My economic vision for a sustainable economic recovery is easy to understand, easy to believe in and almost impossible to enact politically. I’ve laid it out in bullet points throughout the article below:
- Banks that failed would be allowed to fail, so the bad stuff dies and decays back into the fetid earth, and the evil and greedy are not rewarded for the destruction they brought upon everyone else.
- To keep individual depositors from being hurt when the mighty fall, those whose deposits were insured would have new accounts opened up by the government in their name in small, stable banks, using the same fiat money that wrongfully went into the reserve accounts of big failed banks.
The federal government stated over and over (both Bush and Obama) that we had to bail out banks that were too big to fail. It’s been the mantra of 2008 and beyond. It was the rationale presented to the public to bail out the wealthiest bankers; but the government was hypocritical because the solution it, then, employed was to make these banks all larger than ever.
In my sustainable economic recovery plan, small banks would be made larger and failing banks that suffered from gigantism would die as their obsessive weight crushed down on their lungs. The herd would be strengthened by natural selection even as the innocent depositors were protected … so long as they were wise enough to put their money in insured accounts.
If creating trillions of dollars in new money didn’t create runaway inflation when given to big bankers, why would it create runaway inflation if it were given, instead, to their depositors through little bankers? The fact is that the government simply cannot think outside of the big box of helping the rich first and foremost.
One reason creating trillions of dollars out of thin air didn’t create inflation in the case of bank bailouts is because creating this money actually added nothing to the economy. It just replaced what was wiped out in the collapse. By the same logic, then, creating that money in other bank accounts would only replace what was lost in the big bank that died. So, it does not really add money into the economy. It just moves it all into the hands of responsible people.
Under my economic vision, the newly created money all goes to the poor and the middle class and bubbles up, instead of trickles down. When big banks fail, the money they claim to have in all their accounts evaporates, and the big bankers lose their jobs, and the institutions they controlled close their doors forever.
If the government creates an equal amount of new money in new accounts, it is only replacing money that just evaporated from the system. That should not create inflation. Yes, the new money is created out of thin air, but so was all the money that exists in the U.S. today. So was all the money used for banker bailouts.
Why not create new money for the depositors, instead of creating it in reserve bank accounts for the big banksters? It is not impossible. It can be done. What is lacking is the political will to see it done that way.
A sustainable recovery must restructure the economy by letting bad banks crash and burn and by rewarding good banks that didn’t participate in outlandish greed. Because we don’t have the political will to do that, we have no real recovery.
So, my economic vision is based on righteousness to use a good word that is often misunderstood. By rewarding the righteous, I don’t mean the perfect or the religious. I mean those who acted in the “right” manner by not participating in high-greed, high-risk financial adventures.
Why do Americans continue to believe in a clearly failed economic vision?
The majority right now follow a vision for this country’s growth that has said for thirty years that the way to make all citizens better off is to start by helping the rich. Tax them less on their capital gains than you tax the person who actually works and produces something.
Because this philosophy is held as tightly as religion, the majority of Americans have been willing to lap up the lie that the new money that was created as economic stimulus could only be created at the top! On what basis can it only be created at the top? Why would you even believe such a thing?
All money in America is fiat money. It is, in other words, all created simply by decreeing it into existence. The Federal Reserve, run by the nation’s richest bankers and by government appointees, is the sole body with the power to do this. The government appointees on the Fed’s board should have seen that the new money did not go to the corrupt bankers whose greedy vision for their companies failed miserably; but the appointees love their banker buddies and, for the most part have all participated at or near the top of the present economic pyramid, themselves. It’s crony capitalism.
Congress could and should mandate that banks that fail go through normal bankruptcy dissolution. Congress failed. Republican and Democrat presidents failed. Congress could order that the successful parts of those failing banks be sold to intermediate-size banks that are firmly solvent, so that good banks benefit from their prudent practice and become larger. That would encourage moral banking behavior.
