Even the weak Dodd-Frank was too much for financial corporations. The FIRE (Finance, Insurance & Real Estate) industry is near the top of those that spend/contribute/invest $ in lobbying and political campaigns. Another fine example of their investment royally paying off…and why we need the We the People Amendment.
“Rogue One” is not simply the title of the latest Star War film due out this week. It’s also a dead-on accurate description of the institution being suggested as the go-to source to fund President-elect Trump’s $1 trillion proposal to repair, modernize and expand our nation’s infrastructure. The institutional Rogue, Darth Vader, Death Star or Dark Side (take your pick among Star Wars metaphors) that some are seriously suggesting to provide the stimulus to our economy are super duper big banking corporations directly responsible for the financial implosion a few years ago, instead of We the People and our public power to create debt-free and interest-free money to meet our basic needs.
There’s no debate on the following:
- Our roads, bridges, water and sewer systems, public transit systems, schools and other basic physical public structures are rapidly crumbling,
- Bi-partisan political will exists to address infrastructure needs across the country, and,
- President-elect Trump and his advisors, specifically Treasury Secretary nominee Steven Mnuchin and chief advisor Stephen Bannon say they are open to exploring literally all solutions to fund the program over 10 years — an approach described by Bannon as “We’re just going to throw it up against the wall and see if it sticks.”
Many claim, including the prestigious American Society of Civil Engineers, that $3.6 trillion (as estimated in 2013) is needed by 2020 to serious address our infrastructure needs. Whatever the amount, the question of how it’s going to be paid for is central.
No one supports raising taxes. This is a political non-starter.
Several of Trump’s economic advisors proposed several months ago providing tax credits to private investors. This and other ideas fall into the category of Public-Private Partnerships, which have a demonstrated history of being ineffective and expensive.
Ellen Brown in a recent article commenting on Trump’s infrastructure plan correctly asserts, “net new spending requires net new money.” There simply isn’t enough money in the current money or monetary system to fund even $1 trillion without taking it from somewhere else and, thus, causing economic pain — a “robbing Peter to pay Paul” dilemma.
The question is who, or what, should create the needed new money? That would be money created “out of this air,” which is how most new money in our society is created — not simply by printing paper notes, but by crediting a sum to a borrower in their account by computer key strokes (97% of our nation’s money is created in this way).
The U.S. Constitution allows for the public creation of money. President Lincoln took this very step to pay for the Civil War. Several hundred prominent economists urged the same strategy in their “Chicago Plan” during the 1930’s to President Roosevelt as a means to stimulate the economy out of the depression/recession (sound familiar?).
A more up-to-date and complete version of the Chicago Plan was introduced twice in Congress over the last few years — the National Emergency Employment Defense (NEED) Act, which has three critical and inter-related components:
- Making the Federal Reserve a public agency and no longer influenced by banking corporations,
- Ending the ability of banks to create money “out of thin air” — only able to lend what they have in their vault or able to borrow (called “fractional reserve lending”),
- Empowering the federal government as affirmed in Article I of the U.S. Constitution to create and distribute U.S. money — specifically several trillion dollars to repair, modernize and expand our nation’s physical and human infrastructure, which would result in the employment of millions of people and paid with interest- and debt-free money.
Brown assesses in her Trump’s infrastructure article the public money option the following:
“But the current conservative Congress is likely to balk at that solution. A more acceptable alternative in that case could be to borrow from banks. Ideally, this would be the central bank, since the loan would be interest-free and could be rolled over indefinitely. But borrowing from private banks would also work, since they too simply create the money they lend on their books.”
Of course Congress is going to balk at creating public money. Banking corporations have hijacked for decades the political process via lobbyists galore and campaign contributions/investments as high as the Washington Monument. It’s a major part of the political “swamp” that Trump railed against during his campaign and that his supporters applauded.
