ECONOMIC RECOVERY: A Dozen Doses of Real Medicine for Sustainable Economic Recovery
I spend much time criticizing the outlandish economic foolishness I see throughout the global economy and especially in the US economy (because the US economy is the one I am familiar with as a direct participant). Those who criticize need to be able to offer solutions. I have real, sustainable economic recovery ideas, but I rarely present them because I know almost no one wants to hear them.
Until total economic collapse forces us to take painful medicine, we’re not going to go that route. Nevertheless, I have presented economic recovery solutions from time to time, so that when our circumstances become economically dire enough to force us to take our medicine and face our pain, maybe some of these will come to mind. I also share them from time to time to show I am not just a critic who has no better answers than those he criticizes. I share them now because the Federal Reserve has just reinstated its program of palliative care for a terminal economy. Once again, we are heading right back into the Fed’s old tired answers that have failed to accomplish anything other than dulling our pain for the pasts decade, just as I’ve said we would.
Because most people will not like my answers at all, I give them reluctantly. I’ll give criticism where it is not wanted because I have to suffer the lunacy created by the financial establishment’s wrong answers every day — answers that assure every day the gap between the top 1% and all the rest will grow. I am less inclined to give advise where it is not wanted.
My solutions require we bear the pain involved in correcting the numerous laws embedded throughout our systems. What the hoi polloi and politicians want is a quick and easy fix, which is exactly what the Fed has tried to deliver over the past decade. FedMed may not have seemed easy on the surface, given that it took a decade of effort, but it only took a decade of effort because it was not a solution to begin with. It was a temporary fix — a fix of drugs.
It was life support, and without corrective surgery, life support is just fake life. The patient remains dead, as in incapable of sustaining his or her own life as soon as life support is removed. We saw proof that the patient was still dead throughout the past two years as the Fed removed life support and the patient grew pale. Then Trump jumped in with tax-and-spend resuscitation (but, again, no surgery to remove our many cancers). That, too, failed to bring recovery. At the same time, the Fed started to actually suck the blood it had transfused into the patient back out, so the patient began to die. Last fall and again this September, we felt its death throes.
The Fed’s recovery program was never capable of delivering a sustainable recovery — just endless dependence on the Fed (which assures the Fed’s continued power unless people see through Fed fakery to recognize the Fed failed. FedMed wasted a full decade, doing nothing but re-inflating old bubbles with new money and creating new bubbles along the way due to spillover.
With that said, here are twelve real solutions for which the financial establishment has no stomach and neither does most of the rest of the citizenry of this world; but I think a few ready readers here will see the need for these tough measures that accomplish actual correction of chronic economic problems.
Real steps for sustainable economic recovery
My recommended solutions for economic recovery won’t trickle down to everyone by helping the rich get richer. They cannot be found in the Fed’s cheap and easy answers, nor in the equally cheap and easy answers of modern monetary theory, as espoused by socialist revolutionaries such as AOC, Sanders, Warren and some other Dems. Everyone wants to take a pill and get better. There are no easy answers.
The following are difficult surgeries that likely involve complications and certainly involve pain and a lot of therapy afterward, but they can bring durable recovery:
- Solid markets require that we curtail purely speculative stock trading that turns Wall Street from simply being a marketplace where one can buy and sell ownership in corporations into nothing but a casino for the rich and their expensive algorithms to out-game each other.
- We must also urtail the most speculative practices that turn commodities exchanges and foreign exchanges into nothing but casinos.
- Enduring economic recovery requires that we reform banking at its core and restore regulations — first of all Glass-Steagall, which created a firewall between banks and the stock market. We especially need to keep all central banks entirely out of the stock market and probably out of bond markets via major central bank reform. It is not their place to save markets or manipulate economies or to create jobs. Because they have infinite, nearly unrestrained capacity to manipulate any market they play in, they must be kept out of markets for markets to function as capitalist systems. The function of central banks should be creating stable money, nothing more.
- If we want a sustainable economic recovery, we need to rewrite corporate laws so they do not provide scoundrels with shelter from full personal financial liability for their mismanagement. (If you can’t take the heat of personal financial liability for gross mismanagement or illegal management, don’t become a CEO or a corporate executive or corporate board member. I don’t care. I won’t miss you. Your income should not be sheltered from your mistakes. Mine isn’t!)
