What's Going On With The Economy: Part III
The federal government and the rich are having a significant impact of the stability of the economy.
The state and local governments are in a pinch. Their revenues are down, way down, because the taxes they rely upon, namely sales taxes, income taxes, and property taxes, are all on the decline. As the these revenue sources diminish, so to does the spending of the states, most of which, is upon paying people to support the general welfare of all the people of the state.
The people are in a pinch. The total amount of money that they are bringing home has diminished markedly, and their ability to borrow is seriously curtailed. While they might like to spend much, much more, spending money at businesses, on all sorts of products, the reality is that the people do not have the capacity, or the level of irrational exuberance, necessary to increase the spending level.
In many cases, the people "buy used", which is simply an exchange of an already existing product for money. People buy stocks, bonds, houses, and other used items, which often has only a fraction of the impact that actually going out and buying products would have.
The businesses, and even the corporations, are in a pinch. They are experiencing less sales, and sales are necessary to keep the revenue coming in, and in order for the businesses to continue borrowing money, on a rolling basis, into the future. As they have less and less sales, certain businesses fail, taking with them any jobs, taxes, or other contributions to the economy. Other businesses reduce their expenses by layoffs, pay cuts, benefit cuts, hour cuts, the result being that less money is flowing through the businesses and back into the economy.
Draining the money out of the economy are many corporations, foreign countries, oil producers, and banks.
The corporations take profits, and in order to make more profits, shift as much production as possible to the location with the lowest cost to do business, which is typically in other countries.
The people in the USA buy all sorts of products from foreign corporations, sending the money out of the US economy, on a path that may or may not return it to the USA in the necessarily timely fashion.
The oil producers, both foreign and domestic, whose total world oil extraction rate is already declining, and perhaps more importantly, whose amount of oil available for purchase on the world market, is decreasing even more rapidly, leading via the existing mechanisms to very volatile pricing, whose fluctuations intensify or depress the functioning of the national economies. In the case of the USA, as the price rises, people are forced to spend a greater and greater fraction of their money on the products of oil, and thus less and less money is available to support their typical spending patterns. This puts additional pressure on the domestic private sector to reduce expenses, meaning both cutting payroll costs in the USA, and perhaps outsourcing more production to other nations.
The banks, the profit seeking private corporations whose sole purpose is to maximize returns, via their monopoly on the validation of the credit of the people, are faced with the consequences of seeking to maximize short term profits by relaxing and abolishing standards of credit approval. Now, they find that the promissory notes, including the home mortgages, are suddenly worth fractions of their noted value, as people such as those who recognize that they're in impossible situations, walk away from homes that are worth much, much less than they "owe" to the bank. The banks in turn, are, slowly but surely, marking down the values of their assets, which automatically decreases the value of the bank. Given the continued decline in the value of homes and other real estate, as well as businesses and other extensions of credit, the banks, in order to maximize profits, must raise standards of lending, cutting off a supply of credit to the people that had been used for years. The banking system, as a whole, was bankrupted in this process, but the actions of the Federal Reserve Bank and the U.S. Federal Government propped up the system in the name of stability.
We can tease two more fractions out of the whole of the economic system: the rich and the federal government.
The rich are getting richer. Their riches come from the labor of the people, from the innovation of the people, from the risks taken by the people. Each dollar they earn, or have, comes from others, either directly or indirectly, and over the past 50-years, they have convinced enough people that they themselves are the essential aspects of a strong economy. Despite the fact that they work the same number of hours, or less, than the average working person, the income of the rich, and their vast assets of property, grow disproportionately to the income of the people.
This income disparity convolutes the economic system. A person earning a million dollars per year spends their money very differently from a hundred people earning ten thousand per year. The hundred people buy food, and clothes, and pay rent, and buy fuel, and support the base of the economic activity in the country. The millionaire buys different food, and different cloths, and pays different housing expenses, and shopping at different stores. The more money that goes to the rich, the less money is available to support the bedrock of the economy.
