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Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2013
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On Anti-Semitism
Kimball Corson
06/15/2013, Pago Pago, American Samoa

On the Charge of Anti-Semitism

Don't I know it. The charge of antisemitism is a ruse to shut you up when you say something Jews don't want to hear. I have been there a thousand times. Failing with a charge of antisemitism and other efforts, and realizing I can't be muzzled, I have next usually heard the door of friendship slam closed with a "Fuck you, Corson" or words to that effect.

Christianity has a tradition of forgiveness that Judaism more fundamentally lacks. I have subsequently learned much about that, too. Like infidels to Islam, Goyim to Judaism lack preferred status and less is to be tolerated from and forgiven them. They can easily say too much, which tolerated from a Jew, is not to be tolerated from them.

Cave, Muslim and Christian Men
Kimball Corson
06/15/2013, Pago Pago, American Samoa

Cave, Muslim and Christian Men

When and if male physical violence and oppression against women -- as in the Middle East and under Sharia law -- becomes compromised by developing, preclusive secular law, male oppression in the Middle East will have to turn to other means of suppression, such as the psychological, social and vocational techniques adopted by the 21st century American, Christian male. However, we are a long way from that point just now, with much retrogression in the Muslim world, with each new fundamentalist movement.

If cave men could club their women and drag them back to their caves, Muslims ease their effort with Sharia law by engaging in multiple pedophiliacal marriages (age of consent is now typically 9 and holding) and by then keeping their young girls essentially under house arrest, working in and for the household, while their fathers who sold them like chattel go off and count their lucre . A bit like selling livestock at market.

The treatment of the women was essentially the same by the caveman as it is by the contemporary, fundamentalist Muslim male: physical beatings to enforce household and sexual obedience. Popular opinion and secular law eventually caught up with the cave man in most areas of the world, however, as he came out of his cave and began tilling the land to farm it. But things have proceeded more slowly in the Muslim world. Progressivism has little quarter there. But even so, popular, worldwide sentiment and secular law are beginning now to target fundamentalist Muslim males and make inroads regarding their acquisition and treatment of women. The pressure mounts, as this first ad shows.

By contrast, modern Christian male culture has race well ahead of these primitive doings and has developed newer and more subtle means of continuing the oppression of women, all in order to skirt the spirit of progress yet abide by the developing law. The new means are, as explain, now more social, psychological and vocational, with all being used as much as possible to hold and keep women down, if not in their place at home.

If there is one thing Christian dominate males can't stand, however, it is uppity, smart and independent women. That is what the ladies tend to become once they wiggle loose from being just housewives, as the Southern Baptist Conference explains. Independence is substantial liberation from psychological oppression at home, with divorce making it quite possible where necessary. Smarts and developing secular law on non-discrimination and equal pay likewise make vocational containment and control by males of women much more difficult. And uppity females makes even he-men cringe, as playground boys do when the little girls they are picking on, scream bloody murder. Uppity is hard on the ears and a man's peace and quiet.

So while Christian males are ahead in the tortoise race on civility toward women, fundamentalist Muslim males tend to linger at the back of the pack, more aligned with the early cave men. Not exactly worthy of accolades, I say.

NSA Tries to Justify Itself
Kimball Corson
06/15/2013, Pago Pago, American Samoa

Get Ready for Our Government to Lie to Us Again

Shortly, as our government explains, it will tell us how many terrorist plots NSA spying programs have foiled. We are about to be lied to again. Watch it happen. The government is out to justify it NSA spying programs which have too largely been a bust in foiling terrorist attacks but really great at spying on us.

The matter has already been studied. And the truth is most terrorist plots -- some 45 foiled since 9/11 -- have been foiled by citizen action, tips from the Muslim community, basic police work, tips to the police from citizens, law enforcement investigative work, and tips from foreign governments and NOT by NSA spying programs.

Professor Erik Dahl of the Naval Postgraduate School in Monterey, Calif., and the START program at the University of Maryland has compiled the most detailed list of attempted terrorists attacks to date, spanning a period of 25 years, in his paper "The Plots That Failed: Intelligence Lessons Learned From Unsuccessful Terrorist Attacks Against the United States," recently published in the academic journal Studies in Conflict and Terrorism. ($37 for a copy)

Dahl's bottom line: "When it comes to domestic attacks and securing the homeland, what works is really good, old-fashioned policing--law enforcement, tips from the public, police informants--and not so much spies overseas or satellites run by three-letter government agencies."