Instead, what’s proposed is the “more acceptable alternative…to borrow from banks,” which also creates money out of thin air as debt and which, by the way, also charge interest. It’s acceptable to banking corporations all right. It should be unacceptable, though, to the millions of Americans whose futures, neighborhoods and communities were killed by the too-big-to-fail Death Star banking corporations that became even too-bigger-to-fail by profiting from home foreclosure schemes and from all taxpayers who bailed them out. There would be nothing more to the liking of the big banks that to come across as the white knights that came to the rescue of the U.S. economy when We the People could have saved ourselves.
Thomas Edison once said:
“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good… If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency… instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?”
Needed are the vision, energy and commitment to resist the current corrupt and undemocratic financial and monetary institutional rogues as hard, long and deeply as possible. We shouldn’t give up or give in to the financial Dark Side when the struggle has barely begun. Needed is a positive, potent and diverse economic and political movement to demand that the NEED Act be “thrown against the wall.” Any bill that is just, sensible, practical and all-inclusive like the NEED Act should certainly stick.
We the People should alone possess the authority to create and distribute our nation’s money as we collectively decide, not banking corporations.
Keep the fictional Darth Vaders on the movie screens and financial ones out of our monetary system.
We can’t seriously address income and wealth inequality if the only democratic tool we use are tax policies. We simply can’t ignore monetary policies — the creation and circulation of our own money.
Currently, the vast majority (estimated as high as 97%) of our money is created not by our government — as authorized in the Constitution (Art 1, Sec 8 giving Congress the power to coin, or create money) — but by private financial corporations. It is the penultimate privatization/corporatization of any public assets.
Worse, the financial corporations create this money via loans — meaning money is created as debt, which of course must be paid back at interest.
There are numerous economic…not to mention political…problems with this scam. One of the problems is its contribution to inequality. As the above image from Positive Money in the UK describes, each time a person pays the interest to the financial institution is each time wealth is transferred from the bottom to the top. Ten percent of the population benefit from this set up, 90% gets stiffed. Inequality is built into our monetary system.
There are numerous worthy proposals to address inequality through tax measures. A new report issued just this week, “Billionaire Bonanza: The Forbes 400 and the Rest of Us” by the Institute for Policy Studies, is the latest example. The report, which documents that the richest 20 people in the US own more than the bottom half of all Americans (i.e. 152 million people), presents several recommended tax changes. These include closing various tax loopholes and increased direct taxes on wealth, not just income.
Instituting these tax changes would certainly provide an economic relief to the majority of people and to society as a whole. Failing to change the design of our monetary system, however, guarantees that inequality via interest payment on bank loans will continue.
Our money should be conceived of as a public utility. It should be publicly created and determined publicly how it is spent — as an asset, not a loan/debt.
There are proposals to end the ability of banks to create money as debt. Just as we educate ourselves on the nuances of tax policies, it’s time to get serious about monetary literacy. That’s the only way we can get serious about solving wealth inequality.
Audio of AFSC Monthly Conference Call Conversation
Speaker: Joe Bongiovanni — Co-Director of the Kettle Pond Institute, second generation monetary reformer, annual speaker at the American Monetary Institute national conference.
Joe discussed the topics of money and how it’s created by banking corporations, how monetary policy connects to the economy and our lives, and why it’s important to become monetarily literate, He talks and answers questions about the National Emergency Employment Defense (NEED) Act, which if enacted would infuse debt-free money into our economy to meet our basic physical and human needs, create jobs and reduce our national debt.
Boy do I wish I had been exposed to this in 12th grade…however, it’s never too late to become monetarily literate. it’s imperative to try to get on the other side of the learning curve ahead of the next soon-to-come (and much more severe) economic collapse — to understand and counter the PR blather that will be rolled out by the power elite and be in a position to offer and organize around fundamental change to democratize money creation.
“Without knowing how money is created and managed, all other topics concerning money are out of context. This is crucial: regarding trillions of dollars of economic power, you have no idea where money comes from.”
