By Kevin Zeese and Margaret Flowers
Co-directors, It’s Our Economy
Milton Friedman of the Chicago School of Economics suggested in 1969 that dropping money out of helicopters for citizens to pick up was a sure way to restart the economy. This was consistent with long-held views; in 1948 he argued that governments should rely solely on printed money to finance their regular cyclical deficits.
This is the Keynsian’s favorite Friedman monetary recommendation. In fact, John Maynard Keynes put forward a similar idea in 1936, but he urged people to dig up bottles filled with money.
Looking at the shape of the economy, maybe it is time to consider direct cash payments to citizens. Does anyone doubt that if the $20 trillion or so dollars the Federal Reserve has given to the banks in the 2008-09 bailout, the virtually no interest loans for 3 years and the subsequent QE’s (Qualitative Easings) had been given directly to the people (except, of course, the 1 percent) the economy would be better off today? That the economic collapse would be behind us?
Wait. This is not just the insane ravings of two occupiers who believe in economic democracy.
The big underreported economic news of the last week came from England where Lord “Adair Turner, chairman of Britain’s Financial Services Authority and one of the most influential financial policymakers in the world” gave a speech. Here’s the summary: “Turner argues that a virtually surefire method of stimulating economic activity exists today and that politicians and central bankers can no longer treat it as taboo: Newly created money should be handed out to the citizens or governments of countries that are mired in stagnation . . .”
That is the same argument Milton Friedman made. And, the same argument Ben Bernanke made in 2002 in a speech three years before becoming Fed chairman. Bernanke was talking about a period of economic stagnation that led to deflation even after the central bank had put in place loans at virtually no interest. That pretty much describes the situation we are in today. You can read the speech, “Bernanke Argues Money Can Be Printed to Stimulate the Economy,” here. We republished the 2002 speech he gave to the National Economists Club in Washington, D.C this week because of Turner’s comments. Anatole Kaletsky writes in Reuters: Bernanke “offered the most detailed and eloquent justification of monetary financing prior to Turner’s, and it earned Bernanke the Wall Street nickname ‘Helicopter Ben.’”
Some have raised concerns that this would lead to inflation, and of course that is always on the minds of bankers, but in his speech Lord Turner deals with that issue. He notes that inflation is always a fear but creating money to finance debt was “a surer foundation for a low inflation regime” especially within “tight disciplines, with independent central banks, self-denying ordinances and clear inflation rate targets.”
Now, the Fed has not been dropping money on people, but it has dropped trillions on the big banks who have hoarded those dollars and paid big bonuses to executives. Kaletsky points out the “Fed prints $85 billion of new money monthly [emphasis added] and distributes it to banks and Wall Street investors by buying government bonds.” Divide that money among 300 million Americans instead and it is $283 for every person in America ($3,396 annually) and $1,450 monthly ($16,980 annually) for a family of five. Wouldn’t that get the economy moving better than giving it to the banks?
News from the last week shows that Americans need this money and will spend it. The annual Assets & Opportunity Scorecard showed two-thirds of Americans live on the edge and face constant financial insecurity, and, another article pointed out that 42.6 million live in poverty. Even though more families are in need, less are being helped by Temporary Assistance to Needy Families. These are realities that the elites should see is as a powder keg that needs to be confronted before there is an explosion.
This powder keg will get worse as more Americans realize there is no Social Security crisis while President Obama continues to threaten cuts to Social Security and Medicare. In his last press conference, Obama once again put cuts to Social Security and Medicare on the table and in his State of the Union address Obama said he was open to “reforming” Social Security and Medicare to save money. As we pointed out last week, the path for the economy would be to face up to poverty retirement and health insecurity by doubling Social Security payments and expanding an improved Medicare to all. We’re not alone as more are saying it is time to increase Social Security payments.
And the impact of the Obama health law is coming into focus. Last week HHS announced a strict definition of affordable health insurance that left out families. This will result in millions of Americans who cannot afford the family coverage offered by their employers being denied assistance in paying their insurance premiums for spouses and children.
The US economy needs a stimulus! There are already signs of the potential beginning of a double-dip recession with both the shrinking GDP and rising unemployment reported last week. Another factor making another recession more likely is an ‘unpredented’ drop in government spending (in January there was actually a federal budget surplus for the first time in five years) including cuts to necessary programs that have already been approved outside of the sequestration or ‘Grand Bargain’ offered by Obama. As Paul Krugman wrote this week, austerity at this time would be “irresponsible and destructive.”
Though we are in ‘recovery, ’the jobs being created are primarily low wage service sector positions. We are experiencing a structural loss of many middle class well-paid jobs that have disappeared permanently due to technology and to corporate trade agreements that send jobs overseas and create a race to the bottom for US labor. Labor academic Bill Barry puts forward a five point plan this week that includes raising the minimum wage, expanding unions and health care as well as a shorter work week and earlier retirement.
We do not expect people to be given thousands of dollars, but Turner, Friedman and Bernanke show that “The alternative to national bankruptcy is not austerity and permanent stagnation; it is for governments to finance tax cuts or public investment with printed money and thereby promote economic growth.” More and more Americans are seeing that transformative change is needed to a democratic, sustainable clean energy economy.
Of course, there’s a problem. The banks want the Fed to give the money to them and not to the people. They want to loan it to government and the people so they profit from interest on debt. And, as Neil Barofsky the Former TARP Director told Jon Stewart, “The banks still hold guns to our heads.”
We can see the banks’ power in Obama’s appointment of Mary Jo White to the SEC. She represented an A-list of big banks and major corporations in her New York law firm. Among them are several Fortune 100 companies — JPMorgan Chase, General Electric, Microsoft, Hess and Verizon — Switzerland’s largest bank and the world’s biggest automaker, Toyota. Jamie Dimon, CEO of JP Morgan, calls her a perfect pick, while professionals at SEC say she will have a “chilling effect on enforcement.” (Dimon, had his pay cut in half to $11.5 million by the JP Morgan board because of the $6 billion investment scandal.) White is part of the revolving door between Wall Street and Washington, one that Tim Geithner is ready to profit from.
Recent news shows how ruthless the banks are. A trove of emails uncovered in litigation by an investor against JP Morgan found that the bank, Bears Stearns and Washington Mutual sold securities they knew were bad. And, the Royal Bank of Scotland was fined £390m ($611 million) for ‘widespread misconduct’ in Libor-rigging scandal. These powerful central banks meet each month at the Swiss based Bank for International Settlements for secret Global Economy Meetings that determine world finance.
The banks have the government game rigged. It is time to break their power. People are getting organized and active trying to do so. The Public Banking Institute will be holding its annual conference this June in California. We will be speaking along with Matt Taibbi, Ellen Brown and a host of others who want to see public banks as an alternative to Wall Street domination of the economy. Sign up here. Wresting control of money and government from the big banks is one of the most important priorities for the nation.
We don’t expect the ideas in this email to be talked about in Washington, DC, and they were not included in the State of the Union, because our dysfunctional government controlled by Wall Street banking interests and has lots of taboo topics and facts they will not consider. Sadly, we did hear more talk of the Grand Bargain (aka Charade), with cuts to Social Security, Medicare and Medicaid.
As usual, there are solutions to the problems the country faces. We can end the economic collapse, transform the economy to a clean sustainable and democratic one as well as create jobs. A corrupt and dysfunctional government and a still mostly idle public are the only things stopping us.
Kevin Zeese JD and Margaret Flowers MD co-host ClearingtheFOGRadio.org on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-direct It’s Our Economy and were organizers of the Occupation of Washington, DC. Their twitters are @KBZeese and @MFlowers8.
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