The Weiner Component #149 – The 2016 Presidential Election: The Democrats & the Election

Bernie Sanders and Hillary Clinton are the Democratic candidates for the presidency in 2016.  He is now a Democratic Socialist who has always caucused with the Democratic Party.  Hillary Clinton has always been a liberal Democrat.  Both would like to be President of the United States.

 

Bernie was born on September 8, 1941 in Brooklyn, New York.  He is 71 years old and the junior Senator from Vermont.  Bernie is also the longest serving independent member of Congress in the history of the Institution.  As of 2015 he officially became a member of the Democratic Party and now calls himself a Democratic Socialist. 

 

In 1964, as a student at the University of Chicago, he was a civil rights protestor.  After settling in Vermont he ran as an unsuccessful socialist candidate for governor and U.S. Senator in the 1970s.  He was elected as mayor of Burlington as an independent in 1981 and reelected three times.  He was then elected to the House of Representatives from Vermont’s at large congressional district where he served through 2007 when he was elected to the Senate.  He is still serving in the U.S. Senate.

 

Bernie Sanders rose to prominence in 2010 with his filibuster against Bush’s extension of his tax cuts.  He favors policies similar to those in the Social Democratic parties of Europe, particularly of the Nordic countries.  He is a leading progressive voice on issues such as campaign financial reform, corporate welfare, global warming, income inequality, parental rights, and free universal healthcare.  He has been critical of U.S. foreign policy and was an early and outspoken critic of the Iraqi War.  In addition he is outspoken on civil liberties and civil rights.  He has criticized the racial discrimination of the criminal justice system and advocated for privacy rights against mass surveillance policies as the patriot act.

 

I suspect that Bernie Sanders chose to run for the presidency of the United States in 2016 as an act of protest against the traditional political structure of the U.S.  As a long-time member of Congress he knows that there is little he could do with the current Republican dominated Congress.  After all, they make the laws and the President just carries them out. 

 

Inadvertently Sanders picked a time when a goodly percentage of the population was disgusted with the inaction of Congress over the last five years, since the Republicans took control of the House of Representatives, and later in 2014 when they also gained dominance in the Senate.  The Republican majorities in Congress have either not cared to or not been able to pass any laws needed by the nation.

 

In addition the overall population that was either fourteen years of age to just below eighteen years old in November of 2012 has now come of voting age and they want a candidate to represent them; most of these people believe that Bernie Sanders is that person.  They represent a goodly percentage of the over 350 million people who make up the population of the United States.

 

To Bernie the extent of his success has been euphoric; he apparently believes that a Giant Revolution is in the process of occurring and that he will not only be elected President of the United States but that the Democrats will sweep into Congress with giant majorities in both Houses of Congress.

 

Is this true?  That’s an interesting question.  It could happen in the Senate where 24 Republicans will be running to get reelected, some in swing states.  We could get a lot of politically disgusted people in those states voting for Democrats.  In the House of Representatives through gerrymandering in 2010 the Republicans were able to assign Districts along the line of the voters.  This will not change until 2020 when the next census occurs.  In 2012 over a million and a quarter more votes were cast for Democrats running in the House of Representatives but the Republicans still maintained the majority.  It will probably take at least two million addition Democratic votes for the Democrats to win control of the House of Representatives.

 

Donald Trump has attracted those disgusted with the government who, for whatever reason, could never get themselves to vote for Democratic candidates.  It would seem that most of Trump’s followers are not overly educated.  Many of them like his simplistic view of the world.

 

The election has its own special energy and no one can truly predict where it is going.

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

The other major Democratic candidate, Hillary Rodham Clinton, was born in 1947, which makes her currently 71.  She is the wife of the 42nd President, Bill Clinton, has served in the Senate from 2,000 to 2007, then unsuccessfully ran for the presidency against Barack Obama in 2008, was his Secretary of State from 2009 to 2013, and is at present the leading Democratic Candidate in the 2016 Presidential Election. 

 

She came originally from the Chicago area and graduated from Wellesley College in 1969.  She achieved a doctorate from Yale Law School in 1973, married Bill Clinton in 1975 and moved to Arkansas, where her husband became governor.  While first lady of Arkansas she led a task force that reformed the state’s public school system. 

 

Her husband, President Bill Clinton appointed her to lead the Clinton health plan of 1993 which failed to reach a vote in Congress.  The Republican protagonists came out with a catchy slogan, “There has to be a better way.”  The “better way” was no health care bill.

 

She played a major role in advocating the creation of the State Children’s Health Insurance Program, the Adoption and Safe Families Act and the Foster Care Independence Act.  During most of her adult life Hillary Clinton has been involved in causes for the needy.

 

In 2,000 after the end of her husband’s term as President of the United States, she moving to New York and was elected as the first woman Senator from that state.  Clinton was reelected to the Senate in 2006.  She ran against Barack Obama in 2008 for the presidency.  Instead she became Obama’s Secretary of State for the first four years of his term.  Probably no other candidate in the history of the United States for the presidency has had as much experience as Hillary Clinton.  She has been involved in public service most of her adult life.

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

If an individual has watched the debates in this 2016 Presidential Election year that person gets the impression that two separate and distinct elections are going on.  The magnitude of the difference between the Republicans and the Democrats tends to give the impression that we are dealing with two entirely different countries.

 

For the Republicans this country has been abused and taken advantage of by all the other nations on the planet.  We have been militarily inept, not capable of carrying out any military operation.  We have signed unfair treaties with countries like Iran.  Our trade agreements always favor the other nation or nations, taking needed jobs out of the United States.  The U.S. under its current leadership, as a nation, is totally inept.  Only by electing Republican leadership can the country properly function again.

 

Listening to them one get the impression that treaties need to be renegotiated and other countries need to be straightened out in their relations with the United States.  If the United States reneges on past agreements with other nations this could be a direct path to war.  Iran spent two years negotiating a compact with 5 Security Council nations plus Germany.  I can’t see the Republican U.S. President telling them that the terms are now unacceptable and that the treaty now has to be redone on a much harsher basis with the U.S.  To me that’s a recipe for war with Iran.

 

If Affordable Health Care (Obamacare) were to be suddenly cancelled, then no matter what is said a large number of people will suddenly lose their current health coverage.  They and others adversely affected will be extremely unhappy.   The Republicans have continually denounced this program since it came into existence in 2010.  It was initially a Republican plan put into existence by Mitt Romney as governor of Massachusetts.  It was voted into existence by the Democratic majority.  The Republicans have denounced it since its inception, calling it a job-killing bill.  They have never offered any real proof of its so-called negative aspects.  Mainly they seem to object to it because it came into existence under a Black President, Barack Obama. 

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

Somehow it seems that the Republicans have forgotten that the prior President was George W. Bush and that he got the country involved in a needless war in Iraq, wastefully spending trillions of dollars while reducing taxes mostly for the wealthy, and massively increasing the National Debt while making the U.S. a laughing stock to other industrial nations.   It was also toward the end of his administration that the economic Real Estate Bubble burst almost bringing about the greatest economic decline in the history of the nation.  It appears, to many Republicans that these events never did really happened.  It was also Bush’s actions that destabilized the Middle East and brought about the current situation there.  Basically a study of our current economic and military problems can be traced back to Republican Administrations which were then left for Democratic Administrations to deal with and, of course, were blamed on the Democrats by their Republican colleagues.

 

On the Democratic side we have a country with a broken or outdated infrastructure where state governors like Rick Snyder of Michigan can appoint inept city managers who then can arbitrarily switch a healthy water supply to a toxic one, poisoning a whole generation of children with lead infested water arbitrarily and even after that fact comes out, continue charging the residents of Flint for using the poisoned water and then when questioned about it by a Congressional committee blame the inexcusable problem upon the EPA.    

 

We have a country where roads are filled with pot holes, bridges, in many instances, were built 100 years ago; where ports cannot handle modern shipping, railroads are today inadequate for properly transporting goods, many airfields are out of date, many school buildings are so old they are unsafe.  Flint’s problem of unsafe water exists in many cities and buildings.  The list goes on and on.  In essence we are living in the 21st Century with an early 20th Century infrastructure.

 

According to Bernie Sanders we have, among many other problems, a broken legal system that incarcerates more people than a dictatorship like Communist China or Russia.  And the bulk of those jailed tend to be Hispanic or Black.  We have serious racial problems which are not really being dealt with.

 

As far as both Democratic candidates are concerned, both Hillary Clinton and Bernie Sander, this country needs a lot of internal repair and the major factor that has kept any of it from happening has been the Republicans in Congress and the state governments who apparently believe that this country can go on forever with little or no  maintenance.  Upgrading the infrastructure will probably take a decade or more and will cost trillions of dollars.   Both feel it’s time we got started, particularly since the country still has an unemployment problems left over from the Great Recession of 2008.