“When you understand the power of creating credit out of nothing, your mind will eventually take the next logical step and ask: why don’t we create money out of nothing to pay for public goods and services directly rather than surrender this awesome power to the banks? You’ll wonder: why doesn’t government create money to hire unemployed workers for all the infrastructure work that needs to be done?”
Debt-damned economics: either learn monetary reform, or kiss your assets goodbye
This is the first of a two part series reflecting on the fate and state of “democracy” in the U.S. in 2014. Part two addresses pro democracy happenings.
“Democracy” is for many a loaded word. It’s meant to mean the ability of individuals to possess an authentic voice either directly or indirectly in the shaping of decisions affecting their lives and communities, and to a lesser extent, the larger world. Feel free to mentally insert “self-governance,” “self-determination,” or “sovereignty” wherever “democracy” appears if you find any more accurate, comfortable and/or legitimate.
“Top” is in parenthesis to acknowledge the relative nature of the selections. There is no presumption that this is the definitive list. Readers will, no doubt, have their own ideas.
The lens used to determine both lists were impediments/possibilities for We the People to have genuine opportunities to have their voices heard and ability to shape decisions impacting the world around them.
1. Supreme Court decisions expand “money is speech” and corporate “personhood” doctrines
There were two notable cases handed down by the appointed-for-lifer Supremes — which itself is a profoundly undemocratic and unaccountable institution in our society. Both were controversial 5-4 decisions.
The first was McCutcheon vs Federal Election Commission, which stuck down aggregate limits on individual contributions to national political parties and federal political candidate committees. The existing limits, which one Mr. Shaun McCutcheon asserted was way too constraining and violated his First Amendment “free speech” rights had stood at a stifling $46,000 for federal candidates and $70,800 for political parties, or a $117,000 aggregate limit in the last election cycle. Following the decision, McCutcheon and his 1% friends are now free to donate to as many candidates as they wish and to as many political parties as they desire knowing their “free $peech right$” are protected.
The aggregate limits dated back to the Watergate era of the early 70’s. The majority of the Supremes obviously felt that the political corruption of the Nixon era connected to money in elections were as antiquated as bell-bottoms, vinyl records, and Star Wars.
The Burwell vs Hobby Lobby decision in June proved beyond doubt that the incredible imaginations of children’s fantasy lands with talking animals and candy raining from the heavens pale in comparison to the majority of the Supremes who concluding that a pile of legal documents which constitute a corporation possess “religious beliefs,” thus expanding corporate “personhood” one more notch. Just to be clear, the court ruled that religious beliefs could be held not by the individuals who own the corporation but the corporation itself. The legal yoga of this decision with its impressive constitutional twists, stretches and contortions allowed Hobby Lobby’s human owners to avoid covering certain contraceptives for their female employees under the Affordable Care Act which violated the “religious beliefs” of the pile of legal papers.
2. Scientific study concludes U.S. is an oligarchy, not a democracy
Researchers from Princeton University and Northwestern University concluded in a study published in the fall, “Testing Theories of American Politics,” that the U.S. is a government ruled by the rich more than We the People. The study analyzed 1,779 policy issues from 1981-2002 – years before the Citizens United and McCutcheon decisions were handed down.
From their report:
“Despite the seemingly strong empirical support in previous studies for theories of majoritarian democracy, our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts. Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise. But, …America’s claims to being a democratic society are seriously threatened…When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.”
In case you missed the conclusion of our political impact on public policy, that would be “near zero.”
“Near zero” is also the difference our increased ability to govern would be if all we do in response is, as some proposed, to pass laws that make more transparent political contributions and/or reverse via constitutional amendment the Citizens United and/or the McCutcheon decisions.
Most average citizens who have PhDs in trying to do more with less didn’t need this formal study to know what their experiences have repeatedly confirmed.
Of course, as the gap between the rich and everyone else widens, so does the political impact. A Pew Research Center report earlier this month documented that the wealth gap in 2013 between America’s middle-income and upper-income families has never been greater in recorded history.