- Sustainable economic recovery requires ending government deficit spending and actually living within our means. That means the US needs to stop policing the world and stop seeking to change unwanted regimes in America’s supposed best interest (which regime change never brings about because it just creates a world full of new enemies). We need to face the reality that we are not able to pay for that nonsense, and we do not pay for it now. We force others who are not alive yet to pay for it. As we end loyalty to the Warfare Party, we also need to end loyalty to the Welfare Party. We have to stop providing welfare we don’t actually pay for out of our own pockets. You are not generous to the poor when you help them with your children’s or grandchildren’s money. Stop pretending you are strong (militarily) or generous (socially) with other people’s money.
- Curtail immigration, which suppresses US wages (as is intended), by putting those who hire illegals in prison, rather than jailing the poor illegal aliens or building walls. Walls are a fake solution that merely attempts to avoid the real solution. Jobs will dry up quickly when we start imprisoning the employers upon their second offense (fines for the first discovery of offenses). The illegals will pay to transport themselves home voluntarily (or walk the long road) so that we’ll need no expensive and ugly, nature-destroying wall because illegal traffic will be reduced by over 90% when there is no economic opportunity for illegals. The problem will become manageable without a wall. We do not have a history of welcoming immigrants in order help aliens. The US encouraged a huge number of immigrants because of the Louisiana purchase and other big land grabs thereafter as a way to occupy the land in order to hold it against Indians and other colonizing nations. (Let’s be honest. Holding those lands required massive numbers of people who would pledge their allegiance to the US who would relocated into those millions of acres of land.) We also have created an illegal status for immigrants then turned a blind eye to their presence as a way of creating a true peasant class that has none of the rights of the landed gentry. That said, I am 100% for loving the immigrants who have already been let in legally. We are not going to do better as a nation by alienating ourselves from people who are already here or by hating each other. It is ludicrous to think that markets will do better or the overall economy will do better when people hate each other, and who cares how the economy does if society is riddled with hatred? Such a society doesn’t deserve to continue. However, ending excessive immigration as a supply of cheap labor will go a long way to softening hatred. You cannot force people together as a means of teaching them to get along. Forced social engineering creates a lot of animosity. Love cannot be legislated by jamming people together. Besides, our nation is overpopulated and overburdened with the welfare needs of the world. (Since we have created an economy around all this cheap labor, this may need to be phased in over time, to allow people to adjust, but that means there must be solid resolution to carry out the phased changes and not using phasing as a path to avoidance.)
- That also means ending all welfare for illegal aliens — no medical, not even for children, no education for the children, no temporary housing for, etc. Just leave. We owe non-citizens nothing, and none of us are actually paying for all our government is providing as we pretend we are. If there are no jobs and no welfare for anyone who is not a legal citizen and no government housing, people will leave on their own. That means you won’t have to process them through courts, freeing the courts to focus on legal immigration. Denying illegal aliens all welfare is perfectly moral and ethical because 1) They have no right to be here in the first place and are breaking the law by coming here, so no one has forced austere conditions on anyone; such conditions are entirely self-imposed when one chooses to illegally cross the border; 2) aliens have legal channels through which those who need asylum are required to come (which probably need to be improved and could be improved if we weren’t dealing with such a huge inflow of economic immigrants); and 3) you’re not paying for this supposed generosity with your own money now anyway but with the firepower of future generations, saddling them with mountains of debt to solve problems in your world today with their life’s energy just so you can feel good about yourself. That, in itself, is highly unethical! What right have you to leave behind debt for your pretend largesse? When we are back to paying as we go, we can see if there is room within that restriction to help others beyond our borders.
- Sustainable economic recovery means equitably shared burdens. We must permanently end trickle-down economics by terminating the special low capital-gains tax rate that is the heart of trickle-down economics. That and the Fed’s method of creating money by giving to bankers are the main engines widening the gap between rich and poor. The rich do not make their money off of ordinary income — wages or salary — and there was never any chance they would reinvest their tax savings from capital gains — where they do make their income — into creating new factories. Why would you buy land, then fight legal land and zoning and environmental battles, then pay to design a factory, then to build the factory, which will take a couple of years, and then hire hundreds or thousands of people who are liabilities walking, in order to fight labor battles forever, and hire accountants and lawyers to conduct daily operations, all so you could wait ten years to see your first dime of profit if there ever is only to pay higher taxes on that profit than what you’d pay if you just reinvested in stocks in companies that already exist??? No one would ever do that! The whole concept is a ludicrous fantasy. Giving tax breaks on capital gains actually makes sure that hard path to wealth will never be taken! Trickle-down economics has been a lie from the get go.
