and the emergence of monopolies, society became too complicated to be left alone by the Federal Government.  State and   National regulations began to come about attempting to control the economic ravages brought about by the moneyed classes which had and continued to lead to miserable conditions for the masses, and included both recessions and depressions.

In addition to assorted laws regulating conditions with the society in 1913 the Federal Government created the Federal Reserve as a semi-autonomous agency whose mission was to control the National Cash Flow, the amount of money available throughout the economy.  They were to add or subtract cash as needed to keep economic growth regular and avoid rapid upturns or downturns in the economy.

This became one of the major tools in attempting to control economic conditions within the nation.  Were they always successful in what they did?  The answer is obviously, No.  Witness the Great Depression of 1929 and the Real Estate Debacle of 2008.

The other major tool which the Federal Government had/has was Fiscal Policy.  This is the power to spend money by passing a law.  Congress, with the signature of the President can appropriate money for any purpose it deems necessary.  This was done during the Great Depression and enabled Roosevelt to propagate his New Deal and later to pay for World War II.  Congress, at the time, spent much more money than it took in in taxes.  Eisenhower did the same thing in the 1950s, both to build a national highway system across the United States and to fight the Korean War (police action).  This use of fiscal policy has been used over the years of our history to do numerous things, generally for the benefit of the entire country.

During the Great Depression the economist, John Maynard Keynes, promulgated what is called Keynesian Economics, which stated that during periods of economic contraction the government has to spend more money than it takes in in taxes and during periods of expansion or growth it can balance that by taking in more money than it spends.  He is considered the progenitor of Macroeconomics.

While this is not always true, generally because of war or police actions, still, historically, the economy has grown to the point of decreasing the percentage of debt in relation to the Gross Domestic Product, the amount of wealth produced in one fiscal year.  The National Debt has never been a problem in our history for future generations.

It should be noted that the Debt reached its astronomical level beginning with the Administration of Ronald Reagan and his Star Wars policy.  It went from 848 billion in 1981 to 2.698 trillion by 1989, a 218% increase.  Then it continued to zoom with George H.W. Bush and his Desert Storm operation increasing another 55% to 4.188 trillion.  It increased another 37% with Bill Clinton and was actually reduced during his eighth year in office.  The Nation Debt took off like a high flying rocket with the Administration of George W Bush and his policy of two wars, one in Afghanistan and the other in Iraq, while at the same time he lowered taxes.  It rose 86% to 5.778 trillion.  With Barak Obama the amount of the Debt initially increased but by the end of 2013 reached a surplus.  The National Debt grew voluminously under Republican presidents and tended to decrease under Democratic Presidents after rising somewhat.

The National Debt is currently at about 17.3 trillion dollars.  Is this too high?  Is this amount endangering the country in any way?

It should be noted that the nation began in debt.  During the Revolutionary War the Continental Congress issued paper money, called Continentals, to pay its debts.  The value of this money varied depending on how well we were doing in the war at the time; it never commanded full face value.  The British paid for everything in gold. After the war the new government, under the first Secretary of the Treasury, Alexander Hamilton, redeemed this paper for full face value.  There had been speculation with the Continentals and a number of people, not the original possessors of the funds, made a fortune on this.  They had bought up the currency for pennies on the dollar. (See Charles Beard, The Economic Interpretation of the Constitution.)

Jefferson hated the debt and tried to get rid of it, but under his presidency the United States got involved in an undeclared war with the Barbary Pirates, the North African nations along the Mediterranean.  Other presidents had similar occurrences, facing military crises not of their making.  There have been a few short periods over our history when there was no National Debt; but generally the United States has always had one.  The question in terms of today is: Does the current debt endanger the welfare of the nation?

The National Debt consists of two parts, one public and one private.  The public part of the debt is owned in various ways by the Federal Government, the private section is money borrowed for short to long periods of time by individuals, foreign nations, and other entities.

The Federal Government admits to owning, through various government agencies like Social Security and Medicare at least 40% of its own debt.  Social Security, for example, holds well over 1 ½ trillion dollars in debt paper.  This was several years ago.  Today, I would estimate, the Federal Government holds 60 to 70% of its own debt.  I would be inclined to quote the higher figure.