3. Advanced negotiations of proposed Asian and European “trade” agreements
The proposed U.S.-Asian Trans Pacific Partnership (TPP) and U.S.-European Transatlantic Trade and Investment Partnership (TTIP) are “trade” agreements in name only. Both sets of negotiations are close to completion. Their ultimate objectives, however, aren’t about “trade” at all – being it free or fair – but about who rules, who decides. For their advocates, the answer is simple – transnational corporations.
The TPP negotiations have been negotiated in secret — secret to the public that is but not to trade representatives from 600 corporate transnational corporations who are consultants. Even members of Congress have been oblivious to the contents of the deal. What’s known about it is due to leaks.
Both corporate rule deals would usurp democratically enacted labor, environmental, consumer, health, internet and financial laws and regulations which to the corporate crowd are just downright silly impediments to doing what they want, when they want, and where they want via a “investor-state dispute resolution” process. This allows a corporation to sue governments (local, state and federal) before a panel of corporate-friendly types if it concludes that a democratically enacted law or regulation limits its ability to make a profit. Popular sovereignty via elected officials and judges and juries is replaced by the good ‘ol days of a single sovereign – but not a King or Queen ruling before his/her court but rather a corporate sovereign making decisions with no appeal process.
No wonder these proposed deals if agreed to internationally would be introduced in Congress for ratification only if something called “fast track trade authority” is first passed, which coincidentally was introduced in Congress this year. Fast Track allows the President to bypass Congress’ constitutional authority to write the laws and set and ratify trade policy. Fast Track would shift power from the legislative to executive branches through limiting the authority of Congress to only approve or disapprove trade agreements after limited debate, but not to amend or filibuster.
4. Increased privatization/corporatization
The transfer of providing a good or service from the public to the private sector both increased in intensity and awareness this year – from privatized/corporatized prisons, to schools (charters), to torture (companies specialize in psychological interrogation), to warfare (private contractors who hire mercenaries in place of actual soldiers or “advisors” to the Middle East), to municipal services in response to bankruptcy (Detroit).
While privatization/corporatization advocates tout efficiency, cost savings and modernization, the realities are most often quite different – inefficiencies, cost increases (when everything is accounted for), layoffs of public employees, and basic lack of transparency and accountability. There’s one more reality – hefty profits for those corporations now providing the service or good. Still one more reality. Privatization/corporatization is a way for public officials to achieve an outcome that would be more difficult if done through public means (i.e. using private mercenaries instead of soldiers to wage wars or occupations, or private contractors who don’t have to be held publicly accountable for torture).
5. Power of financial corporations
No subset of private corporations is more powerful than financial corporations. Unlike most corporations which make money from producing ostensibly useful goods or services – then translating their economic profits into political power — financial corporations make money the old fashioned way. They print it. Or create it out of thin air electronically as debt. That individuals, non-financial corporations and governments must pay back. With interest. That’s real financial power. Then they translate their virtually unlimited financial power into virtually unlimited political power. This came in mighty handy yet again in 2014 for bank executives who avoided criminal prosecution (at least in the U.S. but not in Iceland and elsewhere) for causing the 2008 global financial implosion, resulting in the foreclosure of hundreds of thousands of homes.
The misnamed private Federal Reserve System is a branch of government unto itself, though not accountable to any of the others. Their power to manipulate the stock and bond markets peaked in 2014 through the injection of upwards of at least $4 trillion thanks to their Quantitative Easing (QE) program. The gradual end of the program and its cheap money that was borrowed by corporations to buy back stocks and invest in overseas markets has had its own effects – the emerging financial crisis in emerging markets and a series of massive financial bubbles in the energy sector who borrowed on the cheap and now only sell oil and gas below their production cost.
Banksters basically wrote the bill slid into the federal spending bill as a “rider” that protects trillions of dollars of risky financial derivatives from crashing. If and when these casino bets (many on the price of oil continuing to rise. Oops) flop, the betters don’t pay for the losses. The Federal Deposit Insurance Corporation (that would be we taxpayers) does. Call it a “heads they win, tails we lose” scenario.