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

It would seem that the Republicans have no understanding of the principles of economics.  Most, if not all, Republican members of the House of Representatives believe that all economics is Microeconomics.  That is, if one has raised a family and provided an adequate income then that person has a proper understanding of the discipline.  They have a total knowledge of all they need to know about financing the United States.  The nation takes in so much in taxes and that is its income.  If it spends more than that it has to borrow the money and pay it back at some time in the future.  That is all a person needs to know about finance it order to run the country.  It’s a rather naïve and limited view of National financing.

 

To them money is like gold, it has an intrinsic value.  Actually money today is just paper that is treated by most people as something of great value.  It has not been gold since 1933 when Franklin Roosevelt’s New Deal collected all the gold coins, melted them down into blocks that were then buried in underground depositories, like Fort Knox, and issued paper certificates in their stead known as Federal Reserve Notes.  Gold then was worth $18.00 an ounce, today an ounce of gold is worth slightly over twelve hundred dollars and the Federal Government has sold most of its gold bullion.

 

Money today is just a token that is used in the exchange of goods and services.  It has no intrinsic value.  The Central Government can print and issue as much as it wants.  There are, however, general rules and regulations that govern this process which is done by the Federal Reserve.  Both the 2008 oncoming depression and the banking collapse of the Housing Market were largely resolved by the Federal Reserve through its use of Creative Monetary Policy.  This became necessary because the Republican dominated House of Representatives refused to deal with the problem with Fiscal Policy.  In fact they exacerbated it by shrinking the size of the government and increasing the level of unemployment.

 

The Republican dominated Congress today cannot even accept the existence of the idea.  Their concept of increasing employment is to get rid of the EPA, lower taxes for the rich, and allow increased pollution.  The increased wealth that the rich gain through lower taxes, they say will allow for industrial expansion and the new wealth being spent on new productivity will tinkle down to the middle class and the poor.

 

This is the Republicans basic concept of job creation.  Lowering the costs of production by allowing for more pollution.  We can have industrial centers like China where the air is dangerous to breathe.  This they believe, according to what a number of the candidates have said in the Republican Candidates 2016 Presidential debates, that if they do away with the EPA (Environmental Protection Agency) restrictions on production, unemployment will automatically disappear and there will be more jobs for everyone. 

 

It’s a nice thought but it does not deal with reality.  During the Reagan years as taxes for the wealthy declined their additional wealth was put into old production, the stock markets and what was then considered other safe areas of the economy.  Very little, if any, trickled down to new production.

 

During Ronald Reagan’s Administration it was called “Supply Side Economics.”  Its chief advocate was David Stockman who became President Reagan’s Director of the Office of Management and Budget from 1981 to 1985 when he resigned from that position.  Eventually even Stockman admitted that it didn’t work.

 

It should be noted that under Reagan the National Debt not only reached a trillion dollars for the first time in U.S. history, it also rose to over double that amount.

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

The Republicans are also convinced that climate change is a hoax that the earth is too large to be affected in any way by anything man does.  It seems that they are never bothered by evidence of what is going on around them as they plod through life.  Donald Trump believes that the Chinese started the rumor of climate change. 

 

To the Republicans the melting of the Southern and Northern ice poles and the decreasing glacier areas would have happened even if man did not live on this planet, it is a normal, natural event.  And this is also true of the rising ocean water levels.  The tons of carbon that automobiles spew out into the atmosphere and other gases added by man to the air do not effect temperature change on the planet, which is naturally getting hotter.  

 

The real problem for the Republicans is that the people who fund their elections are the producers of all this garbage that pollutes, fouling the air and warming the planet.  It is to their advantage that pollution causing oil is used.  The Koch Brothers who deal heavily in oil have had a law passed in Kansas making green energy illegal.  The law is generally ignored but the brothers had enough political influence to get their state to pass it.  They are heavy contributors to the Republican Party.

 

The Republicans mainly have vested interests in maintaining their contributor base—the wealthy producers and political contributors in the country.  They have consequently adjusted their prospective to support the upper economic percentile of the population, making the interests of these people their interests and ignoring the needs of their economic base.  As a result they cannot accept any facts about global warming being true, since that reality would separate them from their major political contributors.

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

If Donald Trump is not chosen as the Republican candidate for president he has threatened riots by his followers.  That would seem to mean that if he is short the 1,237 delegate votes but is still leading the other two potential presidential candidates he still expects to be nominated.  Trump has not mentioned being a possible third party candidate if the Republican Nominating Convention in July were to choose another candidate. 

 

In terms of public statements he seems to be moving toward total monomania at this point in the election process.  2016 may be an historic election year!

The Weiner Component #147 Part 1 – Development of Money & Its Uses

Various Federal Reserve Notes, c.1995. Only th...

Various Federal Reserve Notes, c.1995. Only the designs of the $1 and $2 (the latter not pictured) are still in print. (Photo credit: Wikipedia)

Embed from Getty Images

Probably the most misunderstood entity that exists today is money, currency, what it is and all the ways it works in the existing societies.  The problem with money is its history, what it was and is, and how the concept is generally understood by most people today.

 

Originally money was an object of value like gold, silver, or some other precious entity.  Presumably, in places like early Phoenicia, well over two thousand years ago, goods were traded for precious metals.  This was done with scales; gold or silver would have a fixed value and an equal value of goods would be traded for a set amount of the precious metal.  Eventually someone or a group of someones came up with the idea of stamping a set weight on the gold and coins came into existence.  They were gradually refined, as time went on, with stamped pictures of the rulers profile and with these specific coins with set amounts of money came into existence.  From this, over the centuries, with occasional breaks in the sequence, the concept and use of money, set amounts of gold or silver, developed.  It was until the end of the first third of the 20th Century an exchange of value for value, the goods and services for the coins (money).  Money was as good as gold because it was gold.

 

The problem that developed over time was that the amount of gold and silver available for currency was dependent upon mining discoveries or exploitations of different parts of the world.  For example in the 16th Century Spain gutted the New World of its gold supply causing a 90 year period of inflation in Europe that lasted through most of the fifteen hundreds.  By the 17th Century there was again a shortage of the gold supply in Europe and not enough money (gold coins) available to supply all the monetary needs for economic growth on the Continent.  Consequently the value of gold rose and periods of deflation occurred, the value of the gold coins increased.

 

The problem here was that there were two totally different processes which were supposed to balance each other but never did.  Precious metals had to be discovered and mined at the same rate that business between and within nations expanded.  This never happened.  Added to this were economic systems like mercantilism, which hoarded gold by creating royal monopolies within European nations.  Economically much was not understood then.  And the amount of gold was never enough to cover all the needs for monetary growth.

 

The use of paper came into existence largely during the Renaissance with letters of credit, which allowed simple transfers of large amounts of currency.  This would eventually become paper money and checks.  Paper money was initially issued by banks and could, presumably, always be exchanged for gold or silver.  Of course if everyone decided to exchange their paper money for gold at the same time there would be a run on the bank and it would go bankrupt since generally they issued a lot more paper than they had gold.

 

Paper money was also issued by governments during times of crises when gold was in short supply, like the United States government did during the Revolutionary War or the Northern and Southern Governments during the American Civil War.  They did not have adequate gold or silver supplies to pay the cost of the wars.  Since the South lost the Civil War its money became worthless while the Northern greenbacks were eventually redeemed for gold coins.

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

Up until 1933, when Franklin D. Roosevelt had assumed office as President, money was mostly gold and silver.  Other metals like nickel and copper were used for smaller coins.  The paper one and five dollar bills could be redeemed for silver; they were silver certificates.  The larger denominations were presumably redeemable for gold; they were Federal Reserve Notes.

 

Actually after 1933, the use of large bills being exchanged for gold ceased.  In the U.S. the Roosevelt administration collected all gold coins, melted them down into gold bars, issued paper gold certificates that were held by the Federal Government, and issued paper money starting with the ten dollar bill and going up.  These were Federal Reserve Notes which the banks distributed then and thereafter.  They were used in place of the gold coins.

 

The gold standard was essentially a fiction.  In 1933 the money supplied was doubled as the value of gold was legally doubled, going from $16 an ounce to $36 an ounce.  This essentially paid for Roosevelt’s New Deal.  Similar actions would also be done in other industrial nations.  The problem that existed was that there still was not enough money in circulation to meet the actual needs of most nations.  There would not be enough money available until World War II when it tended to be freely printed by the various governments.  During the war, since most production was going toward the war effort, there was more money available than the goods and services that could be purchased.  People worked double shifts in the factories and earned lots of currency, far more than they could spend.  At the end of the war there would be a large buying splurge that would create jobs for a good percentage of the returning veterans.