During the last quarter of 2013 the Federal Government collected more in taxes than it spent.  There was a surplus.  This would indicated that the GDP has grown to a point where it is or can handle the National Debt and in all probability very gradually decrease it.

It should also be noted that since 2011 when the Republican majority first took over the House of Representatives there has been no fiscal policy.  If anything Congress has reduced government spending to the point of shrinking the government and entitlement spending.  This process together with the shrinkage of State governments because of decreased taxes has phenomenally decreased government employment on all levels and exacerbated the 2008 Recession.  What has saved the country from another Great Depression has been imaginative Monetary Policy.

Had there been Fiscal Policy since 2011 unemployment would have dropped to about 3% or less and the Gross Domestic Product would have been far higher than it is.  Virtually everyone in the country would have been better off.

With Republican help we are doing a good job of holding back economic growth and not bringing the United States solidly into the 21st Century.

 

 

 

 

 

The Weiner Component #66 – Macroeconomics & the GDP

Imagine a giant caldron or pot as high and as large as the tallest building you’ve ever seen,

The western front of the United States Capitol...

The western front of the United States Capitol. The Capitol serves as the seat of government for the United States Congress, the legislative branch of the U.S. federal government. It is located in Washington, D.C., on top of Capitol Hill at the east end of the National Mall. The building is marked by its central dome above a rotunda and two wings. It is an exemplar of the Neoclassical architecture style. (Photo credit: Wikipedia)

filled[ with money, paper bills, with over 17 trillion dollars in it.  This is the Gross Domestic Product, the GDP, the amount of wealth produced in one year in the United States.  It represents the monetary value of all the goods and services produced and consumed in a twelve month period.  The money is a paper means of exchanging all this wealth and productivity, all the goods and services produced in one fiscal year.  It has no real value except as a token of transfer, goods and services for goods and services.  There is nothing behind the dollar except the word of the Federal Government.  Gold, which has a high value, cannot be used for money because there is not enough of it in existence to meet the financial needs of any of the many industrial nations.

The real wealth is what is produced and exchanged.  The money is merely the means of exchange that rates one unit of productivity against another and is used nationally or internationally.  The currency, then, is the tool through which this system of exchange occurs.  It can be used immediately or stored in institutions like banks or credit unions and used at some point in the future.  Money can also be used as a commodity, loaned or rented out with interest for a period of time or it can be used for all sorts of investments that pay interest or dividends.  It is in every case a tool to satisfy different types of wants and needs.

To consider money as the source of wealth is to be naïve.  The amount one has through earnings or inheritance can be used as a sort of score to determine one’s level of success against that of all other people in the society.  It is a government supplied tool that allows for the productive functioning of society.

It is the responsibility of the Federal Government to keep enough of it in circulation, a constant cash flow, so that full productivity occurs.  A shortage of the money supply in the nation can cause economic recession and eventual depression.  An excess amount of money in the National Economy can bring about run-away inflation, too much money available for the goods and services produced.  The Federal Government’s task is to provide just enough for full employment and full creation of the goods and services needed for the highest possible standard of living for the entire population.

This is not easy and requires constant readjustment because, according to the U.S. Census Bureau the population of the nation is increasing at the rate of one additional person every eleven seconds.  This figure includes births, immigration, and deaths.  In 2010, the time of the last National Census, the estimated population was 308,745,536, and this was considered a low count.  While an adjustment upward was made a year later this figure was used for the apportionment of seats in the House of Representatives.

One has to keep in mind that in addition to this number the population since then has increased at the rate of 5.46 people per minute, 327.27 per hour, 7,854.55 per day, 54,981.81 per week, 2,866,911 per year, plus another 7,854 for leap years.  The money supply has to be continually increased to keep up with these ever-growing numbers or the country moves in the direction of economic constriction, unemployment, recession, and finally depression.  All this is supposed to be done by the Federal Reserve with the aid of Congress and the President.

