Author: How elites sold out American workers and how to fix it

The Hill channel on YouTube has the video Author: How elites sold out American workers and how to fix it.

Author Matthew Klein discusses his new book, Trade Wars are Class Wars, in which Klein explains how today’s trade conflicts are caused by governments promoting the interests of elites at the expense of workers.

For years, I have been trying to get people to understand this. One thing not mentioned in the interview is that countries used to negotiate with each other on tax laws to prevent the wealthy from fleeing one country to go to another country that charged them less in taxes. George W. Bush put a stop to the USA’s participation in these negotiations. Biden could get these talks started again, but I bet he won’t.

The Jain Family Institute channel on YouTube has the video Trade Wars Are Class Wars: Adam Tooze, Michael Pettis, & Matthew Klein in conversation. There are echo problems when Michael Pettis speaks.

Even just half way through this second video, I find the situation explained with much more insight than I have been able to figure out on my own.

Watching this second video to the end, I notice that all the people involved in the video fail to recognize the overhead on the USA economy due to the financialization of the USA economy. If you remove this overhead, then people in the USA don’t need increased wages to have a higher standard of living.

We have to restore the laws against usury, we have to change the tax advantages of financialized enterprise, we have to restore laws against monopolies and trusts. If we were able to do that, and then have the Federal Reserve Bank (Federal Government) payoff the private debt burden and prevent the debts’ rebuilding, then we could compete in trade in the international arena. If restoring anti-usury laws made it unprofitable for the credit card companies to make a profit the way they do now, there would be less of an incentive for them to entice people into credit card debt. If public colleges were free, student debt wouldn’t get built up again. If the tax cuts to the rich were rescinded and replaced by tax cuts to the not rich, the need for the not rich to borrow money to pay taxes would go away. This is all laid out by MMT proponents like Stephanie Kelton and particularly Michael Hudson.

Undoing Joe Biden’s bankruptcy reform laws would also take the incentive out of financializing the economy.

Making it illegal for vulture capitalists to rob private pension plans of the companies they take over, would also slow down that pernicious process. The vulture capitalists make their money by buying companies, stripping the assets, and putting the proceeds into their own pockets. If we could put the brakes on the takers like Mitt Romney, it would go a long way toward solving our economic problems.

Perhaps the boo discount code YETWC will prove useful in purchasing the book.

Reading Trade Wars Are Class Wars is essential. I am half way through the book. I am sure I’ll have to digest a lot and think about what I have read a lot before I will fully appreciate it. I am learning that even some of the recent economic miracles in China and Germany were won on the backs of the lower classes.

Looking at my subsequent post Polarisation, Then a Crash: Michael Hudson on the Rentier Economy you get to see Michael Hudson explain the role of the overhead in stifling our economy.

Macroeconomics, Money (MMT Style) and Post-Brexit Recovery, All in One Twitter thread

Naked Capitalism has the post Macroeconomics, Money (MMT Style) and Post-Brexit Recovery, All in One Twitter thread.

Money is just a promise to pay.
If you think you have ‘money in the bank’, think again. You have not. You just have a promise from the bank to pay you money if you demand it. And if they can pay it, of course. You’re now the banker. They’re the borrower. And you have the risk they won’t repay.

I emphasize this part because this is what I have been trying to explain about private-bank created “money”. It is not “money”. It is a promise to pay you money if you want to take your “money” out of that private bank’s system. By hook or by crook (or by Federal Deposit Insurance Corporation in the USA), the bank will fulfill that promise.

Even if Warren Mosler doesn’t want me saying this, I am sticking to my story as explained in this article. In my mind “the promise of money” explains a whole lot of things that seem to be hand waving to me in the “official” explanation of MMT. My explanation does not contradict anything that the “official” explanation says. I think it clarifies.

Jamie Galbraith: How Jason Furman and Lawrence Summers Reinforce a Destructive, Debunked Mainstream Paradigm to Support Deficit Spending

Naked Capitalism has the post Jamie Galbraith: How Jason Furman and Lawrence Summers Reinforce a Destructive, Debunked Mainstream Paradigm to Support Deficit Spending.