The rich also have a disproportionate ability to alter their spending patterns. While the spending patterns of the poor are very predictable and regular, the millionaire can easily stop spending tens of thousands in one month, to save up, or just to take a break; or can spend well beyond their income, adding a sudden jump in sales to the businesses they frequent.
As the income disparity grows between the rich and the poor, the rich's impact on the the volatility of the economy increases. In one recent example, one billionaire made an announcement on his spending patterns, for the expressed purpose to stimulate the economy. One person, whose single decision, could stimulate an entire economy.
The state governments. The people. The businesses. The spending on foreign products. The spending on oil. The privately owned banks. The millionaires and other rich. What these all have in common is their operation within a set of laws and rules established and enforced by the federal government.
The federal government can create jobs, or destroy jobs, as simply as by changing its spending. At the moment, it is considering cutting $60,000,000,000 of spending. Those left jobless would include all sorts of federal employees, and those supported either directly, or indirectly, by this federal spending.
By reducing the spending levels, the federal government threatens to not only force thousands, or millions of people into desperation, but also threatening to push the economy into a new phase of contraction, leading to even more job losses in both the private sector, and, eventually, in the state and local public sectors.
The federal government could provide jobs for everyone, just as it during past crises, and yet, due to a fear of debt, a fear which appears to be mirrored by the people, the government is unable, and perhaps unwilling, to provide jobs for everyone.
One stumbling block for the federal government is their belief that the only way to employ people is by borrowing money from others. Their sources of income are two: taxes and the selling of bonds. One is a requirement. The other is a hope. Upon selling the bonds, the government has then obliged itself to repay the bonds with interest.
The federal government has the ability to simply hire people directly without borrowing money. Money, after all, is a construct of societies. It is simply a symbol to represent the credit that one has earned or been given. Various organizations have attempted to point this out to the federal government, using terms such as US Dollars (not Federal Reserve Notes), and Sovereign Money, and the like. Still, motion in the federal government on this topic is between slow, and non-existent.
Upon stepping back, to view the economy from a distance, one can see that the amount of money is inadequate. Millions are ready and able to do productive work, right now. Yet, they sit idly, available but uninvited, unable to contribute to the general welfare of the nation.
At the same time, the call for help achieving the general welfare grows by the day. There is need for infrastructure to be fixed and improved, need for help in schools, need for revitalization of urban neighborhoods, need for cleaning up the messes left by profit-seeking corporations, and needs to help us achieve a more perfect union.
With an infinite amount of productive work to be done, for both those that live now, but also for the next generations, the call to enable the people to do this work is beginning to rise.
Some argue that to employ so many would lead to great economic ills, but if one takes a moment to think, one can see that the result would be a burst of spending throughout the economy, as the people went to work for the good of the nation, and spent their hard earned money back into the private sector, which in turn would necessitate hiring. This new lifeblood in the economy would also course to the states and local governments, through the normal revenue channels, and allow the states to continue to provide for the good of their people.
The federal government also has the ability to stabilize the economy in other ways.
With one bill, the federal government could restore the necessary and appropriate level of contribution and taxation on the rich, to decrease the income disparity, to promote the general welfare and common good, and to ensure domestic tranquility.
With one bill, the federal government could ensure that tariffs were placed on imported products enough to motivate people to buy American, and to necessitate dead and dying industries, providing even more jobs for the people.
With one bill, the federal government could nationalize the entire financial services industry, to ensure the stability of the nation, and to remove the profit motive from an industry whose primary purpose is to validate the credit worthiness of the people.
Still, how does one deal with two other major impediments to economic stability: corporate personhood and energy dependence?
Related Reading
http://en.wikipedia.org/wiki/Economic_inequality
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States
http://en.wikipedia.org/wiki/History_of_central_banking_in_the_United_States
http://en.wikipedia.org/wiki/Monetary_reform
http://en.wikipedia.org/wiki/New_Deal
http://en.wikipedia.org/wiki/Trade_deficit
http://en.wikipedia.org/wiki/Tariffs_in_United_States_history
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
The state and local governments are in a pinch. Their revenues are down, way down, because the taxes they rely upon, namely sales taxes, income taxes, and property taxes, are all on the decline. As the these revenue sources diminish, so to does the spending of the states, most of which, is upon paying people to support the general welfare of all the people of the state.