The Federal Reserve continually monitors the economy and continually makes its adjustments through Monetary Policy.  It can strongly but not completely affect the amount and flow of currency. The other section of the Federal Government that is supposed to continually affect the level of economic prosperity in the country is Congress.  They do this through fiscal policy; passing laws that can diminish or create employment throughout the United States by either increasing or decreasing government spending.  In essence through the passage of laws they can constrict or expand the cash flow and the level of employment

If we look at the actions of the Republicans in the House of Representatives from 2011 on, when they gained control of that body, it would seem that they by their actions are working very hard to bring this country into an economic depression and not allow for any recovery from the Real Estate Debacle of 2008.  We are still, six years later at seven plus percent unemployment.  Millions of people are still not earning enough to maintain a decent standard of living.  There is growing hunger in America, that many people are not food secure.  What are the Republicans proposing and trying to push through Congress?  Massively reducing food stamp and other programs that are vital for the proper survival of fifteen or more million people.

Their version of job creation is to massively reduce Federal spending for entitlement programs while wasting twenty-five billion dollars on shutting down the Federal Government for a period of time.  If one looked for a plan to destroy the United States or make it into a third rate nation then one would do exactly what the Republicans in Congress have been and are trying to achieve, to bring a large part of the population into despair and desolation.

The Republicans are acting like the Hoover Administration did from 1929, when the Great Depression broke, until 1933, when the Roosevelt Administration came into being.  Is it an act of maliciousness or just simply economic ignorance?  They are attempting to run the country as they run or ran their household budgets.  One Tea Party Congressman stated that he understood economics because he had raised a family.  They are making money the object of value and ignoring the potential productivity of the nation.  They are actually using the principles of Microeconomics, which works well with households, businesses, and state and municipal governments but can create disaster if it is used to run an industrial nation of over 300 million people.

 


 

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The Weiner Component #65 – Dysfunctional Government

A dysfunctional family is one that is perennially in chaos.  Nothing ever gets done; no issue is ever solved; nothing is ever accomplished.  A dysfunctional government works or doesn’t work on the same basis.  Its lawmakers are incapable of accomplishing anything, at least anything that the nation really needs.

Is that the situation that exists in Washington, D.C.?  The answer to that question is obviously, yes.  But is the answer that simple?  Are both political parties equally responsible or is the true villain just one of the particular political parties?

Toward the end of the last year of the reign of George W. Bush as President of the United States the economy collapsed.  Because of the activities of the major banks the country was facing a catastrophe greater than that of 1929.  Bush and his Secretary of the Treasury, Paulson, did an emergency bank bailout of the big Financial Institutions whose greed and irresponsibility had caused the situation.

In 2008 Barak Obama was elected President on a platform of: “It’s Time for a Change.”  Through the use of both Fiscal and Monetary policy he was able to avert a major breakdown of the economy.  In addition he bailed out the auto industry.  The country had a recession with major unemployment but it never reached a real depression.  The Obama Administration also passed a universal Affordable Health Care Bill, which, had been initially suggested by the Horizon Institute, a Conservative Republican Think Tank and earlier put into operation in the State of Massachusetts by a Republican governor, Mitt Romney.

In the 2010 Midterm Election the Republicans under Tea Party leadership became the majority party in the House of Representatives.  Apparently there hadn’t been enough “change” during President Obama’s first two years in office!

The Republican caucus in both Houses of Congress had earlier decided the Obama would be a one term president.  Mitch McConnell, the Republican minority leader in the Senate had announced this publically.  They would support nothing that President Obama proposed.  In fact, they would oppose everything he would favor.  Government functionality would cease.  From 2011 on the House of Representatives would not pass any bill that supported any program that Obama or the Democrats favored and that they would oppose any bill that had been passed during his first two years in office.

The House repealed Affordable Health Care (Obama Care) over forty times.  The repeals went nowhere because the Senate had a Democratic majority and the majority leader would not take up the bill which was already law.

In 2011 President Obama came out with a plan to put America back to work by both extending and modernizing the infrastructure of the United States.  This would probably have reduced unemployment to about 3 1/2 percent, increased the GDP significantly, and substantially increased the tax base of both the Federal Government and the states.  The Republican majority and the Speaker of the House of Representatives completely ignored these plans.  The House of Representatives from 2011 on has done absolutely nothing in any way to create jobs for the unemployed.  By their actions they have sought to reduce government employment and have actually added to the unemployment problem.