Congress could make it illegal for the largest banks in the nation to bid for parts of the insolvent banks that are still successful on the basis that those banks are already too big so are not eligible. Instead, Congress and George Bush and Barrack Obama all participated in making certain that those behemoth institutions became even larger. They insisted upon merging failed banks into larger banks that had not, yet, failed.
Why on earth would you do that if your vision for the nation’s economy was one that intended to fix the problems for good? The government clearly stated that one of the biggest problems in this economic crisis was that worst banks were too big to be allowed to fail. In that case, making them larger is either a plan of idiots or a plan of corruption. Take your pick.
Congress could have been visionary and restructured the economy for sustainable wealth creation with a solution that helped smaller banks become even stronger, but congress lacks any economic vision.
We have no visionary leaders in the presidency either. This is where Barrack Obama as a man of “change” has most particularly failed. His years of government have all been status quo economically speaking, and the economy was where we had the greatest need for true vision and brave leadership.
We got none, but Republicans have nothing better to offer. It is just more disappointing from Obama because he failed to be all that people hoped he might be. With Republicans, we know they will serve the banksters every time out of their religious belief that anything good for big business is good for all and that wealth is created from the top down.
“You can’t do that!” the indoctrinated will argue. “Money printing is a certain path to economic collapse!” Maybe so, but money printing is all we have been doing throughout the Great Recession, and it caused no hyperinflation, except in the stock market. So, why not do it in a righteous manner? Why on earth would you put all of your newly created stimulus money in the coffers of rapacious banks that created the problem? It defies all sense and can only be explained by sheer stupidity or cronyism in the highest degree.
More of my economic vision for a sustainable recovery
If we really want to avoid “moral hazard” and create moral success, we’d have to rewrite some of our corporate laws. Corporate reality has to happen to stop corrupt banking:
- Bankers who took foolhardy risks need to go to prison.
- They also need to pay for all the losses out of their own wealth before any others do.
Financial investment advisors who counseled investors to buy junk while, themselves, buying insurance against the junk in belief that it would fail (such as Goldman Sachs did) … should be in prison. It’s time to rewrite corporate law to put more responsibility on the shoulders of the highly overpaid executives and on board members. If they’re going to be entitled to such enormous salaries, they can and should shoulder some enormous risk to go along with it. As it is, they have almost no risk at all.
Corporate leaders who deceived investors at a level that caused their own institutions to fail would, under my economic vision be stripped of ALL of their personal wealth. Corporate law would specifically state that personal wealth cannot be isolated from the losses created by those within a corporation who corruptly cause those losses or who cause such loss through great imprudence.
Corporate law is corrupt and needs to be rewritten so that it does not protect avarice. Leaders who can’t take the heat of that responsibility or what it could mean to their own vast fortune, can get out of the kitchen. We don’t need them in charge anyway. Theirs must be the first money to be used to replace what was lost.
There is nothing in this universe, other than the indoctrination that protects the wealthy, that can prevent Congress from drafting corporate laws in such manner that they never protect the wealth of criminals nor of greedy people. Corporations are artificial entities for the benefit of mankind that are only created via laws in the first place.
Only when you place the risk on the shoulders of those making the big decisions will you find they act in ways that are responsible with other investors’ and depositors’ money. End moral hazard by creating moral responsibility.
- Do not put your stimulus debt on the shoulders of other generations unless you give them something for it.
This, too, is moral irresponsibility. Government could have and should have used the astronomical deficits of the past six years to fund improvements of our transportation systems, schools, parks, sewers, water supply, electronic infrastructure, and security because these are things government is behind on anyway. They are a legacy, once we have created them, that we can hand to the same generation we are handing the debt to so that they get something for the money we are charging to them.
Creating these projects would have created far more jobs than inflation of the stock market has fueled. Yet, it would have wound the stock market up, too, because money always bubbles up. Projects like this make companies bigger and wealthier. So, the money will bubble its way up to the wealthy share holders in a manner that only works when new jobs are created, rather than just giving it to bloated banksters to invest in the stock market — a game that only the rich get to play, which rarely creates jobs. It just creates higher stock prices and richer rich people.
