I.O.U. Who?
The documentary, I.O.U.S.A, was recently brought to my attention and it will probably be the most sobering clip that you will ever see about the state of the economy. I was aghast at the findings. I think it should run three times a week on all TV outlets for a solid month during prime time. I just wished that I had watched it a bit earlier. It's nearly 1:40 AM and I'm afraid I will get no sleep tonight.
A few of the most awakening facts are even if we ended the war in Iraq, rolled back the Bush tax cuts, and eliminated earmarks and pork barrel spending, our problems will not be solved. Another very, very sobering fact is the trade deficit. This is simply outrageous! We have become dead last among the nations of the world that are buying more than their selling. Not to mention what we are receiving are cheap goods. With a country as big and rich in intellect and resources, it is shameful that we have become indebted to paper shufflers and not innovated by product producers.
It is incredibly hypocritical that those who are screaming about the current deficit spending and continued tax cuts have presided over the largest deficit spending in our country's history. Both the Reagan and Bush W. administrations were the worst. Yet, we still hear the Republican leaders in Congress today railing for more of the same. This is insane. The deficit increased tremendously throughout the Reagan administration and we were not even in a war and those tax cuts did not seem to work as planned either.
There are so many outrageous things in this video that its simply mind boggling that we could have allowed ourselves to get here. Who could have ever thought that we could have two wars, tax cuts, and personal debt spending, and there not be a perfect storm? It was no secret why Secretary of State Clinton tread softly in China on human rights issues. China currently holds the largest denomination of our Treasury Securities.
We most certainly have had a leadership problem. To think that Paul O'Neill, the former Treasury Secretary, was asked to lie about his release because he told the Bush administration in 2002 the truth about our dire situation is a stunning omission, though perhaps for many not surprising in the least. President Bush and Vice-President Cheney should be ashamed of their actions. Maybe that Truth and Reconciliation Commission is indeed necessary. I wonder who else was told to lie in many matters. Mr. O'Neill appeared too honorable for the former administration. I guess Secretary Paulson was more to their liking for whatever reason.
At the end of the documentary my question was not when we were going to get out of this crisis, but how. It is going to require the effort of everyone to emerge from this very serious deficit crisis. As friend of mine often says, "debt is like cancer; it kills." But we really must know how bad it really is. I knew we were in a major crisis, but not to this extent. This is apparently what the president was aware of and chided for. Others thought that his Inaugural Address and tone thereafter were too somber. Because President Obama is so hopeful, many could not help but to think that he was bracing us for something huge.
This is huge!
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I'm just glad the criminals who did this to us will walk free with billions while the poor slobs like me will see their savings vanish into the AIG black hole and possibly lose everything I have ever had. Heck of a job Barak!
thanx for joining us in reality. Only a couple dozen-million more citizens to go.
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Oh, Enlightened One, better late than never I'd say. :-) (By the way, when did you know the exact number of the deficit and did you realize that it greatly increased under Reagan?) How might we get those other "dozen-million more citizens" to join?
Really scary, and here's where my brain just freezes and my teeth chatter....how are the collective "we" going to help dig our country out of this? I make, on paper, a decent salary and we lead modest lives. The big change in our lives has been that we decided to have children, and with that came so many new expenses that we are struggling to keep up and are not able to put anything away. We have a somewhat special situation in that we are self-employed and pay higher tax rates and our own health insurance, but I think the general problem is very, very widespread.
Transitioning to a debt-free money system with full reserve lending:
The Treasury stops borrowing from the Federal Reverse and starts issuing debt-free Treasury notes to systematically repay both public and private debts denominated in Fed notes. As the debt is repaid, the fractional reserve ratio is reduced proportionately.
The repaid debt is offset by equal amounts of new debt backed by the newly deposited Treasury notes. The speed of this process is limited only by the delay in depositing repayments and might take a year or two at most. When deposits rise to meet the stable debt volume, the reserve ratio reaches unity and each Fed note has been replaced by one Treasury note with no inherent inflation.
As loans become increasing backed by deposits, bank ownership is transferred to their depositors, converting them into credit unions. The credit unions still lend money at interest, but the loans are completely backed by deposits created as debt-free money. The interest collected on loans is distributed to the depositors as dividends and/or spent on public goods for the community.
Finally, the government creates new Treasury notes equal to the interest collected by the credit unions and spends it into the economy for public goods. The interest on private loans justifies government spending without taxation, because the new money is necessary to pay the interest. The interest rate sets the inflation rate and the ratio of public to private investment.
