Monetary policy eclipses all other issues.

Here we are smack dab in the middle of January. I still hear loud squawks about Trump’s impeachment as the press tries to engage us on that topic. The fever pitched press efforts at dramatizing impeachment don’t engage the public when there isn’t a basis to the charges. Most people don’t care about it anymore. After the Russia Hoax there’s little press credibility on Trump matters.
In Virginia, there are clashes of desperados devoted to stopping or enhancing gun regulations but many Americans aren’t really tuning in to that either. Despite Virginia’s Governor’s passionate denial of his voter’s rights according to Virginia statutes and constitutional prerogative, all he deserves is removal from office. The drama of a Civil War isn’t needed now. Natural rights still matter as much as always and the Constitution still offers it’s political wisdom to any who wish to appreciate the document and its guidelines to having a prosperous polity.
These issues pale in comparison to our banking problems. Banking is where politics and economics are bending our reality into its mishapen mess right now. Our monetary policy is failing us.
I would like Americans to pay attention to abuse of our monetary system by the Federal Reserve with all of its ill fated experimentation using derivatives, financialization and cross border capital flows. Also notice off the books expenses by the Pentagon and by private military forces in the Middle East. Notice rampant monetary fraud in Obamacare, Medicare, Medicaid and their attendant price increases in a monopoly market that undermines reasonable price discovery. Notice that despite whatever experts such as Timothy Geithner tell us all to the contrary, TARP, zero interest rate policy and QE failed our nation’s economy and sowed fresh seeds of distrust. American distrust of political organizations and institutions is the rot at the core of our nation’s center. A distrustful nation can’t do as much as a nation that is solvent and accountable.
I would like all Americans to see where capital has been injected into the stock market in order to elevate stock market prices. These injections are undermining real market trading with capital injections and computer trading. I would like all Americans to notice the effects both now and in history to monetary abuses involving graft, involving over-printing capital, involving debt. Look at myriad easy-money disasters that have followed banking deregulation…buyouts, long-term unemployment. Let’s come together in a universal vigil and acknowledge that our leaders are failing us when they make decisions involving our monetary system.
Reform of our monetary system must be undertaken in order to restore a prosperous America. We can start by ending the existence of holding companies. Holding companies were FDR’s honey to assuage the vinegar of the SEC. They were the escape trap door and tunnel out of bankruptcy and financial regulation. The SEC is mostly powerless now, so what do we need holding companies for? They hide the capital holdings of people who abuse their opportunities and allow them to escape bankruptcy with hidden cash reserves. This is cheating. We can also acknowledge that derivatives have to go away. They aren’t really constitutional because they lead to imbalances in the market and cash creation after insolvencies that they cause. We can reduce the size of giant Too-Big-To-Fail banks. We can go back to the earlier regime of Glass Steagall separation of investment and commercial bank holdings. We can start paying interest on bank accounts that encourage savings instead of ripping off savers. We can close the borders of nations to free capital flows which hurt people who have smaller amounts of assets. This greedy dance of wild capital hasn’t freed people as many imagined that it would. It only misallocates resources which are wasted. It destroys opportunities that we all need. If you want to learn more about these topics, buy a copy of Political Catsup with Economy Fries from Amazon.com.

A positive approach for New Year’s.

Happy New Year! The overall economy hasn’t recovered since the 2007-2008 Great Recession but here’s some practical approaches to gaining a foundational education in essential information that can help you and all of us to extricate ourselves from political and economic challenges that we face:

* Learn about the subject of economics. A great reference is: Basic Economics: A Common Sense Guide to the Economy, Third Edition, by Thomas Sowell, Published by Basic Books in 2007. A careful reading of this dry book will reward you at the very least about such topics as “Profit vs. Loss”, and “What is an Economic Market?” Our public schools and universities have neglected the broad topic of economics even though everyone is affected by our economy. You should try to learn something about economics because our divisive politics that has become so full of combative subjects has become that way due to economic conflicts. When you don’t understand anything about economics, it makes you more vulnerable to economic exploitation.