Government didn’t want to make the rich work for they money, but these kinds of projects would have done much more than create hundreds of thousands of new jobs and would have done more than giving the next generation some goods along with the bill. They would have paved the way for sustainable economic improvement. New and better roads move goods faster. New electronic infrastructure conducts business faster. It all improves the quality of our economic engine. So, that kind of stimulus improves the economic foundation of the nation; but we did almost none of that because we’re stupid and short-sighted and addicted to feeding the rich.
In terms of moral success versus “moral hazard,” deficit spending on civil projects does not strap the future with the impossible burden of solving our problems. (Highly immoral in my way of thinking.) It doesn’t strap the future for the obvious reason that it gives them tremendous assets in exchange for the debt we are passing along. That’s money they won’t have to spend to repair those things or build those needed things.
Under my plan, the next generation inherits something that balances the huge debt it inherits. Moreover, that generation saves money because all of the necessary work has been done for them with today’s dollars. The cost in today’s dollars will seem like a spectacular bargain twenty years down the road when the debt is still being paid.
This vision is nothing more than common-sense. Obvious opportunities were missed simply because corrupt minds do not see the possibility. They think first of saving the rich, saving themselves.
How do you know this is a true economic vision? Because it’s simple and clear. New money CAN go into the economy at the bottom first. When it does, it creates wealth all the way up as the rich cream inevitably rises to top. It creates durable assets that benefit everyone, not just wildly speculative fortunes on paper.
Moral hazard is simple to avoid if you have the courage to do what is right. Greed CAN be made accountable if you have the moral fiber to create laws that enshrine accountability, rather than give sanctuary to greed. M
aking overpaid executives personally responsible for their decisions will not cause them to flee their top positions because they’ll have no alternatives. Those who don’t have the courage to shoulder responsibility at personal cost should not be the ones making decisions anyway. To have your wealth protected from mistakes of others or from decisions that you don’t have full control over is one thing; to have your wealth protected when you participated in a decision that was clearly risky or clearly criminal is another matter altogether.
My economic vision can be summed up in five points:
- Never bail out those who created the problem as that always creates moral hazard. (The fact that banks are still doing all the same things that caused the Great Recession proves this point.)
- Never make institutions that are too big to fail even bigger by forcing mergers as a solution (which the government did with several massive banks). In fact, do not even allow them to become bigger. In fact break them up. (Since corporations only exist as a creation of law, law can prevent goliath structures that pose a risk to everyone just because of their size if they fail.)
- Save depositors by creating new deposits in small, solvent banks with the same fiat money that would have been used to bail out big banks.
- Only take out government debt to create economic stimulus by using it to build infrastructure that creates jobs, builds up companies, and improves the economic capacity of the nation for the future so that those who inherit the debt also inherit the assets. (Because THAT is sustainable.)
- Create accountability at potentially great personal cost within corporate law because those who are afraid of the risk that corporate leadership puts on their own personal assets aren’t big enough to deserve to be in the game anyway.
Those five points would change the world, but congress will never enact them unless the bulk of Americans stop taking whatever comes and put some skin in the game and demand that their leaders fully carry out these changes. The amount of public pressure required to get congress to stop dancing with the big banksters would be enormous because those banksters are really persuasive in their arguments that you must first help the rich if you wish to help the poor and that doing anything else will fail economically. They also have persuasive wallets.
The number of enraged Americans would have to completely overwhelm members of congress before they’d stop listening to the successful bankers. They believe these bankers understand what it takes to make money and do business better than the average person on the street, so they will listen to them, not you.
As I see it now, Americans are asleep and are gladly letting their government come up with all the solutions to the economic crisis. That’s why there have been no sustainable solutions. Congress has no creative ideas. All we have seen is public welfare to the richest of the rich in the hope that they will save all the rest of us from themselves.