 

In 1969, under President Richard M. Nixon, the last limited amount of stored gold behind the dollar would be removed and the Federal Government would sell a large percentage of its gold supply.  It would cease to legally buy all gold mined within the country.  Gold would within a relatively short period of time, several years, go from $36 an ounce to $800 an ounce.  It would later go to well over $1,000 an ounce and eventually rise to $1,800 an ounce.  At this time one of the agencies in Texas would buy gold and set up its own depository.  Later, gold would drop down to around $1,100 an ounce, where, with continued slight oscillations in price, it would remain in 2016.

 

This entire process has been going on for the last 46 years.  The value of gold is determined by the economic laws of supply and demand.  The value of gold, silver, platinum, titanium, and other precious metals are determined by the amount of supply and the demand for that supply.

 

In 1969 the silver would also be removed from new coins and all money would become tokens, generally copper sandwiches, having almost no value within themselves.  All money became a valueless instrument for the exchange of goods and services, having no real innate value in itself except that of the word of the nation issuing it.

 

Today money of one country has to be exchanged for that of another when one visits Europe or Asia or, for that matter anyplace else that isn’t part of one’s country.  With very few exception it has no relevance in another country but it does have an exchange value in the banks of other countries, where generally, for a small fee, it can be exchanged for the currency of that particular nation.

 

Money is no longer as good as gold, there is no longer any gold behind it.  The metal has become too expensive and its supply is too limited to be used for a base for currency.

 

This in a nutshell is a short simplified history of money and its uses.

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

Now, in terms of the modern world what is money and what are it uses?  Today money serves a myriad of purposes.  While it is no longer an object of intrinsic value it still serves as an object of inherent value.  It is, first of all, a form of score-card which demonstrates ones’ standing in the overall society, like Donald J. Trump the billionaire.  Mainly it allows the traditional exchange of goods and services within the society and between nations.  But in addition to this money also functions within the nation in relatively new ways.

 

According to most economists there are various forms of economics.  For our purposes the two more important ones are Microeconomics (small) and Macroeconomics (large).  Everything that has so far been considered falls into the area of Microeconomics (small economics).  In essence an individual has so much wealth (gold) or earnings that comprises what he/she possesses and earns.  That can be spent to satisfy needs and wants or saved for a future time of need or desire.  Some of it can be used as a commodity and invested in income gaining property or stocks and bonds or anything that will pay an income.

 

Virtually every individual or family unit fits into this category.  So also do government entities like municipalities and individual states.  Their incomes would be comprised of taxes and fines.  If any of these people or entities need more money than they are taking in or have then they can borrow.  For individuals and families there are banks and credit unit loans or credit cards.  For municipalities and states there are short and long term bond issues.  These eventually must be paid off with interest.  This is usually tax free for state and local governments and ridiculously high for credit cards.

 

Of course the object with individuals and families is to live within their incomes.  There are big-ticket purchases like automobiles and homes that generally do require long term payments or occasional emergencies like a large auto repair bill or a sick child.  With cities and states the taxes are supposed to be high enough to cover their expenses.  But they also have long term expenditures like roads and bridges which are inordinately expensive and must also be paid off over the long term.

 

The problem that comes up with individuals and families is when too many short-term expenses are charged to credit-cards, much more than can possibly be paid off in a billing cycle.  Then the recipients are paying 18 or more percent interest on these loans and life becomes an uncomfortable struggle to survive.  Particularly since the standard of living for many people will continually exceed their incomes.  This is not unusual with many families.

 

With municipalities and states the same pattern can occur.  The entities income does not match their expenditures.  This can be caused by a large number of reasons besides irresponsibility on the part of the city fathers.  Industry can move out of the area drastically reducing the tax base or other changes that drastically affect the tax base such as a natural disaster or a recession or depression.

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

All this, prior to 1933, would also include the individual nations.  They would also be funded by their incomes in taxes and fines.  But from that point on, by changing from money being precious metals to printed paper, the situation became different for all the industrial nations that had switched to paper money.  And in the United States, particularly since 1969, all printed money is just that, official paper with numbers stamped upon it which in itself has no real value; it has become merely a means of trading goods and services for goods and services.

 

Federal or Central Governments still follow the age old practice of Microeconomics, collecting taxes and issuing fines for different forms of misbehavior.  But, more importantly, now in addition they also practice Macroeconomics, wherein they attempt to control the amount of money continually present within the nation.  They tend to try to keep inflation low and economic growth at a steady pace of about 3 to 4%.  Countries like modern China prefer a growth rate of 8% which they are no longer able to maintain.

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

Economics is concerned chiefly with the description and analysis of the production, distribution, and consumption of goods and services.  What we have mainly looked at so far has been Microeconomics, dealing with individuals, families, local and state governments.  Macroeconomics deals with the National or Federal Government and applies these principles to the entire economy of the nation.  Its ultimate purpose is to use this knowledge to positively regulate the economy of the entire state in order to avoid economic downturns and keep the nation at its level of highest efficiency.

 

Consequently Macroeconomics (Big Economics) is now, in addition to collecting, controlling revenue, and attempting to maintain a regular level of growth a regulatory device, attempting to even out the overall incomes of the majority of the population.  Income taxes are graduated, that is, the more the individual earns the higher is his/her tax rate.  This is truer in European and Asian nations than in the United States where the graduated income tax rate is currently toped-off at $400,000 and the percentage of income paid at that amount stops rising regardless of how high the income is beyond that amount.

 

It would seem that the bulk of the Congressional Legislators, particularly the Republican legislators, have no real knowledge of modern economics and are still functioning with only an awareness of Microeconomics.  Some of the far-right, Tea Party, legislators have publically stated that they totally understand economics because they have raised families.  Consequently their reaction to economic downturns is to use a “common sense” approach which, in turn, worsens conditions.

 

It would seem that in the United States the one occupation that requires no knowledge of economics or government is that of a Republican Congressman.  Since taking over the House of Representatives in 2011 they have just passed one bill in 2015 that applied Fiscal Policy; and that was a continuation of a law that expired which added a small tax to the purchase of gasoline that has been used for road maintenance.  Every other bill dealing directly or indirectly with employment actually decreased it, adding to the level of unemployment within the nation.  One can safely say they have been penny wise and dollar stupid.  They have favored government economizing over growing employment.  And even here they have not been consistent, going on mad spending splurges like the 1.145 Trillion Dollar Funding Bill of 2015.

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

Basically the Central Governments issues paper money as it is needed by their particular society.  The National Debt is itself partly a fiction since the Government owns the majority of its own National Debt and will use it at times to adjust conditions within the nation.  The amount of money in circulation within the society is supposed to be the full amount needed for the nation to operate at its highest level of efficiency.

 

The Agency, in the United States, that does this is the Federal Reserve.  It continually monitors the entire economy throughout the fifty states and territories belonging to the nation.  On a constant basis it is supposed to continually fine tune the overall economy.  The Federal Reserve has twelve districts that cover the entire nation.  To a certain extent its powers are limited.  It can make adjustments to the economy but the changes or corrections it makes generally are slow in coming about.  Even though its’ Board of Directors meet once a month and carefully considers what is happening in the overall economy it can miss or misconstrue important economic changes within the society.

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

The Democrats, the political party begun by Thomas Jefferson in the late 18th Century which still persists, during the Great Depression of 1929 took control of the Federal Government in 1933.  They tended to totally dedicate themselves to helping the public pull out of the Great Depression.  They dedicated or rededicated themselves to helping the ‘forgotten men” survive in what had become almost overnight an alien world.  They became responsible for the welfare of all their citizens, creating what Franklin D. Roosevelt called a “New Deal” for everyone, caring for those who could no longer properly care for themselves.

 

Freedom to the Democrats meant freedom from want and need.  President Barack Obama’s Affordable Health Care (Obamacare) meant an extension of these rights.  To the Republicans, on the other hand, freedom means government withdrawal from the public lives, giving them, among other things, the right to starve, freeze, and die.

 

In solving societal problems the Federal Government in 2009 and 2010, with the Democrats controlling both Houses of Congress and the Presidency, saved the banks and the United States auto industry by extending them massive loans and the Public by enacting Affordable Health Care.

 

According to Mitt Romney, speaking for the Republicans during his 2012 Presidential Campaign, he would have done neither of these.  It should be noted that the Affordable Health Care Law was modeled after a similar law which Romney had signed into law during his one term as governor of Massachusetts.

 

The probability would have been in 2009, if Republican actions were taken by the Republican candidate, John McCain that the United States and the industrial world would have fallen into a depression far greater than that of 1929.

