Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People
1. It is shocking that the current article in Foreign Affairs calls for saving the plunging economy by giving money directly to people for consumption. Shocking in that Foreign Affairs, the publication of the Council of Foreign Relations (CFR) appears to be advocating a radical populist plan of income redistribution. CFR is a think tank of the power elite. It’s also surprising that CFR, which focuses on foreign policy and international affairs, would be advocating a plan that is seemingly exclusively domestic.
2. It is predictable that the current article in Foreign Affairs calls for saving the plunging economy by giving money directly to people for consumption. Consumer spending represents upwards of two-thirds of the U.S. economy. People aren’t spending because they don’t have money — due to stagnant wages, rising prices and large debt. The power elite realizes the Federal Reserve’s Quantitative Easing (QE) program, which injected over $4 trillion into the economy which ended up in bank coffers and in the stock market, achieved little in real terms to generate real economic activity — which is based on demand. If people in the middle and bottom don’t demand stuff, producers won’t produce stuff. It’s also predictable because the power elite realize people are angry and may begin, as billionaire Nick Hanauer suggests, to wield pitchforks if they aren’t helped and the rising rich-poor gap isn’t closed. Move over, the Federal Reserve has run out of monetary tools to spur the economy — injecting money to bankers and lowering interest rates to zero hasn’t worked. Handing out money may also blunt increasing calls to abolish or nationalize the Fed.
3. The proposed plan contains a concept contained in the National Emergency Employment Defense (NEED) Act. This was the bill introduced in the two previous sessions of the U.S. House of Representatives which called for giving every single person in the US a certain fixed amount of money to help meet their needs. Most people, especially in the economic middle or bottom, would spend the money almost immediately, thereby, injected cash into the economy and creating an economic multiplier — with hopefully each dollar injected being exchanged multiple times. The concept is sound.
4. The specifics of the proposed plan are unsound. It appear the Foreign Affairs authors call for the US government to do further into debt to come up with the necessary initial cash, which would be invested in a bundle of diverse market investments that supposedly would earn 5% over 15 years. After that time, the proceeds would be distributed by the Federal Reserve, not the US Government, to the lowest earning 80% of the population into tax-exempt savings accounts with constrains on how the money could be spent (presumably spending on high speculative derivatives would not be on the list). What’s the plan between now and 15 years from now? Does the Fed in their right banking corporation-serving mind believe people can tread economic water for 15 years? Or will the mere fact that announcing that people are going to receive cash 15 years into the future enough to generate sufficient consumer confidence that people will go on a spending binge? Lastly, what exactly happens if and when the “diverse market investments” plummet anytime over the next 15 years? The markets are currently in extreme bubble territory. Will this plan only go into effect after a crash when the market resets 30% – 60% lower than today?
5. If economists (connected to the Fed or otherwise), policymakers and the public are serious about examining “outside the box” alternatives to (a) going into more debt, (b) robbing Peter to pay Paul spending shifts, or (c) significantly raising income taxes to generate funds to put into people’s hands, they should examine a fourth option: putting debt-free and inflation-free money into people’s hands by enacting legislation that would nationalize the private Federal Reserve system, end the practice of banks lending many times more than they actually possess (fractional reserve banking), and shifting the authority back from banking corporations to We the People in creating and distributing our own money, as called for in the US Constitution. US Money, similar to Greenbacks created by the Lincoln Administration, could be used to rebuild our nation’s crumbling infrastructure, provide funding for needed investments at the state level and provide every person a certain amount of funds. Limited democratically controlled money creation would shift our nations money from banking corporations to people. The Fed isn’t stupid. Their plan seeks to co-opt the populist idea of bottom-up money distribution. We need to promote the real thing.