*In addition you should make an effort to learn about financialization and derivatives from a variety of online sources. A really fantastic resource on financialization is an article by Greta R. Krippner, “The Financialization of the American Economy” by Socio-Economic Review, (2005)3, 173-208, http:cas.umkc.edu/econ/economics/faculty/Wray/ 631/Week%207/Krippner.pdf

* Read about the Great Recession and discover its causes with this useful book: All The Devils Are Here: The Hidden History of the Financial Crisis, by Bethany McLean and Joe Nocera, copyright 2008 published by The Penguin Group. This book will tell you the deregulation steps that led to the rise of derivatives. It will help you to understand where Congress went wrong and how the Federal Reserve gained too much power over our economic opportunities. Our economy today continues to be vulnerable to imbalances like the ones that caused the Great Recession.

* Read Confessions of an Economic Hitman by John Perkins, the Plume Group, copyright 2004 to see more about the shaping of a global system and the use of debt as an opportunity to gain power over people. Most of us fail to know as much about globalization as we need to know. This book will get you started.

* Read Political Catsup with Economy Fries: Liberalism, Pragmatism, Opportunism, by Mel Scanlan Stahl, published by Fast Car Publishing, 2015, to put all of these resources plus a lot of historical ones into a big picture that will help you to understand how we got into our economic and political predicaments as we enter 2020. Get your copy today at Amazon.com.

If you are facing 2020 with misgivings about your future, take a moment to read these few references to give yourself some solid ground to stand on as you face a new year full of challenges.

Power hungry politicians undermine the power of politics.

The desire for infinite power has destroyed characters in fiction many times. There is Ahab in Moby Dick, there is Voldemort in the Harry Potter series. You probably remember others in examples from literature that go back centuries from Shakespeare to ancient Greek plays. Megalomania ends badly for most everyone who is drawn into the appetites of a power-hungry person who can’t be satisfied. The endless hunger and reckless pursuit of coveted power ends badly.
When the Nixon era happened there was a concerted effort to undermine Nixon’s power base in press coverage both on television and in newspapers. Press coverage was unrelenting for months. I wondered at the disparagement of Nixon. Some said that Nixon was a power hungry and paranoid person and we Americans were all better off without him. Some said that opening China to trade and political negotiation was important and beneficial to foreign policy. Some liked Nixon’s War on Cancer using federal dollars. Some said that Nixon wasn’t worse than most other politicians that gradually had started using audio tape to record themselves and others. I was just a kid so I couldn’t understand much about it.
Later, as an adult, I noticed the Clarence Thomas controversy. During the Clarence Thomas hearings, I thought Anita Hill believed what she testified. But I wondered if she was overly sensitive and overly imaginative about events that she described. Recently we’ve seen Judge Kavanagh and Donald Trump attacked with invented stories dramatized by emotion. There is a pattern here. At this point, I can’t help but view  Trump controversies as an artifact of the power hungry neoliberal era.  It’s an example of Congress vs. the President.

Neoliberal American politicians and bureaucrats are aspiring to evade the real work of good governance. They have become corrupted by the increased power that the American government embraced and sanctioned after WWII in a response to global trade and political networks in the age of atomic weapons.
In today’s American government we see megalomania. We recognize players in the Military Industrial Complex who have the goal of exercising global military hegemony at huge cost and with terrible consequences. They seem to want military exercises to never end.  Global economic and political negotiations are being backed up with military force.  But this isn’t a solution to political and economic malfeasance. We see abuses of the U.S. monetary system leading to insolvency and inflation. We see monopolies abusing the public.  We see disasters of deregulation in banking, communications, energy and transportation. We hear cheering for the computer information technology disruption of our economy, an economy that is measurably less prosperous. We observe a disastrous deconstruction of American small businesses in buy-outs leading to fewer jobs. There are lies being told about the success of self driving cars and the existence of artificial intelligence. There are absurd stories that suggest that American companies should replace people with expensive robots. There’s 23 trillion dollars of government debt and plans and promises to create more debt. Regulations such as the ACA make running a new business more expensive, forestalling small business formation. Algorithms are keeping people out of work.
There’s a bad moon rising and more trouble’s on the way.
Our neoliberal politics is so aggressive that each side is trying to have the other side arrested. Meanwhile, Congress doesn’t address problems facing most of  us in America. If you look in the American Constitution the power of the executive and Congress are spelled out and so is how we elect them. That’s your power.  You and I elect a president every 4 years, the House of Representatives members are elected every 2 years and Senate members are elected every 6 years. If everyone would agree to do it, we could sweep this disfunctional Congress right out of office by voting them out.