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

What we are dealing with here is Macroeconomics (Big Economics).  The application of vast amounts of money to parts of the economy to avoid an economic disaster that would affect everybody in the U.S. society.  President Obama did this upon assuming office over a two year period.  At the end of that time two important events occurred: first, for various reasons during the Midterm Election of 2010 the Republicans achieved a majority in the House of Representatives and second, 2010 was a census year in which the seats in the House of Representatives were reapportioned to adjust for the increase in the national population.  In those states which the Republicans controlled they gerrymandered the new voting districts to their advantage whereby they were able to get enough seats in the House to maintain control of that body.  In fact they were able to get and keep their majority in the House even though more votes were cast for Democrats throughout the United States in the next Midterm Election.

 

What followed from 2011 on was that no fiscal policy bills were passed.  In fact what the Republicans did in Congress was to shrink the size of the Federal Government when possible and actually increase the unemployment problem by decreasing funding for both federal and state governments.  The chairman of the Federal Reserve at this time was Ben S. Bernanke.  After unsuccessfully requesting that Congress pass Fiscal Policy laws numerous times he came up with Creative Monetary (Money) Policy.

 

Both Bernanke and Obama were able to work through the Great Recession and point the country toward recovery by the use of massive blocks of spending, adding large amounts of currency to the National Cash Flow.  What was being dealt with here is called Macroeconomic (Big Economics), the Federal Government controlling the economics of the nation and freely spending money in order to avert disaster.

 

The question arises: How much currency can the Federal Government print and distribute without destroying the economy?  That’s an interesting question?  Remember the money itself has no inherent value.  Theoretically any amount can be printed and issued.  But if it is done endlessly growing inflation will occur and the value of the currency will systematically decrease until it becomes valueless.

 

The limitation in terms of the amount issued would be determined then by the rate of inflation.  Once inflation reaches some single digit point, say 5 or 6%, then the limit would be reached.  But this limit was never reached.  Inflation stayed at 2 to 3%.  In 2009 President Obama added well over a trillion dollars through bank and auto loans, plus other forms of expenditure and the inflation rate stayed at its original level.  Later in the Presidency the FED for a period of well over two years added 85 billion dollars a month to the Nation Cash Flow, $45 billion buying up pieces of mortgage paper and adding $40 billion directly to the National Cash Flow. The FED added well over a trillion dollars.   Again there was no change to the inflation rate.

 

Interestingly, with all this cash being added the indication was that the country had a phenomenal need for additional money to circulate so that economic growth could occur.  Congress should have been the agency applying most of these funds.  If they had the monies could have been more focused on upgrading the dated infrastructure of the United States.  Instead over half the funds resolved the Housing Dilemma created by the deregulated banks from the 1980s on.

 

It should be noted that the money spent on mortgage paper, unlike the bank and auto loans which were repaid with interest, was never directly recovered.  The mortgages in all 50 states had been fractionalized into well over a hundred parts each and applied to many different Hedge Funds.  The record-keeping that the banks had set up to expedite the financing and refinancing was unbelievably sloppy.

 

In essence no one owned a fair percentage of those houses because it was almost impossible to put enough pieces of mortgage paper together to make up over 50% of the ownership in these properties.  Consequently how could anyone foreclose on any of these homes?  The spread sheet or sheets that the government would need to determine when it owned enough of any property would probably cost more to generate than the properties were worth.  In any event the Federal Government was more interested in solving the Housing Problem than in collecting on its debt.

 

In addition all those people would no longer be deducting their interest payments on their income taxes.  And a percentage of the home owners suddenly had more disposable income which they spent on short term activities like more eating out, infusing the additional currency into the National Cash Flow which, in turn, increased productivity and employment in the nation.  The government would indirectly get a good part of this money back in increased taxes across the nation.  Here the Federal Government was spending vast amounts of money, which Congress refused to do, upgrading the entire nation.

 

 

 

 

The Weiner Component #140D – Congress: Fiscal Policy & the Infrastructure

Dwight D. Eisenhower, official portrait as Pre...

Dwight D. Eisenhower, official portrait as President. (Photo credit: Wikipedia)

One of the greatest problems facing the United States today is the fact that most of its infrastructure was built in the late 19th and early 20th Centuries.  By definition the infrastructure is the basic physical systems of the cities, states, and country.  Largely our local cities, states and nation have acted as though they will last forever with little or no maintenance, repair, or modernization.  If something breaks down it is generally fixed.  In essence this nation has taken a Band-Aid approach to maintaining our infrastructure and as a result yearly the country falls farther and farther behind as its infrastructure slowly rots or becomes obsolete.

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

It should be noted that when an individual buys a new automobile he knows or will quickly learn that the vehicle will need constant maintenance over its lifetime or it will stop functioning.  The same can be said for the basic apparatuses of our cities, states, and country as a whole.  Their roads, bridges, water supply, school buildings, transit systems, sewerage disposal facilities, electric grid, ports, airports, dams, etc. also need occasional replacement as they become obsolete or continual maintenance over their lifetimes otherwise they will eventually grow out of date or stop functioning, or, for that matter, both of the above.  All of these are called the infrastructure that allows the community, cities, states, and nation to function.  When they partially or completely break down there is chaos.  How come most people are responsible when it comes to their individual possessions but irresponsible when it comes to their communities of nation?

 

Specific responsibility for these entities can be local government or privates industry or a combination of these.  It can also be state government.  In the final analysis the ultimate responsibility rests with the lawmaking body of the National Government, the Congress.  They are responsible for the overall functioning of the nation.  They alone have the resources available, financial and otherwise to modernize, repair, or rebuild parts and pieces of the infrastructure, to provide for the needs of the entire nation.

 

Cities and states follow a system of microeconomics.  They have an income, the fees and taxes they collect.  If they have to spend more than they collect then they can issue tax-free long term, bonds to finance the project, usually a 30 year low interest, tax-free bond.  They are limited as to how many of these they can issue by their projections of their incomes over the next three decades.  The Federal Government does not have this problem.  They utilize macroeconomics and can issue money as needed.  They are also limited as to how much they can issue, but their limitation goes far beyond what any state or city can do.

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

Because the problem currently seems insurmountable it has been largely ignored on virtually every level of government and keeps getting worse with each passing year.  In the third Republican 2016 Presidential Debate in early November of 2015 several of the potential candidates commented on the infrastructure, stating that it was the responsibility of the states and local governments to solve these problems, that the Federal Government should not be involved.  This is passing the buck or dropping the rock.  The cost of solving this problem is in the trillions of dollars.  No city or state can afford to do more than light maintenance of this problem.  The statement itself by potential candidates like Ted Cruz denotes total ignorance of the problem or total cynicism toward it.  No city or state can sell trillions of dollars’ worth of tax-free 30 year bonds and hope to be able to pay them off and operate the government at the same time.

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

The city of Pittsburgh is known as the city of bridges, both highway and railroad bridges.  Most of them are old, nearing the end of their useful lives.  There are over 4,000 bridges in the city.  Over 20% of them are structurally deficient.  This includes one located as part of the city’s main arteries.  This bridge was built in 1928 when cars and trucks were lighter.  It was designed to last 50 years.  It is now 86 years old.  Five million people use it daily.  The bridge connects the northern and southern sections of the city.  It should have been replaced years ago.  At one point structural damage was discovered on the bridge.  It was closed for two weeks while structural repairs were made on that section causing great hardship to the people of Pittsburgh.  An arch bridge in the city had a platform type structure built under it to catch falling concrete which would otherwise hit traffic underneath it.

 

In Minnesota in 2007 a bridge collapsed, that was over 50 years old, killing 13 people and injuring another 145.  The antiquated Skagit River Bridge in Washington State collapsed last year after a truck hit one of its trusses.

 

The overall cost of repairing and replacing the needed bridges in Pittsburgh has been estimated at being over two trillion dollars.  It has been estimated that about one of every nine bridges in the country, about 70,000 of them are considered structurally deficient.  Some have had a section collapse.  Essentially repair has been done on a band aid basis, just repairing the damaged section.

 

The majority of airports in the United States are out of date.  They need to be modernized.  The majority of seaports are in danger of becoming obsolete as the ocean going ships gradually increase in size and number.  A report from the American Society of Civil Engineers states that 32 percent of the main American roads are now in poor condition and in need of major repairs.

 

In 1956 Congress passed and President Dwight D. Eisenhower passed a bill establishing the Highway Trust Fund.  The law directed federal fuel tax to the fund to be used exclusively for highway construction and maintenance.  Over the years both Democratic and Republican presidents have increased the tax to 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel.

 

In 2008 the fund required an additional $8 billion dollars from general revenue funds to cover shortages brought about by the recession of that year and higher gas prices.  It seems that from that year on there has been less driving and more efficient vehicles that used less gas for greater mileage.  Since 2008 Congress has authorized $65 billion from the General Fund of the U.S. Treasury to keep the Trust Fund solvent.  These monies go to all the individual states in the form of block grants and are more or less matched by state spending.