Here is an excerpt from Yves Smith’s introduction to the article.

The fact that the Washington Post depicted an article by Jason Furman and Larry Summers pumping for deficit spending as evidence of an “intellectual revolution” shows how bad a grasp most commentators have on economics. As the post by Jamie Galbraith describes long form, the Furman/Summers argument was incoherent and relied on the “loanable funds theory” (loans come from existing savings and are therefore limited; interest rates serve to balance supply and demand) that was debunked by Keynes nearly 100 years ago.

Here is an excerpt from the Galbraith article itself.

FS therefore arrive at a correct conclusion – interest rates will remain low indefinitely – by a route that requires them to argue that the world has changed in some fundamental, relevant (“structural”) way, for which no evidence exists. The effect is to leave in place an incoherent theory of interest rates, which does not even claim to explain the phenomenon – low long-term rates – that their paper is trying to address. But a correct and viable explanation, as above, of a form long-ago explained carefully by no less than John Maynard Keynes, is readily available and wholly sufficient.

Some times it amazes me how the people who claim to be experts can get things so wrong. In this case it is Larry Summers who continues to be wrong year after year. It is nice to see James Galbraith confirm my thinking that John Maynard Keynes is still correct about some very fundamental economics.

This discussion of the “loanable funds theory” gives me an opportunity to state my explanation of what is wrong with the “loanable funds theory”. In my own quirky way, I explain that private banks do not create money when they make a loan. They create a promise of money to the borrower. As long as the promise of money circulates among customers of the bank, the promise never needs to be fulfilled with actual USA money. If the promised money is given to someone outside the private bank’s customer base, then and only then does the promise of money need to be fulfilled. The bank has many ways to fulfill that promise that I won’t describe here.

The larger the bank is, the smaller the fraction of its promises of money will ever leave its own customer base. Also the money going out is mostly offset by money flowing in from other banks’ customers giving money to the original bank’s customer for deposit in the original bank. Very little of all the private banks’ promises of money ever have to be realized in actual Federal Reserve Bank USA money. Some of that realization will come from “loanable funds”, but not even all of it.

Where does the (economic) buck stop?

Medium has the article Where does the (economic) buck stop?.

This is the most honest discussion of this situation I have seen coming from the MMT world. I just saw a March 2020 interview with Stephanie Kelton where she did mention the supply shock from the pandemic, but the interviewer wasn’t smart enough to push her to explain more. Actually Stephanie should have answered the question the interviewer failed to ask. I did a little skimming of the Medium article above. Did I miss where he mentioned that the people who are willing to “sit” on the money, and not spend it, are the wealthy who are actually “spending it” to keep the stock market bubble inflated? I am one of those retired folk who will take a hit when the stock market crashes.

The Stephanie Kelton interview is at Stephanie Kelton: MMT, the Crisis, and the Real Economy

David Harvey- The Crises of Capitalism

YouTube has this excellent post David Harvey- The Crises of Capitalism.

10 years old, but very applicable still. Meaning we never solved the problems that we had 10 years ago. Pay attention to the fact that the speaker admits that he has analyzed the problem, but has not figured out the solution. I worry about the people who have an ideology that they think is the perfect solution.

This is why I call myself a “what worksist”. We need to try various solutions, measure how well they are working, adopt the ones that help, and get rid of or modify the ones that don’t That’s not an easy process, but I think it is the process that was adopted by the Roosevelt administration.

As long as there is population growth, there may need to be economic growth. (Although, some redistribution could minimized some of the need for growth.) This goes along with my idea that people think in binary terms. They think something is good to do or bad to do, without considering the amounts in between 0 and 100% mat be what’s needed.