It would only take six years to vote out all the incumbents in Congress and it might gradually lead to better governance. Think how voting would be simpler if we voted out of office all congressional incumbents every election for as long as it takes to get rid of government malfeasance like what we see today.  At least we could stop Congress members from negotiating for their own profit for years on end without caring about 90% of their American constituency.
We need a functional Congress with appropriate powers. Not a disfunctional Congress with bloated powers and aspirations that lead to corruption and mismanagement of our country. If you want to learn about ideological periods in American history, or changes in American politics that affect you buy a copy of Political Catsup with Economy Fries available at Amazon.com.

Deregulation of utilities leads down to darkness.

Deregulation is a huge goal of neoliberals. Freeing corporations from oversight was always a neoliberal goal during the neoliberal ideological period which started after WWII and continues today. Neoliberalism has advanced gradually since then. Richard A. Posner in 1999, wrote about four industries where deregulation happened in “The Effects of Regulation on Competition: the Experience of the United States.” At first, after deregulation, it seemed that business was improved because profits seemed to grow. According to Posner, we have seen the deregulation of 4 industries including banking, transportation, communication, and energy. After deregulation, PG&E made huge payouts to executives and to stock holders and they neglected to maintain the utility itself. And this pattern can be seen in all of the industries affected by deregulation. Privatize gains and push the inevitable costs and consequences of failure onto the public; that’s the goal of these policies.
Not maintaining the PG&E utility is not predicted by neoliberal theory under the “Efficient Market Hypothesis,” which imagines that a CEO would do the opposite–that he or she would protect the company’s resources instead of converting them to capital that is soon spent. By way of contrast, the “Principle Agent Problem” says that CEOs can and do choose to maximize their own financial rewards instead of putting financial resources back into keeping a company healthy.
In PG&E there has been less utility maintenance, or utility improvement. Fires have happened because there has been an absence of landscape maintenance at the power lines. PG&E’s solution hasn’t been the costly one of returning to proper maintenance or improving the landscape and power lines but instead PG&E cut people’s power. California, a technology rich state, the state that once got American innovations before any other state did, has surprised everyone with its many darkened homes and people living without power for days at a time. And California’s electricity costs more than it used to. Californians have paid huge increases in the price of electricity and yet they are living under blackouts. Fires are consuming their homes.
Where did the money go and can Californians get it back? Can they get the utility’s reliability that they once enjoyed in the current policy environment of deregulation? I think that they can’t. They are experiencing a system-wide problem because of deregulation.
Even though PG&E has been fined and has declared bankruptcy, PG&E’s goal isn’t protecting or improving the public resource. Instead, PG&E’s resources have been frittered away. Why should Californians pay even more now? Because the neoliberal plan is to privatize gains and make the public pay for losses. If you don’t like this way of running the country, then you should understand that as long as neoliberalism continues, it will often go exactly this way. The partnership between government and industry is corrupt and empowers the most powerful while giving the costs to the least powerful people who are being robbed. The deregulation of industries that matter a great deal to everyone leaves most Americans in the cold and in the dark.
If you care about these issues, the issues of harm that confront all of us, buy a copy of Political Catsup with Economy Fries, for sale now at Amazon.com.

Stingy information disappoints.