 

The Highway Trust Fund is only authorized to spend money through November 20, 2015.  In August of 2015 the Senate passed a six year highway bill.  The Republican House of Representatives ignored the bill and went into recess.  During the summer a short term $8 billion spending bill was passed by the House extending infrastructure spending until November 20th. Early in November the House passed a six year highway bill which they only funded for three years by a bipartisan vote of 363 to 64.  It was the new Speaker, Paul Ryan’s, first major accomplishment.  The bill has to be reconciled in a Conference Committee with the Senate or voted on by that body as it stands and signed by the President before it becomes law.  One comment on the bill is that it is a six year bill that is only funded for three years.

 

The basic problem with this bill, as with most bills dealing with the infrastructure is that the funding is mostly inadequate; it helps more or less maintain the system but it is never adequate to bring about the fully needed repairs or replacement.  If we take Mississippi as our example then in 2012, a national report found that that state had an estimated $30 billion in highway and bridge needs but had at most $15.3 billion to meet these expenses.  This is true for every single state in the nation.

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

Today public spending on infrastructure has fallen to its lowest level since 1947.  The U.S. which used to have the finest infrastructure in the world is now ranked 16th according to the World Economic Forum.  It is behind Iceland, Spain, Portugal and the United Arab Emirates.  Many large corporations like Caterpillar and GE have complained that it’s hurting their ability to compete abroad.  The conservative U.S. Chamber of Commerce at a Senate hearing early in 2015 expressed strong business support for raising the gasoline tax.

 

In addition to roads and bridges and the gas tax there is aviation.  Throughout the United States there is a shortage of airport runways and gates along outmoded air traffic control systems.  These have made U.S. air travel the most congested in the world.

 

Around the industrial world there are over 14,000 miles of high speed railroads operating around the world but none in the United States.  In Chicago it can take a freight train nearly as long to go across the city as it would take a high speed train to go from Chicago to Los Angeles.

 

In New Jersey there is an old railroad bridge, the Portal Bridge, going over the Hackensack River that was built in 1910.  It gets almost 500 trains a day and is one of the busiest bridges in the country.  The bridge was based upon a design from the 1840s and was obsolete shortly after it was completed over 100 year ago.  It is a swinging bridge that needs to be opened several times a week to allow river traffic to pass.  Its major problem is that it doesn’t always lock when it is swung back and rail traffic can back up infinitely in both directions while is being made usable again.  The bridge has to be replaced.  The project would cost just under a billion dollars.  A new bridge was designed two years ago in 2013.  Everyone agrees it has to be replaced but there is no consensus or political support from Congress to raise the necessary funds.  Its eventual failure could stop traffic in the Northeast.

 

As far as the seaports go we now have a new generation of large cargo ships that will be going through an expanded Panama Canal in another year or so.  On the East coast only two ports of the 14 major ports will be dredged deep enough to accommodate these ships.  Do we then limit all foreign traffic to these two ports?  And if we do then how rapidly can these ships be unloaded and reloaded?

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

We have mostly looked at forms of transportation that are a major part of the infrastructure but far from all of it.  There is also maintaining drinking water quality throughout the nation, dams and dikes that are essentially obsolete, extension of power grids, modernizing public school laboratories and structures, plus a number of other factors that allow the society to function.

 

In the winter of 2014 – 2015 a section of the national power grid froze and ceased functioning.  A section of this country was one step away from losing electric power.  We have not been that lucky in the following year.  A section of the northwest, Washington State, lost power during a period of freeze.  Conditions could still get worse in the near future.  Do we have to wait for additional crises before any action is taken?

 

Actions will have to occur at some point.  Now is considered a good time since interest rates are low and estimates indicate that these projects would generally pay for themselves in the near future.  This will be increased employment, there will be more productivity, a greater GDP, and more collected in taxes on every level of government.

 

Some of it can be done by having local and state governments team up with the private sector.  There are currently such projects in 33 states.  These arrangements are called P3s (public-private partnerships).  They are popular abroad.  But their financial effect is limited according to the extent of the infrastructure needs.  Only Congressional action can bring about substantial improvement.

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

The two major weapons that the Federal Government has to fight economic recession or a major depression are Fiscal Policy and Monetary Policy.  Fiscal Policy is carried out by the Congress and Monetary Policy is done by the Federal Reserve.  Since 2011, when the Republicans gained control of the House of Representatives, there has been no real Fiscal Policy.  If anything, with one exception in late 2015, Congress has largely ignored this responsibility.  The Federal Reserve, under the leadership of its former Chairman, Ben Bernanke, with support from the President, had used creative Monetary Policy to move the country toward economic recovery from the late 2008 Real Estate Crash.  The country is still in the process of recovering.

In March 2012 the Treasury Department published, “A New Economic Analysis of Infrastructure Investment.”  This multipage document explained all the advantages of infrastructure investment, also detailing programs the President was trying to initiate.  From what I understand the issue was never even raised in the Republican dominated House of Representatives.

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

In the 19th Century being a Congressman was a part time job.  The Congress met for only a few months and passed all the necessary laws for the year and then adjourned.  The President spent the entire year running the country but Congress only met for a few months.  The House of Representatives have again reached that point except that they have stretched it out over the entire year.

 

The current schedule calls for the House of Representatives to meet for 111 days over their fiscal year.  They work three days a week and take a four day weekend.  They have extended all their holiday breaks by half again as many days as they used to take.  And for this they are paid $170,000 per year.  All this at a time when the nation is seething in problems, many of which they have no time and probably no inclination to consider.

 

The new Speaker, Paul Ryan, has a bed in his office and lives there the short week he is in Washington and, from what I understand, spends his four day weekends home in Wisconsin with his wife and young children.  That was part of his agreement in becoming Speaker.  The rest was to pacify the conservative elements in his party.

 

What will happen in Congress is anybody’s guess.  I would suppose the country is stuck with these Republican majorities for another full year.  How much will this Congress achieve?  To me that’s an interesting and frightening question.  I don’t expect much.

 

What happens in the 2016 Presidential Election is up to the public voters, whose vote has not been suppressed in Republican dominated states.  We know in a recent Midterm Election the Democrats cast more votes for members of the House than the Republicans did but through earlier gerrymandering the Republicans were still able to maintain the majority in the House of Representatives.

 

What will the attitude of the current Congress be toward the infrastructure?  Ted Cruz and some of the other potential Republican Presidential candidates stated in their third debate that it should be the province of the states.  The states are investing less and less money into infrastructure as their other costs increase, especially their unfunded retirement costs.  Hopefully no additional major infrastructure disasters will occur during the winter of 2015 – 2016.

 

If we ask ourselves how Congress does get away with its current attitude or attitudes?  The answer is quite obvious.  This action and a number of other things Congress does is essentially invisible to the general public.  The media does not consider these items as newsworthy.  They are not really dealt with or dramatically brought before the public.  The concept of the infrastructure itself tends to be more abstract than concrete.  If something specific happens and there is a public hue and cry about it then something is quickly done to resolve the problem.  But as a small piece of information that can be dug up with some effort it is not that important.  While Congress should be concentrating on all these problems they ignore them until they are specifically brought to their attention.  Basically the thinking is that the country has done well and will continue to do so if left alone.

 

An example of this was sequestration, a law passed two years ago to cut government spending across the board.  An immediate result was enhanced waiting time at all the airports as the number of air controllers was immediately cut back.  The complaints were loud and vociferous.  Within a day or so

Seal of the United States Department of the Tr...

Seal of the United States Department of the Treasury (Photo credit: Wikipedia)

Congress had passed a law exempting the air traffic controllers from sequestration.  The military in late 2015 had reached a point where its efficiency was drastically effected by sequester cuts.  This problem was resolved when the debt limit was raised.  Refunding the military became part of that deal. Generally once members of the public are inconvenienced or the change will obviously effect the country change is quickly brought about.  But until that time nothing is done.  In a sense we are waiting for obvious crisis to occur before positive change is brought about on parts of the infrastructure.

 

 

 

 

 

Congress & the Problems of the United States: Are We Getting Our Money’s Worth?

English: Breakdown of political party represen...

English: Breakdown of political party representation in the United States House of Representatives during the 112th Congress. Blue: Democrat Red: Republican This SVG file was originally hand-written. It contains comments suggesting how to amend it to reflect future changes in Congress. Inkscape reads this file as corrupted, thus changes must be made with a text editor or other program and checked with a browser. (Photo credit: Wikipedia)

There are 435 members of the House of Representatives.  Their combined salaries, taken together is $73,950,000 taxpayer dollars per year.  Of these 247 currently are Republicans.  They receive $41,990,000 taxpayer dollars in compensation for serving in the House of Representatives.  Of these 247 House members 40 belong to the Freedom Caucus.  They make up the ultra-conservative far right end of the party.  These people understand compromise as the other side coming to their position; to them anything else in largely unacceptable.