Wall Street’s insulation from regulation was evidenced when Carmen Sagarra, a Federal Reserve bank examiner, released 48 hours of secretly recorded tapes documenting the lax regulation of the Fed toward Goldman Sachs, one of Wall Street’s largest banks. Despite slam-dunk proof that the Fed played footsie with bank leaders, zero change resulted. It didn’t hurt that what little media and political traction the issue received ended when the Ebola outbreak broke out.
Fear has been used by the power elite from time immemorial to paralyze, distract and divide: paralyze people into inaction, distract attention away from real problems and those who cause them and divide people against one another who often have more in common that not. While an appropriate emotion in certain conditions to avoid immediate danger and often containing kernels of truth, fear is exaggerated by those who control social, political and economic institutions to dehumanize others and, thus, to justify wars, racism, xenophobia, genocide and reduction of civil liberties, and human rights to maintain status quos, expand controls, and undermine organized efforts for accountability and (re)create democracy.
Exaggerated fears were pronounced this year on everything from the imminent takeover of the entire Middle East by ISIS, Russian takeover of Ukraine (if not beyond), the Ebola virus spreading across the nation, and N. Korea hacking into movie studio computers. Maybe the single biggest fear, however, was that of the innate criminality and associated societal collapse resulting from black men and youth “roaming” in our society. Of course, black men and youth involved in petty theft, selling cigarettes and waving toy guns in Walmart’s and on park benches justified violent responses by white policemen.
In the face of created or exaggerated fears, those fearful are quite, if not most often, more than willing to let others decide and take care of them with few if any questions asked – whether those “caretakers” be the police, military, judges or politicians.
7. November elections
Many will conclude given their political orientation that the mid-term elections were a tremendous expression of democracy. Not quite.
Yes, there was widespread dissatisfaction with many policies of the President. This was beaten out on Democratic candidates running for Senate and House seats on election day.
Yet, the trend continued unabated that only wealthy candidates or those with access to massive amounts of cash, either directly or indirectly, could run for office to begin with. Another continuing trend was that both major parties and their candidates ignoring the plight of the low-income and the takeover of government by financial and other corporate interests, among other issues.
The rotting election process itself, however, even more than the candidates or the issues regardless of party, was the major anti-democratic electoral reality.
More money poured into the federal elections than in any previous mid-term—following a long-standing trend. What was different was the number of contributors/investors – fewer people gave/invested more money. More money than ever before was also spent not by candidates or the political parties but by outside groups, funded by super rich donors and corporations but who often don’t have to disclose their donors. The Koch brothers continued their effort toward creating their own national but private political apparatus that simply did an end run around the Republican Party in terms of developing a political platform, raising and spending cash, vetting candidates, running ads, and turning out voters.
How exactly is all this good for democracy? And how specifically has this increased the possibility that candidates listened more to citizens and voters without money not connected to a political action committee? Well, it doesn’t. Those with the most money to invest in elections – be they directly to candidates or parties or indirectly to shadowy so called independent groups, dubbed Super PACs or in some cases called “social welfare organizations,” – have their voices heard and ultimately their needs met. If they didn’t, would they spend hundreds of millions of dollars? It’s simply a system of legalized bribery.
There was one more anti-democratic electoral reality in 2014: low voter turnout. At 36.4%, turnout was lower than during any election since 1942.
8. Spying and surveillance
One sign of the crumbling control of any power elite of any society during any period of history is when the lens of the citizens directed toward their government is pivoted to become the lens of government directed toward citizens. The former produces accountability, the later tyranny.