Several years ago, I heard that in the Age of Information after the birth of the internet, information would be segregated out of ordinary circulation. Information would be traded among the powerful and important people and the less powerful people would be out in the cold ignorant shadows. I laughed. Surely that would never happen in the United States where people can use libraries or the internet to learn whatever they want to know about almost any topic.
Because of the Trump Presidency, everyone now has heard of “fake news.” And the nation seems divided about all kinds of political information that is traded in a gossipy way without people ever having a sense of truth about the stories and without meaningful resolution of what these political stories say about us. People are told partisan stories and they are expected to choose either the version on the left or the version on the right. What if neither version is true? What if the divisiveness that people see in our politics is the entire point of these political stories?
A confused public doesn’t really know what our government is supposed to be doing anymore. Congress is trying to impeach the President again, a la Nixon, but what Congress isn’t doing is honestly trying to improve anything. We are supposed to believe that Congress is legitimately distracted when they are too busy to get anything done but the great undoing. The Congressional political trajectory has been destructive enough to cause the ominous loss of our middle class, and Congress still hasn’t reformed its policies. Doing more of the same banking deregulation, tolerance for monopolies, privatizing government and privatizing military, trading foreign influence, fiscal and monetary malfeasance and malinvestment isn’t helping anyone in the long run because it destroys more than it can ever build. Neoliberalism has short circuited our Country’s ability to solve its own problems. Gradually our political and economic problems are undermining still more of what the middle class once had and once could do.  Congress’s bad policy package is making what was once easy to accomplish, now impossible.
If you want to learn more about the changing political ideologies in the U.S. over its political history, buy a copy of Political Catsup with Economy Fries available at Amazon.com.

Weapons of mass financial destruction indeed.

Back during the Great Recession, Warren Buffet said that derivatives are weapons of mass financial destruction. And yet they remain with us. When I did research to learn why derivatives can be so destructive to our economy the answer was mind blowing.

It turns out that a derivative is a lot like an insurance policy but with two main differences. Whereas an insurance instrument can be purchased to hedge against a financial loss and never a financial gain, a derivative can be used to hedge against either a financial gain or a financial loss. Also an insurance instrument requires that the person who is insuring against a loss must own the asset but a derivative can be purchased by someone who doesn’t own an asset about which the bet is being made. This betting without owning causes destruction. Why? Because it means that unlimited bets can be made about a change in value of an asset without the pesky need to invest capital in ownership. Not owning but still betting can multiply the consequences of a given outcome far beyond the owners of a given asset. Instead of only owners losing a bet, many other people who bet wrong lose and must pay. If they can’t pay, they go bankrupt and their bankruptcy can cause imbalances in market liquidity which is what caused the giant crashes that affected the global financial markets during the Great Recession.

At the time of the Great Recession when there was a shortage of liquidity caused by a lot of losing derivative bets, the Federal Reserve along with the U.S. Treasury decided that printing more money would salvage the economy. Supposedly, governments that don’t prohibit their own money printing can print unlimited amounts of money in order to stimulate their economy. Why is it bad to print unlimited amounts of money? Because it causes inflation as the value of the money decreases. When the Great Recession happened, economists seemed to focus on preventing a deflation and people in the Federal Reserve foolishly believed that causing inflation would be beneficial. Although inflation according to our government is supposedly very low, inflation in an ordinary education, ordinary everyday medicines, everyday groceries, an ordinary house, or an ordinary car are extremely high and those items are quite expensive when you compare their price today to their price ten years ago. To prevent a deflation, the Treasury printed more money. But money has to represent something real to retain its value. Trading money as though it’s a commodity in derivative bets across the foreign exchanges has harmed our economy’s ability to set reasonable prices in people’s ordinary lives. Here’s an example.

What is your house worth? The cost of a house was once based on a real market of buyers and sellers who usually had a job that paid their bills within a comfortable range of what they could afford and what they wanted. Their job and income was secure enough that they could invest in a house and live in it. Why should a house cost double or triple now compared to what it cost ten years ago? Especially when you realize that real wages haven’t increased, shouldn’t a house cost about the same? Is the land worth more? Does it do more now than it did? Has construction material doubled or tripled in price? Do construction companies pay their employees double or triple the wages that they used to pay ten years ago? No. When mortgage interest rates fell banks couldn’t make enough money off of interest to make a profit on their loan under conditions of ordinary risk. That is what made it necessary to double or triple the price of a house. The increase in cost is for giving the bank a profit in an atmosphere of low interest fees and higher risk of a loan default. These same low interest rates allowed the U.S. government to take on enormous debt in order to circulate more money to prevent a deflation. Another way to look at house price increases in our current economy has to do with value. A house offers a stable use value that risk does not have. As risk continues to offer less return, the use value of a house goes up because investors want to trade their value losing capital for a house with a stable use value.