 

On the issue of passing a bill to continue to fund the government the Freedom Caucus, which is made up of Tea Partiers, plus a number of other Republicans had refused to act until funding Planned Parenthood was removed from the bill.  If Planned Parenthood were removed from the bill President Barak Obama stated he would veto the proposed new law.  This brought about the resignation of the Speaker of the House, John Boehner, at the end of September, effective October 31st.  A bill was brought through the Senate and later, the House, continuing the funding of the government through December.  In each case with heavy Democratic participation.  There were not enough Republicans supporting it in either House for the bill to pass without Democratic support.

 

As an aside, the evidence presumably proving Planned Parenthood was guilty of breaking the law in performing abortions and selling fetus tissue for research was highly edited video tapes that were the equivalent of a man entering a house, then in the next scene he or someone entered an apartment, greeted a woman, the camera would switch to an image of a bedroom, and finally the man would exit the house, presumably in the morning.  This was the level of the edited video evidence presented against Planned Parenthood, which the anti-abortion groups took as absolute proof.  In addition some of the video were made by paid actors, hired by an anti-abortion group, discussing the sale of fetus parts.   Planned Parenthood has been investigated numerous times by Congressional Standing Committees and others and has never been legally proven of doing anything illegal.

 

To get back to our primary subject, what we spend on Congress and what we are now getting in return.  If we include the Senate in the cost we are adding an additional $170,000 one hundred times, that’s 17 million dollars.  This does not include the fact that each congressperson in either House has a staff in Washington that can employ up to eighteen permanent members and have an office in their home state.  We are spending well in excess of ½ billion dollars annually upon our law-makers.  For this, especially since they take an oath to uphold the Constitution, we should be able to expect them to do their jobs.  Are they passing laws that help the country develop and prosper?  Are they doing things to lower unemployment?  Is the country moving forward to a better tomorrow?  Are they repaying the taxpayers for electing them to office or are they serving their large contributors who have funded their political campaigns or are many carrying out their own specific agendas?

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

My impression is that most, if not all, of the Republicans elected to Congress have no real understanding of what makes up economics; that they think of the Federal Government functioning on the same level as their households, that so much money comes in every month and once that’s gone the government has to borrow money to spend more, and that additional money has to eventually be paid back.  That is how Microeconomics (small economics) works but that is not how the Federal Government works.

 

The Federal Government, all national governments for that matter, operate under the principles of Macroeconomics (Big Economics).  There is today nothing behind the dollar but the word of the National Government; they own the printing presses.  Money has no intrinsic value today; the government can print any amount it wishes.  They do this by legislating the amount that can be printed and the Federal Reserve determines when, if, and how much to release to the banks.  Money to the Federal Government is a tool that is supposed to be used to enhance productivity within the country.  Its expenditure has nothing to do with its taxable income.  The true value or wealth of the country is the goods and services produced within a fiscal year determined in terms of dollars and cents.

 

If the members of Congress do not understand this concept then they are working against the welfare of the nation.  They are not doing what they were elected to do, run the country positively.  What has existed since the House of Representatives achieved a Republican majority in 2011 has essentially been inaction, or when legislation occurred it has been mainly to hamper economic recovery.

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

From the year 2008 on the major banks, first in the United States and then throughout most of the Industrial world, were suddenly on the point of collapse.  In the U.S. one trillion dollars of real estate value disappeared virtually overnight.  The major banking houses were suddenly facing ruin, were ready to go under.  They had speculated in real estate from the 1980s on to the point of insanity in late 2008.  Overnight there was massive unemployment; many people’s homes had larger mortgages than they were then worth.  The country was on the brink of a massive depression.  Banking in the U.S. could conceivably diminish to a trickle.

 

First in 2008, when this madness, brought about by the large banks, both commercial and investment banks occurred, George W. Bush and his Treasury Secretary, Hank Paulson, made massive loans to the banking houses; then this was continued by President Barak Obama in 2009.  Some investment and commercial banks were allowed to go under, their loans and deposits taken over by other big banking houses; but most were saved with additional loans.  (If you’re interested in the specifics of what happened Ben Bernanke the former chairman of the Federal Reserve, has just published a book dealing with all of this.)

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

What have the Republicans achieved?  In 2011, through a process known as gerrymandering, favorably setting up voting districts in states they controlled politically, based upon the party registration of the voters, they were able to gain control of the House of Representatives, and they have kept it ever since.  In the Senate they gained control in 2014.  They could conceivably lose it in 2016 when 1/3d of the Senate will run for reelection.

 

The Republican prospective in dealing with the Real Estate Disaster has been to ignore it.  Mitt Romney, when he ran as the Republican Candidate in 2012, spoke about doing away with the banking reform bills passed after the 2008 Crash.  It seems that one of his goals was to bring America back to where it was before the 2008 Disaster.  Fortunately he didn’t get elected or we might be back to the Crash now with the major banking houses again destroying the economy.

 

Since they gained control of the House of Representatives in 2011 the Republicans in the House of Representatives and, for that matter, also in the Senate have strictly followed a policy of Microeconomics (small economics), attempting to run the country as they each run their own households.  The result of this from 2011 on has been to exacerbate the recession, costing additional hundreds of thousands of jobs lost throughout the United States in the federal and state governments and in the general population from monies not spent by these unemployed former government employees.  They have done everything possible to worsen the overall situation.  Luckily the President and the Federal Reserve, despite the Republican actions, have been able to generally put the country well in the direction of economic reform.  The cost of this has been a 53% increase in the National Debt spent by President Barak Obama during his first six years in office.  This included an economic stimulus package, both cutting taxes and extending unemployment benefits to avoid another Great Depression.  He has also increased defense spending and brought about the Parent Protection and Affordable Care Act (Obamacare).

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

The National Debt is now 18.4 trillion dollars.  If we go back to the Republican Presidency of Ronald Reagan we get a good idea of why it is so high now.  When Reagan became President in 1981 the National Debt was just under one trillion dollars.  His great fear was that the Soviet Union was militarily ahead of the United States.  He wanted to militarily catch up to them and possibly get ahead of them.  In eight years he added 1.86 trillion dollars, over 100% to the 998 billion debt level bringing it up to well over 2 trillion dollars.

 

In point of fact we actually were well ahead of the Soviet Union in our military preparedness.  The Soviet Union bankrupted itself trying to keep up with the United States.  The problem with the U.S. was that the leadership instinctively knew how well armed the Soviets were and that the contrary information that the government intelligence agencies could provide was supposedly inaccurate and ignored.

 

Under George H.W. Bush, through faulty or stupid use of diplomats, the President of Iraq, Saddam Hussein, got the impression that he could invade Kuwait and the United States would ignore the incident.  After the invasion we had operation Desert Storm.  This war could have been avoided with proper use of diplomacy.  Bush Sr. added 1.554 trillion dollars to the National Debt, an addition 54% in just 4 years as president.

 

Interestingly, I would suspect in reprisal, Saddam Hussein attempted to have George H.W.  Bush assassinated.  The attempt failed.  But apparently his oldest son never forgot this fact.

 

The National Debt increased under Bill Clinton but during the last year of his second term he not only balanced the budget he also reduced the Debt slightly.

 

Shortly after George W. Bush became President he got the U.S. involved in two wars: one in Afghanistan as a result of the destruction of the Twin Towers in New York City and another one in Iraq because, I would suspect, to get even with Saddam Hussein for attempting to kill his “daddy.”  The intelligence agencies in the U.S. felt, I understand, that the “weapons of mass destruction” theory or belief was pure fantasy.  Bush Jr. in eight years added 5.849 trillion to the National Debt increasing the National Debt 101% during his eight year period as president.  A good part of this money was spent fighting a pointless war which destabilized the Middle East and brought into existence such groups as ISIS and what seems hopeless confusion and endless civil war that we are stuck with today in the Middle East.

 

While Obama increased the Debt another 53%, 6.167 trillion dollars, during his first six years in office he did so to keep the country from falling into a deep depression, which had been gradually brought about by doing away with banking restriction laws that had been passed from 1933 on, during the years of the Reagan Presidency.  Reagan and his group apparently believed in a Free Market economy; with all economic decisions being made by the actions of the market.  He allowed the big banking houses, with no Government controls to create a maelstrom.

 

Despite all the Microeconomic moves of the Republican House of Representatives during the first six years of the Obama Presidency he has largely worked the nation toward economic recovery.  Had the Republicans understood basic economics the country could now be undergoing a period of full employment with a much higher tax base that might even be high enough to start reducing the National Debt.

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

Other questions loom up here: What exactly is the National Debt?  How does it affect the nation?