How To Cheat On My Electronic Voting Proposal

In the previous article Making Electronic Voting Transparent, I proposed an electronic voting system that allowed the voter to check how his or her vote is recorded in the official vote database. In that system, the voting machine printed a hardcopy receipt for the voter to take home. The receipt showed the vote record and had a serial number that the voter could use to later check the database of votes cast which would be made available online. Nobody but the voter would know the serial number for her or his vote.

Here is how such a system could cheat. The system could memorize the ballots cast, so that it could give all the voters who voted exactly alike the same serial number to check. The actual vote on all but one of these ballots could be modified fraudulently, but the fraudulent votes would have serial numbers that are never printed out for any voter.

If the voting computer program source code were viewable by the public (this is called open source), then experts could look at the code for assigning serial numbers to make sure nothing like this was built in to the software. So, my proposed system could be kept clean of such attempts at fraud.

You also may want to look at a previous post Standardize Electronic Voting Technology. There is already a government agency that could oversee the creation of a standard for electronic voting systems.

How to Move Beyond Utopian Socialism and Libertarianism

Naked Capitalism has the article How to Move Beyond Utopian Socialism and Libertarianism

Again, we should experiment and pursue what works best – be it public or private.

As an avowed “what worksist” I would naturally like an article like this. The trouble I see is in deciding who the “we” is who does the experimenting and deciding what works best. I think one of the reasons this all fell apart in the 1980s in the USA is that we forgot that there needs to be a continuous process of educating the public on what the process is experimenting and pursuing what works and why we use such a process. This education process is also needed for the leaders who are driving the experimenting and deciding process to refresh their memories about what they are supposed to be doing. Under FDR, I think there was a good understanding by many of the important actors about this process. The people who followed in power lost sight of the fundamental reasoning behind the process.

The article mentions Milton Friedman. I think that he and his backers were excellent at erasing our memory of what we were trying to do. Milton Friedman came along with a good story about what was wrong with what we were trying to do, and the people who were trying forgot the counter story that justified their behavior. They also forgot that they were supposed to be seeing what works and changing the things that didn’t work anymore.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis

Naked Capitalism has the post 2020 “Globie”: The Carry Trade. It is a review of the book The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis 1st Edition.

The trader benefits only as long as asset prices remain close to their current levels. Volatility can wipe out a position, and the financial losses can spill over to the economy. Those negative consequences bring central banks into the financial markets. Their intervention may reestablish stability, but it allows those who would have suffered a loss to transfer that loss to the public sector. Central bankers acting as lenders of last resort, the authors write, “…underwrite some of the losses associated with carry. This encourages further growth of carry, and a self-reinforcing cycle develops.”

Another way that financialization of the economy robs ordinary people.

We were told Joe Biden was the ‘safe choice’. But it was risky to offer so little

The Guardian has the article We were told Joe Biden was the ‘safe choice’. But it was risky to offer so little.

But I think that after days of gnawing our fingers down to the quick, it’s fair to say that Biden was not safe at all, as we always knew. Not safe for the planet, not safe for the people on the front lines of police violence, not safe for the millions upon millions of people who are seeking asylum, but also not even safe as a candidate.

Here is the video starting at Naomi Klein’s part. You can watch the other parts at YouTube if you are so inclined.

Remember the idea of the inside/outside pincer. I prefer to work from the outside part.

Replacing Rentier Capitalism Is One of the Defining Challenges of Our Age

Naked Capitalism has the post Replacing Rentier Capitalism Is One of the Defining Challenges of Our Age.

In today’s somewhat bleak political landscape, we need to get serious about building strong counterweights to the power of extractive rentier capital. We need to be smarter about finding sources of leverage and using them to create change – and we need to start somewhere. It’s a formidable challenge; but, as both of these books powerfully demonstrate, it is one of the defining challenges of our age

An article that finally gets to the heart of why arguing capitalism versus socialism, as they are commonly understood, does not address the real issues of the problems we face today.

The two books are ‘Rentier Capitalism: Who Owns the Economy, and Who Pays for It?’ by geographer Brett Christophers and ‘Unions Renewed: Building Power in an Age of Finance’, Alice Martin and Annie Quick