When the treasury stops borrowing from the federal reserve, etc., all foreign creditors say as one, no thank you, to the new debt instruments, we would like you to pay it back in full right now, or we are selling it for pennies on the dollar to whomever will buy it. Nobody, but nobody, trusts a currency that is not managed at arms length by a central bank. The Treasury is not at arms length, and is not credible acting as a central bank.
The treasury eventually buys it up at pennies to the dollar, and partisans like yourself claim that it is a good thing.
The international reserve system quickly switches from the US Dollar to the Euro.
Domestically, the US is faced with a massive shortage of money from the conversion (you know, that pennies to the dollar thing actually meant, you know, you converted dollars into pennies...)
Internationally, the US finds itself in need of IMF backing.
Dream on.
The trust in US currency is based solely on the full faith and credit of the American people, acting through its government. It is up to US to have faith in ourselves.
And, we do.
Please take this message to the IMF, WB and BIS, the Illuminati, the Bilderbergers and the Council.
The jig is up.
I hear your threat.
I recall one similar made by Banker Nicholas Biddle when Andrew Jackson refused to renew the private central banking privilege of the Second Bank US. That was before the internet.
Said Biddle, as documented by a Congressional committee afterwards:
"Nothing but widespread suffering will produce any effect on Congress… Our only safety is in pursuing a steady course of firm [monetary] restriction -and I have no doubt that such a course will ultimately lead to restoration of the currency and the re-charter of the Bank."
We understand that international bankers will stop at no level of personal suffering to prevail in their desire to control the world's people and economy, through control of the money system.
And we do understand that the route of choice away from this "debacle-by-design" is the loss of American sovereignty, and the supra-nationalization of monetary policy through a centralized money system.
We do read.
And we are paying attention.
Debt-free money of government issue.
Milton Friedman's 100 percent reserves.
Put the banks back to banking.
The Revolution was about monetary policy.
This we remember.
Stop Worrying !
The Peterson Clique are just preparing to pull the plug on the drain, down which goes the government and democracy in America.
It's all part of the DEBT-MONEY scheme.
Their dog-and-pony horror-show has been known for decades, it's not just Rubin and O'Neill.
Please consider this.
Please.
ALL money is created as a debt.
Out of nothing.
Repayable with interest.
To the money-creators.
But, they never create the interest.
Except as another debt.
Created out of NOTHING.
Repayable with interest.
Which irt never creates.
DO THE MATH !
Guess where we end up?
The DEBT-Money System is BROKE.
It is the money system that needs changing.
A new money system is the ONLY solution.
Have you ever heard of the Chicago Plan?
Google THAT.
And, then google "Treasury System versus Federal Reserve System".
What we don't seem to have is the courage needed to confront the international financial monied-interest power brokers, who brought this ALL upon us with the federal reserve debt-money system, and then globally with Bretton Woods, Revisited, Basel I and II.
Consider Abe Lincoln's prescient words:
"" The government should create issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government's greatest creative opportunity. ""
Get some sleep.
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Great comments and fantastic and relevant Lincoln quote. Thank you.
Please consider these:
Being Alan Greenspan
Being the Federal Reserve
Your response answers some questions here.
Joebhad's comments are to the right of Milton Friedman. Carrying them out would result in a shortage of money throughout your economy, de-monification of the market, deflation, the hoarding of commodities, and the collapse of the economy. The only time these policies were evenly remotely tried, between the Second American Bank and the Federal Reserve, America utterly stalled, people hid cash in their mattresses and withdrew it from the economy, panics swept the nation and deflation ruled the land. The rich got richer by not investing money, while everybody else faced constant ruin.
You seem almost proud that you are a newbie to these matters. Though you watched a whole half hour video on it, please consider that you might be out of your depth in actually debating these issues.
When Abe spoke these words, he was talking about the US government assuming seigniorage from the Europeans, and printing money rather than borrowing money to pay for the Civil War. Assuming seigniorage is how Abe intended to benefit consumers and government. Once possessed of seigniorage, the ideal government manages the creation of money to maximize seigniorage revenues, because to do otherwise distorts the buying power of consumers and spending power of the government.
The American government still has seigniorage under the current system, and Abe's dream was fulfilled and vastly extended by the Bretton Woods System, which gave the American government world wide seigniorage rights, not just domestic American seigniorage rights.
These are to Graham from below.
Graham : “Carrying them out would result in a shortage of money throughout your economy, de-monification of the market, deflation, the hoarding of commodities, and the collapse of the economy.”
1. Shortage of money - The expansion of money in this country would be done on EXACTLY the basis by which you quoted Friedman elsewhere – “QTM …, .a steady expansion of the money supply was the only wise policy”.
I not only understand that theory, I advocate for it.