 

According to a member of the Freedom Caucus who was interviewed on MSNBC he would vote for Paul Ryan as the new Speaker of the House of Representatives when the current one, John Boehner, leaves at the end of October 2015 if he would acknowledge the seriousness of the National Debt, over 18 trillion dollars, and work to reduce it rather than allow the country to continue to move toward bankruptcy.

 

This seems to be a basic value of most Republicans.  They don’t acknowledge that their party was mainly responsible in raising the National Debt to where it is today.  They seem to blame it on the Democrats and want to reduce Federal Government nonessential spending, particularly spending on the poor and aged.

 

This attitude keeps the country on the edge of disaster seemingly going from legislative crisis to legislative crisis.  The Debt Limit bill that was passed with strong Democratic help after the Speaker, John Boehner resigned from the House of Representatives.  In it Congress had to raise the current Debt Limit or face default by legally running out of money with which to pay its bills.  The Treasury Department had stated that Congress must raise the debt limit beyond 18.1 trillion dollars or not be able to meet all its bills by November 3, 2015.  That crisis was resolved in both Houses of Congress with help from the Democrats.  Also in both Houses of Congress funding the Federal Government will come up again in December.  Will Planned Parenthood again create a crisis there?

 

Former Speaker Boehner was able to get such a bill raising the National Debt through Congress before his Speakership ended and only with Democratic help.  The same holds true with the Senate.  The bill was for two years.  President Obama had stated that he will veto any short term bills.

 

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 and is held by the Federal Reserve and such entities as Social Security that currently holds probably over 3 trillion dollars’ worth of these securities, Medicare, the Federal Savings and Loan Corporation Resolution Fund, as well as a number of other government agencies.  These debts held by governmental accounts represent cumulative surpluses, including interest earnings of these accounts.  In 2012 there were at least two direct transfers of 89 billion dollars from the FED to the Treasury that constituted interest paid on the National Debt.

 

The Federal Government admits to owning 40% of its own debt.  The probability is that it is more like 50% or 60% of the money it owes.  For example, besides massive unemployment and the loss of value of the dollar in the 2008 Real Estate Crash there was an intense mortgage problem: since a very large percentage of the mortgages issued had been broken up into microscopic size and the pieces issued by innumerable Hedge Funds into countless securities, the question that arose was who owned all that mortgage paper?

 

At first the bank computers generated documents and most of the banks foreclosed upon homes they did not own.  After this was discovered the banks stopped the foreclosures.  Then the question arose: Who did own these properties?  The answer was no one.  Each property could have been divided into hundreds of pieces, each issued to a different Hedge Fund.  It should have taken twenty of more years to straighten out this mess.  The housing industry, both old and newly constructed homes, would have been in a state of practical nonexistence.  Many older homes whose mortgages were far above their actual value had been deserted by their former owners and stayed empty, and construction companies would have found it nearly impossible to fund their projects.

 

By the Federal Reserve stepping into this problem and dealing with it they were able to largely resolve it in a period of just a few years.  I would guess that the price of resolving this problem cost the Federal Government well over ½ trillion dollars.  What the FED bought was trillions of fractional pieces of mortgage paper that the banks had created over a thirty year period.  Sorting them out would have been unbelievably expensive and probably totally impracticable.

 

Using imaginative monetary policy Ben Bernanke, the Chairman of the Federal Reserve, over a period of several years, solved this problem by pumping billions of dollars into the economy.  For a period of well over two years.  The Fed pumped 85 billion dollars into the economy monthly.  Forty billion bought back Government loans and Forty-five billion bought mortgage paper from all 50 states, literally trillions of mortgage pieces each month.   What happened to all this mortgage paper?  The probability is nothing.  It would have been prohibitive to sort all these microscopic pieces of mortgages.  An even then it would have required over 50% of the pieces for any action to be legally taken against the homeowner.  The banks had been in such a rush to continually refinance these properties that record keeping became farcical.

 

I would suspect that after two or three years most, if not all, of the deserted homes were sold for back unpaid taxes.  As for the people who stayed in their homes and couldn’t afford the continued payments, they probably waited for foreclosure that never came.  These people could no longer legally deduct their home interest from their income taxes but they still had quite a bit of extra income which they freely spent adding to the National Cash Flow, and encouraging more employment, within the United States.

 

The private section of the National Debt, the forty billion spent monthly, is money previously borrowed for short to long periods of time by the Federal Government from individuals, both in the United States and foreign countries, by foreign nations, and by numerous other entities.  By this action the Federal Government both allowed long term purchasers of this government paper to purchase long term paper at higher rates of interest and cash them out almost at will.  This process allowed the Federal Government to add all this money to the National Cash Flow continuously for this period.

 

The amount of money available to the public grew at an expediential rate.  Interestingly there was no inflationary increase with all these billions of dollars added to public spending.  Instead this Creative Monetary Policy of the Federal Reserve largely solved the bank mortgage disaster of 2008, made more cash available for economic growth, and moved the nation well into the direction of economic recovery by 2015 from the Real Estate Disaster.

 

It is also well to keep in mind that pretty much the same result could have been achieved, probably at a lower cost, by Congress passing fiscal policy as was requested by President Obama during the third year of his presidency, 2011.  This bill and others that could have been passed later would also have modernized much of our infrastructure and moved this country into the 21st Century.  But the Republicans in Congress have done nothing to really help the country or the bulk of its population.  If anything they have been penny wise and dollar stupid.

 

If the question were raised: Have we as a nation gotten our money’s worth from the ½ billion or so we spend to keep Congress functioning?  The answer is definitely negative.  In fact the situation seems to continually get worse.  With the retirement of the current Speaker of the House of Representatives will the new Speaker, Paul Ryan, be able to get positive legislation passed?  Being a very conservative Republican will he want to do this?

 

The question is currently up in the air.  The Republicans have 247 representatives out of 435.  But 40 of them belong to the Freedom Caucus.  The majority of them presumably support Ryan.  But they are far more conservative than the very conservative 207 other conservative Republicans.  In order to elect a new Speaker 218 affirmative votes were needed.  Ryan was willing to be Speaker if the Freedom Caucus  backed him as Speaker.  The majority of them have voted for him.  What will happen?

 

Meanwhile what about the bill funding the government that has to be passed before the middle of December?  The Treasury will not be able to legally pay the Governments bills unless the funding bill is passed by December of 2015.  It has been kicked down the road for three months.  If the Republicans insist that funding Planned Parenthood be removed from the bill President Obama will veto it.  Also if it is again a short term bill the President will also veto it. What will Ryan do?  What will he want to do?  It was Ryan who originally proposed using the leverage of necessary bills to force its agenda upon the President.

The Weiner Component #54 – The History & Use of Money

Money cash

Over most of human history money, gold coins, have been an object of value that have been exchanged for either goods or services of equal value.  This changed in 1933 when money became essentially a paper note with symbolic intrinsic value, which was still used for the exchange of goods and services.  Finally in 1969 the last vestige of theoretical gold was removed from paper money and all coins became copper sandwiches where before they had contained silver.  Since that time there has been nothing behind the dollar except the word of the United States Government.

Economics exists on two levels: one, which affects everybody, is Microeconomics, and the other, which effects only the Federal Government, is Macroeconomics.  Microeconomics deals with individuals and family incomes and budgets; with any entity that lives on a fixed specific income, be it taxes, rents, dividends, or earnings.  Macroeconomics deals with the government adjusting and fine-tuning the entire economy of the nation.  It has to do with adjusting the money supply, interest rates, and the functioning of the nation.

Money, the amount of money one has or earns, determines where that individual fits in the general society.  If one has an adequate amount with which to live then it is not overly important; but if one never has quite enough, then its lack supplies an endless pressure on an individual and his family’s life.  Unfortunately the majority of the population does not ever have quite enough.

What is the problem with having enough money?  Better yet, what is money?  What is it really worth?  Why is money unequally distributed among the population?

Historically, during ancient times, precious metals like gold and silver were exchanged for goods.  This was done in addition to barter.  The metal would be weighed and the weight would determine the value.  Probably the Phoenicians, who traded along the Mediterranean Sea, began this practice well over two thousand years ago.  They traded value for value.

At some point in history, again probably by the Phoenicians, money was invented.  A set amount of gold or silver was stamped with some image, usually a ruler of some dominion.  The coins were uniform, always having the same weight, thus being of a constant value.  This eliminated using scales for the exchange of goods and services.  It made doing business easier.  The basic concept remained the same, trading something of value for a metal of equal value.

The invention of coins, as less valuable metals were gradually used, allowed over time for an end of barter and an extension of the exchange of goods and services for money, which could be traded at any times for other goods and services in virtually any region or state.

How long did it take for this system to become established throughout the ancient world?  Probably it took at least hundreds of years for it to become common practice.

What developed was a system of exchanging goods and or services for an equal value in metals (coins, money).  Once this was established business could occur anywhere.