In 2012 the House of Representatives met in formal session 125 days, in 2013 it was 121 days, and in 2014 it will be for 120 days.  Some Republican legislator made a comment about what will they do in all that time.  The members of Congress receive 174 thousand dollars a year, plus an office and a fully paid staff.  The get an allowance for an office in their home districts.  I would love to work 120 days out of 365 for that pay and do as much as the House Republican legislators!

In 2013, late at night, the Republicans changed the rules in the House of Representatives so that only bills favored by the majority party could be brought up for a debate or vote on the floor of the House.  If a bill favored by the Democrats and a small number of Republicans came up, the Speaker of the House did not have to call for a vote on that bill, even if the majority favored it.  The only bills that needed to be brought up were those favored by the majority of the Republicans in the House.

In the Senate the Republican minority can filibuster both bills and Presidential appointments of judgeships and appointments of assorted department heads.  The position of the Director of the Bureau of Alcohol, Tobacco, & Firearms was only recently filled after being vacant for six to eight years.  The NRA wanted this job left vacant.  The post was filled after Harry Reed, the majority leader, threatened to change the rules and end filibustering most Presidential appointments.

In mid-November, over the issue of three judgeships, in which the Republicans refused to allow a vote to be taken because they did not want Obama to fill three vacancies in the second highest court in the U.S., the Senate by a simple majority changed the rules and disallowed filibustering in most presidential appointments.

In 2012 the closest the Republicans came to a compromise was the Sequester, which automatically dropped government spending across the board on all levels except Congressional salaries that automatically rose every year.  These, cut down military spending and innumerable entitlement programs for the poor: meals on wheels and infant nutrition to name only two.  In 2013 they shut down the government, refused to raise the debt ceiling, and cost the country about 24 billion dollars and around 250,000 jobs.  If they had had their way and gotten everything they wanted the country would currently be in a deep depression with unemployment up well over 25 percent.  Their version of running the government is not only to not spend money but also to massively reduce the size of the Federal Government.

Even though the public cast 1.4 million more votes for the House Democrats in 2012, by gerrymandering in the census year, 2010, the Republicans still got a majority in the House.  The country will need an overwhelming majority in 2014 to beat them.

 

English: President Barack Obama speaks to a jo...

There is a note of irony that helps explain this dysfunction.  Since the Republicans have determined to oppose everything that President Obama supports they have gone against some policies that initially were their own.  The reason for this, as we have seen, was to make Obama a one term president.  When they failed in 2012 they still adhered to these policies.

 

Affordable Health Care will help keep a number of people alive who would otherwise have died earlier because they could not afford to see a doctor until it was an emergency.  Many children will now get prenatal care.  The insurance companies, even with more restrictions on what they can do, will get a tremendous increase in business.  Yet the Republicans continue to denounce this law using mostly general platitudes.  They offer nothing except the argument that it’s no good, that it will harm the society and kill jobs.

We are probably the only industrial nation in the world today that doesn’t have universal medical care for its citizens.  Our original system of medical care is faulty, inefficient, and overly expensive.  The Republicans offer no alternative except that Obama Care is no good.  Really spiteful reasoning!

We can again ask ourselves: Why is Congress dysfunctional?  The answer is because of Congressional Republican acts or lack of any action since 2011 when they gained control of the House of Representatives.  The 2014 Midterm Election will determine what direction this country takes.  If the Republicans retain the majority in the House we can look forward to two more years of economic disaster.  The American People will have to choose in 2014.  Hopefully the majority will understand their choices.  Unfortunately we have to wait another year before there’s any hope of a functioning government.

 

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The Weiner Component #64 – So Called Economic Prosperity & Economic Disaster

English: Monthly changes in the currency compo...

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)

Economic growth has been increasing at a phenomenal rate; with the United States in the last quarter of 2013 reaching a point where there was a surplus, more money coming in in taxes than was being spent.  Dr. Ben Bernanke, the then chairman of the Federal Reserve felt that it was growing too rapidly.  Apparently complete economic recovery with a 6 ½  to 7 percent unemployment level does not really denote a healthy economy.  This would mean that we have an excess surplus percentage of the population that exists within our so-called healthy economy.

The question is how can you have economic recovery with 6 ½% to 7 % of the population still actively looking for employment?  And what about the group that has given up looking for work or those that are underemployed?  While we don’t know the exact numbers of these people they could make up another 6 ½ to 7 percent, or for that matter, the number could be greater.