Thanks to Edward Snowden and others, massive revelations of spying by the U.S. government, both domestically and internationally, was revealed. Public revelations included National Security Agency (NSA) collecting bulk phone records and millions of text messages; government cyber attacks against Anonymous; government spying on journalists and diplomats, jamming phones and computers, and using sex to lure targets into ‘honey traps;” government interception and storage of webcam images of millions of internet users not suspected of wrongdoing; leaked FISA (Foreign Intelligence Surveillance Act) court orders which weakened restrictions on sharing private information about Americans; NSA developed technology to infect potentially millions of computers worldwide; the NSA “MYSTIC” program capable of recording “100% percent” of a foreign country’s telephone calls; NSA targeting of computer network “system administrators” across the globe; government breach of Chinese company servers; NSA infiltration of German networks and specifically targeting Chancellor Angela Merkel; NSA collection of millions of images for facial recognition; extensive cooperation between the NSA and foreign governments; FISA court authorization of NSA to target 193 countries for surveillance; NSA and FBI surveillance of 5 Muslim Americans leaders for no legitimate reason; description of NSA “INREACH” program that allows “one stop” metadata from 23 different agencies; and NSA covert field activities which included in a number of countries “physical subversion” to infiltrate and compromise networks and devices.”
Numerous Congressional hearings addressing some of the revelations occurred. Sixteen former members and advisors of the Church Commission, which investigated government domestic spying in the 1970’s, called for new congressional investigations. The government released several previously classified documents on metadata gathering and surveillance and warrantless searches of electronic communications. However, Obama’s Presidential Policy Directive 28, issued in January, took place prior to most of the year’s revelations. Virtually nothing changed.
9. Federal spending bill
There were too-numerous-to-document examples of programs in the annual federal spending bill passed by Congress in December that the public opposed and programs not funded or inadequately funded that the public supports. Each represents a lack of real democracy.
Three non-spending measures, though, deserve special consideration for their particular contributions to our vanishing ability at self-governance. One was previously mentioned – a “rider” shifting risky derivatives from banking corporations away from the free market in the event they go bust to the safe and secure lap of U.S. taxpayers. It’s capitalism at its finest if and when trillions of dollars of derivatives explode to the upside, socialism at its finest if and when they implode to the downside. Either way, the bankers win and we lose.
A second “rider” of the spending bill included a meteoric rise in allowable political investments/contributions from individuals to political parties. The degree of the increase wasn’t to keep up with inflation (at, say, 2-3%). Nor was the final increase 10%, 25%, 50%, or even doubling the previous limit. Way too low. The new “limits” are now 8 times the old ones – from $194,400 to $1.5 million over a two year election cycle. Eight times the previous limits. This makes the Democratic and Republican parties and by extension their candidates even more beholden to the voices and interests of the super rich and less inclined to listen and respond to the interests of low- and moderate-income people. These realities are even more acute, of course, for youth and people of color. Since the Supreme Court has concluded that money is speech, those with money will be booming their views, wants and needs even louder and more forcefully that ever before.
A final anti-democratic measure of the budget bill is a measure that was contained in the original House version but not in the final version. The House of Representatives in June overwhelmingly voted to prohibit the NSA from searching through Americans’ communications when targeting foreigners. This provision was unceremoniously removed at the last minute.
10. Torture report
The December Senate report on CIA Torture confirmed what many victims and activists have asserted for years – the U.S. government, including the Executive branch along with the CIA and other so-called “intelligence” agencies, were out of control in violation of the due process and many other provisions of the U.S. Constitution and international human rights treaties, including the Geneva Conventions – which were called “quaint” and “obsolete” by Alberto Gonzales, Attorney General under George Bush. The decisions by the President eliminating all legal restraints and authorizing military interrogators to use extreme measures that in many cases were clearly torture were also clearly examples of executive supremacy and an imperial presidency.
The shocking and chilling report in a real democracy would result in immediate actions for justice among those who violated the constitution and international law. No real investigation took place or is forthcoming. No word from the current President that he will call on the Attorney General to launch a Department of Justice investigation what could lead to indictments. And no massive public outcry against torture and those who ordered it. It is this last point that may be the most disturbing of all.