- For solid economic recovery, you have to apply any future tax stimulus to the 99% and never again to the top 1%. I wouldn’t recommend any tax breaks right now, but there might be times when tax stimulus is helpful, and this is the way it needs to happen IF it happens. First, we need to make sure those breaks pay for themselves. That means we have to cut costs that do not contribute to the economy during those temporary times. (They can be temporary cuts to non-essentials that match exactly to the temporary tax breaks. The cuts must come as part of the break.) Money will always bubble up to the rich, but it never trickles down because there are too many filters on the way down. Trying to create economic stimulus on the supply side is pushing a string. You have to pull the economy along by creating more capacity for demand. There are already endless needs and wants on the demand-side economy (translate consumer economy). So, the poor and the middle class will certainly buy things with stimulative breaks, and that means the rich WILL create more factories or more service businesses, and therefore, more jobs, and may have to offer higher wages to get the employees because that is the ONLY way they will ever get their hands on that money. Never give them a tax break on some vain promise that they will do that. Give any break at the bottom to create more customers for the rich, and make the rich work for their share.
- For the present, raise taxes back to where they were in the Gingrich-Clinton era when we actually had a balanced budget for the only time during my 60-year life and were paying down the debt. Those two opposing forces found the sweet spot of equilibrium on the tax-revenue curve where tax revenue is maximized. Paying down debt, however, has become forever impossible at this point if we do not also …
- Legislate a debt jubilee. The mountains of debt piled up during the Bush, Obama and Trump administrations are far beyond payable. So, admit the truth, clear the slate, and bear the pain. There will be lots of it. (I put this after all of the above because without all of the above, it will be useless as we’ll just go right back to where we are now. So lay out all the hard work first.) Everyone keeps what they have physical possession of, and all debts are wiped clean, including government debt (or we and all future generations will remain debt slaves for life). That includes the bonds you own as part of your retirement. To a large degree, the loss of wealth in instruments like bonds will be offset by the losses of your own liabilities like mortgages — not for everyone of course. National bankruptcy is going to force this upon us eventually anyway as we are too far down an unsustainable path which is why the Fed has just decided it will monetize the US debt forever. I want to make sure the little people benefit from the debt elimination and not just the rich. The debt crisis that is going to play out from the Fed’s return to loosening the economy via renewed debt expansion will force a reboot anyway if were don’t plan for one and do it now. Without a reboot, we are forcing all future generations to carry an ever-growing debt burden because taxes no longer even cover the interest on the national debt. We need to take the full correction of out own debt excesses upon ourselves.
- All of that will involve huge financial crashes in banks all over the world, but the blow can be softened by having central banks (if we even keep them) create money in what remains of financial institutions in the amounts lost by every depositor for a fresh start on money supply, too. Creating money to replace money that gets wiped out creates no inflation. We saw very little inflation when the central banks created far more money than what was wiped outdoing the Fed’s Great Recovery that has now failed. We must let all the bad banks simply fail, while rewarding the good ones that remain by creating new deposits in the banks that remain, sufficient to offset the losses.
Why recovery will continue to elude us
Of course, we will never try any of those ideas for economic recovery unless and until our current systems utterly fails, forcing us to deal with the painful corrections to our generations’ own rampant greed and foolishness — the corrections that need to happen to create a truly sustainable economy. Until then, we will deny that any of this needs to happen so that we can enjoy playing in our bubbles, enjoy our structures of bubble wealth that are created over caverns of debt, avoid the pain of correction, maintain our greed, keep pretending we are strong enough to fight the whole world at once, and keep pretending we are generous when we provide welfare to aliens out of our children’s piggy banks, so that we can keep our candied tax breaks and our undeserved self-respect.
Even now, the Fed is returning this very week to more of what it has done before. It’s QE4ever, Baby! (That is exactly as I said the Fed would do and as quickly as I said the Fed would do it, so no surprise here.) When that piles up like a train wreck, as it will in a hurry this time, we’ll look to the next easy Fed answer, which is what I’m laying out in my Patron Posts — global answers to a problem created by global bankers that will assure they retain their control and their wealth. What we will actually do, in other words, is maintain our economic denial. People will accept that because it is easier to trust the experts who proffer painless solutions, and that is why I rarely bother to write out real solutions for sustainable economic recovery.