The people are in a pinch. The total amount of money that they are bringing home has diminished markedly, and their ability to borrow is seriously curtailed. While they might like to spend much, much more, spending money at businesses, on all sorts of products, the reality is that the people do not have the capacity, or the level of irrational exuberance, necessary to increase the spending level.
In many cases, the people "buy used", which is simply an exchange of an already existing product for money. People buy stocks, bonds, houses, and other used items, which often has only a fraction of the impact that actually going out and buying products would have.
The businesses, and even the corporations, are in a pinch. They are experiencing less sales, and sales are necessary to keep the revenue coming in, and in order for the businesses to continue borrowing money, on a rolling basis, into the future. As they have less and less sales, certain businesses fail, taking with them any jobs, taxes, or other contributions to the economy. Other businesses reduce their expenses by layoffs, pay cuts, benefit cuts, hour cuts, the result being that less money is flowing through the businesses and back into the economy.
Draining the money out of the economy are many corporations, foreign countries, oil producers, and banks.
The corporations take profits, and in order to make more profits, shift as much production as possible to the location with the lowest cost to do business, which is typically in other countries.
The people in the USA buy all sorts of products from foreign corporations, sending the money out of the US economy, on a path that may or may not return it to the USA in the necessarily timely fashion.
The oil producers, both foreign and domestic, whose total world oil extraction rate is already declining, and perhaps more importantly, whose amount of oil available for purchase on the world market, is decreasing even more rapidly, leading via the existing mechanisms to very volatile pricing, whose fluctuations intensify or depress the functioning of the national economies. In the case of the USA, as the price rises, people are forced to spend a greater and greater fraction of their money on the products of oil, and thus less and less money is available to support their typical spending patterns. This puts additional pressure on the domestic private sector to reduce expenses, meaning both cutting payroll costs in the USA, and perhaps outsourcing more production to other nations.
The banks, the profit seeking private corporations whose sole purpose is to maximize returns, via their monopoly on the validation of the credit of the people, are faced with the consequences of seeking to maximize short term profits by relaxing and abolishing standards of credit approval. Now, they find that the promissory notes, including the home mortgages, are suddenly worth fractions of their noted value, as people such as those who recognize that they're in impossible situations, walk away from homes that are worth much, much less than they "owe" to the bank. The banks in turn, are, slowly but surely, marking down the values of their assets, which automatically decreases the value of the bank. Given the continued decline in the value of homes and other real estate, as well as businesses and other extensions of credit, the banks, in order to maximize profits, must raise standards of lending, cutting off a supply of credit to the people that had been used for years. The banking system, as a whole, was bankrupted in this process, but the actions of the Federal Reserve Bank and the U.S. Federal Government propped up the system in the name of stability.
We can tease two more fractions out of the whole of the economic system: the rich and the federal government.
The rich are getting richer. Their riches come from the labor of the people, from the innovation of the people, from the risks taken by the people. Each dollar they earn, or have, comes from others, either directly or indirectly, and over the past 50-years, they have convinced enough people that they themselves are the essential aspects of a strong economy. Despite the fact that they work the same number of hours, or less, than the average working person, the income of the rich, and their vast assets of property, grow disproportionately to the income of the people.
This income disparity convolutes the economic system. A person earning a million dollars per year spends their money very differently from a hundred people earning ten thousand per year. The hundred people buy food, and clothes, and pay rent, and buy fuel, and support the base of the economic activity in the country. The millionaire buys different food, and different cloths, and pays different housing expenses, and shopping at different stores. The more money that goes to the rich, the less money is available to support the bedrock of the economy.