Is this working? Well…fast forward to the present and ask yourself how are investors doing today? It seems they feel insecure. I keep hearing about how the Stock Market has become the cause of an “everything bubble.” I hear the President asking the Federal Reserve to lower interest rates supposedly to provide cheap loans to investors and keep our economy thriving. The Federal Reserve is trying to tread water and not drown by being slow to increase or decrease interest rates. Meanwhile the velocity of money continues it’s slow global circulation because so much money has been printed and yet little wealth is being created with that money. Money is gradually losing its ability to resemble something that you can trade for something else of real value. Money going into derivative bets or other risky investments looks shakier every day. Since the Great Recession, ordinary people have experienced extremely slow growth in their own everyday economy. They also have high costs and insecure employment because of mergers and acquisitions that constantly change business ownership and destroy jobs. Money has to represent something that has real value and trading money in derivatives combined with low interest rates has generated economic insecurity. Meanwhile, derivatives remain part of our economy creating havoc and ultimately costing everyone hugely. If you want to understand these issues more fully, and other issues involving the connection between politics, economics and opportunity, buy a copy of Political Catsup with Economy Fries at Amazon.com.

Where’s the fun?

It seems that the predictions I read back in the nineties might be coming true. I read then that sociologists were predicting domestic terrorism. It’s what we see now in public places where people congregate when there’s someone who starts shooting. What trends did sociologists see then that caused them to predict domestic terrorism?

Was their prediction based on the U.S. having a shrinking economy in terms of the opportunities available to most Americans? Was it based on high inflation being experienced by most consumers for cars, houses, medical insurance, and education? Was it based on fewer good paying jobs with an ever smaller middle class or on falling real wages? Was it based on the use of psychoactive drugs in young and old people as a strategy to control depression or mood? What about our society changed to cause this phenomenon of domestic terrorism?

I remember that I didn’t believe that the prediction would come true back then, because I believed that our society was more stable than that. And it was. I remember that I didn’t believe in a growth of “tribalism,” which was the reason given back then for a growth of domestic terrorism. Even when you swap out “tribalism” for “identity politics” that to me, just isn’t enough to cause someone to go on a shooting spree.

Another thing that made me wonder about our society was the closure of “Toys R Us.” I seldom had a need for their products because I’ve never had a child. Occasionally I would go to “Toys R Us” to buy a shower gift or a birthday gift for a friend’s or relative’s child. I remember the isles were full of stuff but mostly empty of shoppers. So much fun has disappeared from American life that the vanishing of “Toys R Us” felt like a metaphor for all the fun that I noticed has been missing in most people’s lives. An investor has decided to reopen a few “Toys R Us” stores and to shrink their size.  But still, their market has clearly gotten smaller than it once was.

Today, people are making hard choices because they have fewer economic resources. Fewer vacations. Fewer nights of going out to a restaurant. Fewer new anything. Probably fewer long lasting relationships and definitely fewer weddings and fewer children. And when we go to shopping centers or the movies, it seems there’s a lot of reruns. Without invention, there’s less fun.

Engineers test metals or other materials for the force required to break them. Something about our society is exerting enough force to break our people. How much stress is needed to break a human heart or to cause a person to go crazy? Maybe it’s our politics or our economy.

As neoliberalism has advanced, there’s been less choice. And markets have shrunk. Job markets are smaller so fewer people can plug into the economy by using their training and talents. We see a less stable society. The solution can’t be more consumerism. What do we need instead of a new car or new kitchen granite countertops or a European vacation or a Master’s degree or Doctorate?

At this point I can say that we don’t need more government interference with the now broken economy. The government’s interference in economic matters and its ambition to rule over global politics and markets has been too large a goal to realize. Our politicians should give up on those outlandish ambitions. They have littered our America with broken lives. We also don’t need more gun control. We do need fewer monopolies and less political cronyism. It’s good that Obamacare has failed and it’s failure shows us that our politicians should stop trying to control people’s medical choices. We had economic stability before deregulation and we can regain economic stability. We should change our course politically and economically. We don’t need to pretend that everything is ok when clearly it isn’t.

If you want to get a refresher on U.S. history from the perspective of how our political ideologies have changed and if you want to understand how politics and economics combine affect our opportunities buy a copy of Political Catsup with Economy Fries at Amazon.com.