Probably from its inception or shortly thereafter there were never enough coins to handle the amount of business possible.  This kept the value of the metal high and allowed for slow economic growth.

The Roman Emperor, Nero, from what we know, was the first or at least one of the first rulers to “water the money;” that is, to add a less expensive metal to the molten gold from which the coins were cast.  The process increased the amount of money the state could spend but I also resulted in a continuous inflation during his reign by lowering the value of the coins.

With the exception of the 16th Century, when Spain looted the New World and brought seemingly endless shiploads of gold to Europe that were immediately turned in currency (gold coins). This brought about a period of inflation that lasted about ninety years.  During this period wages stayed the same but the value of the money continually decreased.  It was a time of rapacious inflation

Outside of this period there has always been a shortage of gold in relationship to the amount of trade (business) that could be done.  Also By the 16th Century Letters of Credit were developed in Europe by banking houses, which made the transfer of money in large amounts fairly simple.  In fact, the Hanseatic League and the Renaissance banking houses created a form of checking.  In essence modern capitalism began here.

In order to stretch the needed money supply and increase their profits banking houses issued paper money that, presumably, could be turned into gold (coins) at any time.  Of course, if any negative rumor occurred, and all the depositors brought their paper money in to exchange it for gold there would be a run on the bank.  The bank would run out of gold, the balance of the paper would become worthless, and the bank would become bankrupt.  These periods brought about the business cycle, periods of prosperity and depression within the respective nations.  Modern capitalism thus came into existence.

The Great Depressions of 1929 and 2008 were results of this type of action.  The great banking houses of the United States brought them both about.  Prior to 1929 the banks lent endless amounts of money to people with which to buy stock.  The margin rate was 10%.  For every dime the citizen invested he could buy one dollar’s worth of stock.  This drove the price of stocks through the ceilings, creating multi-billions of dollars.  With the competition to get rich quickly stock prices continually rose until they reached a point in 1929 when this whole house of cards collapsed and the investors and the banks went bankrupt within a relatively short period of time.  The nation teetered on the point of economic collapse until 1933 when Roosevelt became president.  He was able to bring about partial recovery until 1939 when World War II broke out.  The war ended the Great Depression in 1939 in the United States since there were endless orders for war supplies and food production coming into the U.S.

What Roosevelt did in1933 was to double the money supply by collecting all gold coins and issuing paper in their place.  He also doubled the value of gold from $16 an ounce to $32 dollars an ounce, thereby doubling the money supply and giving the government the ability to spend billions in economic recovery.

But, if we go by the value of the Stock Market, it was not enough.  The value of the Stock Market went from 86 billion dollars to 16 billion dollars.  Roosevelt needed to increase the value of gold to 64 dollars an ounce to match the amount of money that existed in circulation before the 1929 Crash.  This he could not do.

With the Real Estate Debacle, which occurred late in 2008 the situation was similar.  The banks over a thirty-some year period had discovered that they could bundle mortgages into massive packages and sell them as hedge funds, supposedly as safe interest paying investments to innumerable investors.  What the banks did was to issue the mortgages, sell them off in bundles, get their original investments back, and then process the funds for fees on several levels.  In essence they controlled the mortgages without having any money invested in them.  This was continued until the banks were issuing loans based upon 125% of the appraised value of the real estate.  This process continued over three decades until the bubble burst and property values dropped like lead weights from tall buildings, leaving many of the homeowners underwater, owing more on the property than it was suddenly worth.  Both Presidents Bush and Obama pumped money into the banks, bailing them out before the entire financial structure of the United States collapsed.

In both the above cases the banks were motivated by intense greed, endless profits, exploiting the system to become super-rich.  In 2008 the bankers were earning in the multi-millions as their compensation packages, and those below them were not far behind them earning lesser million in fees.  The real estate industry was going berserk with the multitude of fees they were earning.  Many homeowners were happily using their real estate as bank accounts and industry was prospering.  It was a happy “twilight state” that lasted until the bubble burst and the economy tanked.  Then if not for the steps taken by the Obama Administration, the entire nation would have collapsed.

The major historic problem still exists, even though the government prints and issues money as needed, there is not enough money in circulation to allow for all the exchange of goods and services needed within the society.  Can this problem be rectified?  The answer is easily by the Federal Government using both fiscal and monetary Policy.

The major problem here as far as the overall population is concerned is that most people still think of money in terms of gold.  With Macroeconomics it is a tool that the government uses to enhance productivity.  In itself money has no real value except that assigned to it by the government as a token of exchange.  The Federal Government can issue as much as it feels is needed.  The only limitation on this is inflation.  If there is too much money in circulation, more money that goods and services needed then we could have a rabid inflation.  This and this only would limit the amount of currency that the government can circulate.  Money is not gold and should not be treated as such.  This behavior can limit productivity and bring about a continuing recession as it has since the end of 2008.

Unfortunately the Tea Party Republican controlled House of Representatives has not only not used fiscal policy but has also seriously restrained Federal spending, exacerbating the problem of unemployment.  We are still in a recession with a seven plus percent level of unemployment.  This could easily be rectified if the Federal Government could take proper action.

Enhanced by Zemanta

The Weiner Component #53 – My Book: Economics in the 21st Century

Forex Money for Exchange in Currency Bank

If you have enjoyed and/or found my articles useful there is a book that I have written that deals with all these subjects in much greater detail and depth.  It’s called Economics in the 21st Century.  The work was published in 2012 in Kindle and can be downloaded on either a Kindle or any computer for a small fee.  You go to Amazon.com, scroll to Kindle and follow the instructions for locating and downloading the book.

The work begins by examining the Real Estate Fiasco of 2008, its origins in the 1970s, its successful growth and insane collapse toward the end of 2008, thirty-eight years later.  It provides an analysis of what brought about the 2008 economic boom and crash, the results and scenarios for change.

The book looks at popular but misguided economic (values) beliefs and common misperceptions that arise from them.  It shows how Microeconomics – the so-called common sense economics – that deals with business functionality, local and state taxes, and household budgets is now perversely interpreted and used as the basis for entire societies to operate; that is the governments of the United States and Europe.  It explores how Macroeconomics, the way that nations should operate, has been overlooked and usually ignored.  The fact that governments largely control their money supply (the amount of money in circulation) because they can print currency as needed.  This look at economics from an historical perspective provides a broader and deeper comprehension of today’s crisis and gives possible scenarios for the future of this century.

The study examines the current economic ongoing recession in the United States, minutely investigates the 2008 Real Estate Debacle from its beginnings, tracing it from the 1970s to the present.  The work concludes that the monetary increases over the years were necessary for a growing economy but utilized faulty means for the needed monetary increases.

The book’s underlying premise is that the prosperity of the nation is based upon the amount of money in circulation and its distribution among the general population.  The bundling and sale of mortgages from the 1970s on massively increased the amount of currency in circulation without causing any real inflation.  The Real Estate Debacle at the end of 2008 significantly reduced that amount.  People had been using their homes as bank accounts, many constantly refinancing them.  With the sudden decrease in property values the country fell into a recession that could have easily become a depression far worse than 1929.  We should note that the bottom twenty percent of the population did not share in this prosperity.  They were renters and had no houses to use as bank accounts.

In 2008, when Barak Obama was elected President of the United States, he got in on a campaign that stressed “Change.”  But the economy had been so damaged by prior Administrations that most of the first two years were spent in recovery and in passing the Affordable Health Care Bill.  In the 2010 Midterm Election the Republicans were able to take control of a number of states.  Because it was a census year they gerrymandered those states in their favor.  Having also taken control of the House of Representatives they were able to maintain that control for two more years, even though the popular vote favored the Democrats by 1.4 million votes.  From 2011 on they passed no legislation that would favor any additional employment.  Actually they further exacerbated the problem of unemployment in the nation by shrinking necessary government employment and further limiting the money supply in circulation.  What has kept this country economically afloat has been the creative Monetary Policy of the Federal Reserve, adding 85 billion dollars to the economy every single month.  This has countered the restrictive actions of Congress but has not been enough to bring about full recovery.  We still have slightly over seven percent unemployment.

Historically the work examines other economic crises and their causes, particularly the Great Depression of 1929.  It shows how the National Cash Flow, the amount of money in circulation in the nation determines the level of prosperity or hardship in the country.  International trade and money are handled from totally different viewpoints than those traditionally taught and/or widely believed.  The reality of the National Debt is questioned and explored in terms of private and public debt.  Public Debt is held directly by the Federal Government and its agencies.  Private Debt is that held by outside entities such as individuals, companies, foreign nations such as China and Japan.

Can the Federal Government, which owns fifty percent or more of its own debt, owe itself?  The contradictions in our economic system are examined.

Enhanced by Zemanta