The rich also have a disproportionate ability to alter their spending patterns. While the spending patterns of the poor are very predictable and regular, the millionaire can easily stop spending tens of thousands in one month, to save up, or just to take a break; or can spend well beyond their income, adding a sudden jump in sales to the businesses they frequent.
As the income disparity grows between the rich and the poor, the rich's impact on the the volatility of the economy increases. In one recent example, one billionaire made an announcement on his spending patterns, for the expressed purpose to stimulate the economy. One person, whose single decision, could stimulate an entire economy.
The state governments. The people. The businesses. The spending on foreign products. The spending on oil. The privately owned banks. The millionaires and other rich. What these all have in common is their operation within a set of laws and rules established and enforced by the federal government.
The federal government can create jobs, or destroy jobs, as simply as by changing its spending. At the moment, it is considering cutting $60,000,000,000 of spending. Those left jobless would include all sorts of federal employees, and those supported either directly, or indirectly, by this federal spending.
By reducing the spending levels, the federal government threatens to not only force thousands, or millions of people into desperation, but also threatening to push the economy into a new phase of contraction, leading to even more job losses in both the private sector, and, eventually, in the state and local public sectors.
The federal government could provide jobs for everyone, just as it during past crises, and yet, due to a fear of debt, a fear which appears to be mirrored by the people, the government is unable, and perhaps unwilling, to provide jobs for everyone.
One stumbling block for the federal government is their belief that the only way to employ people is by borrowing money from others. Their sources of income are two: taxes and the selling of bonds. One is a requirement. The other is a hope. Upon selling the bonds, the government has then obliged itself to repay the bonds with interest.
The federal government has the ability to simply hire people directly without borrowing money. Money, after all, is a construct of societies. It is simply a symbol to represent the credit that one has earned or been given. Various organizations have attempted to point this out to the federal government, using terms such as US Dollars (not Federal Reserve Notes), and Sovereign Money, and the like. Still, motion in the federal government on this topic is between slow, and non-existent.
Upon stepping back, to view the economy from a distance, one can see that the amount of money is inadequate. Millions are ready and able to do productive work, right now. Yet, they sit idly, available but uninvited, unable to contribute to the general welfare of the nation.
At the same time, the call for help achieving the general welfare grows by the day. There is need for infrastructure to be fixed and improved, need for help in schools, need for revitalization of urban neighborhoods, need for cleaning up the messes left by profit-seeking corporations, and needs to help us achieve a more perfect union.
With an infinite amount of productive work to be done, for both those that live now, but also for the next generations, the call to enable the people to do this work is beginning to rise.
Some argue that to employ so many would lead to great economic ills, but if one takes a moment to think, one can see that the result would be a burst of spending throughout the economy, as the people went to work for the good of the nation, and spent their hard earned money back into the private sector, which in turn would necessitate hiring. This new lifeblood in the economy would also course to the states and local governments, through the normal revenue channels, and allow the states to continue to provide for the good of their people.
The federal government also has the ability to stabilize the economy in other ways.
With one bill, the federal government could restore the necessary and appropriate level of contribution and taxation on the rich, to decrease the income disparity, to promote the general welfare and common good, and to ensure domestic tranquility.
With one bill, the federal government could ensure that tariffs were placed on imported products enough to motivate people to buy American, and to necessitate dead and dying industries, providing even more jobs for the people.
With one bill, the federal government could nationalize the entire financial services industry, to ensure the stability of the nation, and to remove the profit motive from an industry whose primary purpose is to validate the credit worthiness of the people.
Still, how does one deal with two other major impediments to economic stability: corporate personhood and energy dependence?
Related Reading
http://en.wikipedia.org/wiki/Economic_inequality
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States
http://en.wikipedia.org/wiki/History_of_central_banking_in_the_United_States
http://en.wikipedia.org/wiki/Monetary_reform
http://en.wikipedia.org/wiki/New_Deal
http://en.wikipedia.org/wiki/Trade_deficit
http://en.wikipedia.org/wiki/Tariffs_in_United_States_history
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.