On that basis, debt-free money issuance would be done in EXACTLY the same quantity, and EXACTLY the same quality as with PRIVATE federal reserve notes today.
There would be only ONE ‘Q” factor in the money supply.
Given that, how could there possibly be a shortage of money throughout the economy?
2. De-monification of the market -
OK, you got me.
I never heard the term de-monification. Nor monification?
What financial treatise do I explore?
And, which market? The money market?
The money market would be de-monefied?
3. Deflation - The general definition of deflation is a reduction in the price of ALL goods and services, resulting from a contraction of the money supply.
Noted debt-deflation theorist Irving Fisher “Debt-deflation Theories of Great Depressions” identified the pro-cyclical fractional-reserve debt money system as the primary cause of deflation.
continued....
Raise the retirement age for both social security and Medicare. Social security currently has an incentive structure that gives greater benefits to those who wait longer (up to age 70) to retire. Why not stretch it out to age 75, with no payments until age 70 unless a person is disabled.
As for Medicare/Medicaid, replace the whole dang thing with an NHS-like system, and get the insurance companies OUT of the Medicare contracting business. We could cut our health care costs in half if we do that. Oh, and tax junk food, especially soft drinks, and put the funds towards obesity-related diseases.
We could also legalize pot and tax it, tax pornography, increase alcohol taxes, increase gasoline taxes...not popular but what is popular, unfortunately, is getting a lot of something for nothing.
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Interesting thoughts. Thank you. The raising of the retirement age seems plausible, especially since we are healthier on average now and living longer.
"We could also legalize pot and tax it, tax pornography, increase alcohol taxes, increase gasoline taxes...not popular but what is popular, unfortunately, is getting a lot of something for nothing."
Hmmm???
I like the ending. We seem to be most certainly used to "getting a lot of something for nothing." I think this, however, refers more to some bankers and government leaders on all levels than the average hardworking American. Maybe we have spent more than what we actually had.
The only problem with raising the retirement age is that those 50+ are getting laid off, can't get jobs and are unemployed. Age discrimination is rampant. You are assuming that this large group of people actually have jobs. Bad assumption.
We may need to raise the retirement age for social security to restore a sustainable ratio of contributors to beneficiaries, but it's more important to reorient social security from an entitlement to a need-based subsidy. In other words, every employee contributes, but retirees aren't entitled to benefits if they have sufficient personal savings and/or investment income. This would improve the ratio significantly.
The eligibility age for Medicare shouldn't be increased, it should be eliminated. Medicare is a single-payer, private-provider system that is superior to the British public-provider model in almost every possible way. I agree that Medicare Advantage is a scam. Medicare would also be far cheaper on a per-capita basis if it covered young and healthy people in addition to the elderly and disabled.
I'm all for the legalization (not decriminalization) of both medicinal marijuana and industrial hemp, but I don't see any particular need to levy a targeted consumption tax on it. While we work through the collapse of structured debt securitization, the progressive income tax is the best way to allocate tax burden. After that, I advocate funding the government exclusively through a flat tax on outstanding debt and an additional tariff on exported or imported debt.
We may need to raise the retirement age for other reasons, such as the demand of people over 65 to not be stripped of their economic rights and not be discriminated against because of the assumption that 65 is the age of decrepition is ante-antediluvian, but I think the premise that social security must always be in surplus is wrong-headed, social security must only be in surplus across spans of three or four generations, not every year. It is quite acceptable for Social Security to go into deficit for the baby boomers, as it is just another bulge that will pass, and once they begin to die off, the expenditure side of the equation will plunge, just as it will soar when they retire.
It is important for social peace that social security is not directly means tested; once you start to exclude economic groups from payouts, they indeed have great economic justification and ability to object to and destroy any requirement to pay in. As long as social security is considered income that can be taxed, it is through a progressive tax system that you make economic policies like this.
Universality of Social Security also forestalls accusations that means testing actually decreases motivation to save for those who are neither rich nor poor. You do not want to create a situation where partisans argue that the poor get a better deal at retirement than responsible middle class savers relying on their own resources.
I guess raising the retirement age for benefits means that you either have a job or healthcare and money to pay for the health care to reach the age of 75.
Excellent post ! I've been worried about this for along time, and I'm sure that a multi-pronged approach, requiring both tax increases and spending cuts (the Pentagon seems like an obvious target to me) is needed. As a Progressive though, I'm a bit worried by ultra Righties like Pete Peterson, that seem bent on using this opportunity to dismantle Social Security and Medicare. I hope President Obama stops their advances d ead in their tracks.
Assuming they posted it, please see my comment.