Can we truly have prosperity with 10 to 14 percent unemployment and underemployment?  If we look at the statistics the amount of money available in the country, the GDP, has increased exponentially but the distribution of these massive funds have been and are in the process of changing with a greater and greater percentage going to the upper echelon of society and a smaller and smaller percentage going to everyone else.  General wages have essentially stayed the same or risen very slowly with prices rising at a slightly more rapid rate.  People are finding that their incomes, which may be slowly rising, are buying less and less each year.  This situation is reminiscent of the 16th Century when inflation existed for a 90 year period.  Wages remained essentially the same but the value of money, which was gold coins at that time continually decreased in value; that is, every year it bought less.

The 16th Century was the time that Spain looted the gold supply from the New World, the Americas, and yearly brought to Europe shiploads of gold that were almost immediately turned into coins and circulated throughout the continent.  As the amount of gold in circulation rose the value of the money dropped.  A small group became fabulously wealthy while the rest of society suffered without having an inkling of what was causing their misery.

We are essentially in the same position today.  A small group, the upper earning percentage of the population of the United States, is seeing their incomes explode while the bulk of the population is being pushed slowly economically downhill.  The country is recovering, both from the Real Estate Debacle of 2008 in terms of the amount of currency in circulation and seeing a growth of funds beyond that point, but the distribution of those dollars is giving that money to the upper echelon with a fractional increase to the general population and the high unemployment level continuing.

This is a scary scenario for the welfare of the country. We have more money available in the general society but a goodly number of people are excluded from any part of it.  The minimum wage remains at $7.25 an hour and we still have unacceptable levels of unemployment throughout the country.  As a note of irony we have couples working in the U.S. at the minimum wage level and still having to apply and receive Government aid in order to survive with a family of four.

The country seems to be returning to prosperity and misery at the same time.  Recovery would be better at a slower pace with unemployment decreasing as economic recovery is increasing.  Massive changes are necessary if overall economic health is to come about.

We are currently living in a society where the bulk of the population has no real understanding of economics.  They see everything in terms of their household budgets.  They see the government spending money it supposedly does not have, therefore throwing the country deeper and deeper into debt.

This, common sense approach, is all nonsense.  Most people still think of money as gold.  This is untrue.  There is nothing behind the dollar but the word of the government.  It prints and issues money as needed.  It also, through it many agencies like Social Security and Medicare and otherwise owns at least fifty percent of its own debt.  In 2013 the Federal Reserve turned over, well over seventy billion dollars to the Treasury.  Most, if not all of this, was interest from the National Debt which the Federal Government owes and owns.

Recovery would be better at a slower pace, but whether or not it occurs, changes are necessary if massive economic health is to come about.  We have to decide whether all people have a right to a minimum level of economic functionality or if one group deserves to have all the benefits that society can provide and the rest deserve to persist as best they can.  Actually if nothing is done the latter will occur.

Today money is a tool of the Federal Government used to effect economic health within the society.  There is no gold behind the dollar.  The Government prints what is needed for the society to function.  Its value is based upon the word of the Central Government.  The amount in circulation in the United States is controlled by the debt limit which is set by Congress.

Also the amount of money in circulation is determined by an inflation factor.  If there is too much money available, more money than goods and services available, then the value of the money decreases.  If, on the other hand, there is too little cash circulating in the general society then the value of the money increases and deflation occurs.  The Federal Reserve monitors this and attempts to keep a proper balance.

To the individual, the members of Congress, money has value.  It provides for their and their family’s needs.  If the members of Congress apply this position to National Expenditures then they are actually shrinking the economy and exacerbating negative conditions, tightening government spending and adding to unemployment.

It is an interesting conundrum.  Applying “common sense” family budgetary rules to the running of the United States could possibly bring about a recession or depression.

The basic principle, which is a hard one to comprehend and accept, is that consumption is as important as production.  Without consumption there is no need for production.  By allowing an ever increasing majority of the National Income to go to the upper percentage of the population there is less and less money available to the rest of the population.  Consequently the amount of goods and service they can consume is continually decreasing.  The system is working against itself.

Are we having real economic prosperity or is the country working toward economic disaster?  An interesting question!

 

 

 

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