Otherwise, you are correct to scrutinize the rightie Peterson clique.
This is a problem of their design.
The objective is the end of government as we know it.
Unnecessary.
Get ready for a fight.
See Judith Ellis's Profile
Just think of what would have become of Social Security and Medicare in this market. Ugh!
Just to make clear my previous post (see "The Ike Hike") the 90% tax I'm advocating is only for income in excess of say, $3,000,000 per year. The rest of us could see our taxes remain the same. The idea isn't to punish people but to keep cash in the real economy where it works for everybody and out of the speculative markets where it creates a distorted bubble economy.
And if somebody can't figure out how to get by on $3,000,000 a year I don't have much sympathy for him.
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"3,000,000" Reading this number I was reminded of the recent Washington Post piece that essentially asked, where is the middle? Who is middle class?
RabidRightRebel suggests we need to "claw back the bush tax cuts from the richest 5%." That goes WAY too short of the mark. We need to claw back the tax cuts since Eisenhower. Call it "The Ike Hike".
America needs to get back to those good old days that the Republicans are always talking about. And the 1950s was when America was strong and had a stable economy with opportunity for growth.
High taxes on excessive income and wealth were not coincidental to that sucess. Those taxes kept the horse before the cart. Let people have too much discreationary cash and you destableize the economy. If a buisiness owner has to pay 90% of the money he takes out of his buisiness in taxes (over say $3million a year) he will leave it parked where it will work for him and create jobs. He will also pay higher wages to keep the best workers.
The Ike Hike will pay down the debt and stop the speculators from creating a bubble economy. It worked for Ike and it will work now!
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Thoughtful comment here, fpie. Thank you.
I find it surprising that so you seem to be surprised by these numbers. Where were you for the last eight years, asleep, living in cave, mezmorised by Bush's personality?
To solve this problem basisally all Americans have to consume about 15% less than they have over the last 3 years and the the Bush tax cuts have to be clawed back from the richest top 5% of Americans. This means not just a repeal of the Bush tax cuts but a increase of taxes on those people to return the borrowed money that Bush gave to Cheney and his friends.
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Just wondering Triple R :-) - Were you aware of the exact deficit number? Yes, we all pretty much knew that it was high. But how high? Wow! In addition to this number, how many Americans do you think are aware of the many dire facts presented in the documentary? I appreciate your suggestion to consume less. But according to the documentary even if we ended the Iraq war, clawed by the Bush tax cuts, and eliminated earmarks this would not get us out of this slump. What's the exact number of borrowed money given to "Cheney and his friends?"
I also found it surprising that you seemed surprised by these numbers. Dire as these numbers are, and they are dire, they are not the darkest numbers ever seen in US history. As a percentage of GDP, US debt is nowhere near its historic peak.
You should not be so frightened by the numbers that you fail to take in the solution: the solution is not, per se, to see this debt paid off, like a mortgage, but to see it start to shrink against GDP. There are three tools, two "good" economic tools, which are higher government revenues, and encouraging GDP growth, say, by allowing unions back into the market, and, that evil tool in the eyes of the economic fundamental moralists, moderate inflation for a little while.
Turn the corner on the debt to GDP ratio, so that it is going down, and you can relax a little on the debt and outgrow it.
Throughout, you should not be frightened into amazement by the dire facts presented, they have been known for a while, and do not need to be surmounted but systemically managed.
This is horrifying!!! At the end of the clip, I too, just like you, of ways to exit this serious problem. This is definitely huge!!!
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Exactly, Brosreview. It's going to take all of us to solve this problem. I also wondering about the psychological element for a people who have essentially grown "fat" on debt. I also wonder about a return to the Gold Standard. It seems that we have replaced this standard with debt.
Please don't be fooled by the proponents of the gold standard. This is not a sound monetary system, it is a recipe for widespread misery. This has been proven innumerable times in the serially tragic history of monetary policy, and it seems that we never learn.
Money does not represent value. It represents the rate at which value is created. How could it be that we routinely exchange money for labor (or its product), a commodity that regenerates, yet insist that it also be redeemable for precious metals and other commodities that don't regenerate?
Money does in fact grow on trees, and for good reason. Human civilization is ultimately based on agriculture. We've gained access to certain reserves of prehistoric plant and mineral deposits, but we can't base a sustainable civilization on nonrenewable resources.
The gold standard is flawed in the same way as the petroleum economy is flawed: it doesn't regenerate, it doesn't grow, and it isn't sustainable. The concentration of petroleum ownership is only rivaled by that of gold. At best, the gold standard shifts the monetary vortex from Central Asia to Western Europe.
Remember, money is our capacity to produce goods and service over time.
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