Why trust a government that is not trustworthy?
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More Government Duplicity

So while NSA is running around providing those in Congress with canned talking points so they can defend NSA's clandestine programs, Rep Loretta Sanchez, who is on the House Committee on Homeland Security and its subcommittee on intelligence and counter-terrorism, is telling us that the disclosures to date about NSA and its spying programs are "just the tip of the iceberg."

Don't you just love this fucking government?
______


The Law as a Joke
Kimball Corson
06/15/2013, Pago Pago, American Samoa

The Law as a Joke

Historically, 501(c)(3) and (4) status has been accorded only to organizations which engage in charitable work. Tax-free status was the reward to doing such charitable work. Now 501(c) corporations are political tools to protect tax-free little more than raw, blatant political shenanigans and skulduggery. They have become instruments of corruption, not charity.

The law, even as somewhat compromised by bad regulations, is still being abused, bastardized and ignored. 501(c)4 corporations are favored because doners don't have to be disclosed. Fear of public repercussions attend any prospect the activities of such corporations would have to be conducted in the open and be subject to public scrutiny. They are the tools of "dark money." IRS and the Justice Department turn a blind eye on these violations of the law because, in essence, they are controlled by the political parties and each party knows not to upset the apple cart of the other party because they will also upset their own. The law is politicized and corrupted.

It is an abomination and a massive abuse in this lawless America on a huge scale.

Muslims Are Nuttier than Even Christians
Kimball Corson
06/15/2013, Pago Pago, American Samoa

Muslims Are Nuttier than Even Christians

All hell broke loose when Mohammad died in 632. A huge schism developed, with the two big factions of Muslims -- the Sunnis and the Shiites -- each appointing their own successor Caliph and fighting the Battle of Suffin which decided nothing but killed a lot of people. They are still fighting, even though they have splintered into sub-sects or factions, as religions are want to do. The two main groupings still apply however, and the Sunnis and Shiites are still at each others throats. Here is how. The setting currently is Syria.

Assad is supported primarily by the Syrian Alawites, a splinter Shiite faction. Iran and Hezbollah are both Shiite and work together to funnel arms to Assad in Syria. Meanwhile, Saudi Arabia, Turkey and Qatar are strongly Sunni and coordinate to give aid and weapons to the Syrian rebels. (The Wahhabis of Saudi Arabia are a hyper-conservative, originalist group of Sunnis.) Iraq splits the difference. Frustrated that Saddam wouldn't let them fight with each other, Iraqi Sunnis go to Syria to fight against Assad; Iraqi Shiites go and fight for Assad. What started out as a local skirmish, transitioned into a nominal Sunni-Shiite civil war and from there has blossomed into a regional proxy war for dominance of the area between the Shiites of Iran and the Sunnis of Saudi Arabia, with the cloak of nationalism transparently thin. All with the same Allah and under the same holy Koran, mind you.

God bless religion.

A Condemnation of Our Universities
Kimball Corson
05/13/2013, Pago Pago, American Samoa

A Condemnation of Our Universities

In the face of all that is occurring and has occurred in regard to both law and its enforcement --- or the lack of it -- and in regard to economics and the economy, the universities in America are much too silent. Law schools and economics departments in particular are not speaking out, nor are their students, aside from the likes of a micro flap at Harvard against economics professor Greg Mankiw by his students. Generally in both quarters -- law and economics -- mum is the world, aside from the independently wealthy likes of Joseph Stiglitz and Paul Krugman. We hear hardly a peep. Why?

I suggest agendas are being controlled by monied interests, directly or indirectly, not only in regard to tenure tracked faculty, but also with regard to research funding and assistance. Those who keep their noses on the grind stone, remain good apologists and who do not rock the boat by speaking out, orally or in writing, get the promotions and grants. Younger faculty in the tradition of Stiglitz and Krugman either get stuck or shown the door. Private research funding of our Universities is through the roof but figures other than federal funding are harder to come by. That is how monied interests control; that and by political pressures brought to bear on federal funding as well.

American academia should be ashamed of itself. It is developing a lackey mentality unworthy of its station.

Observations in Passing
Kimball Corson
05/13/2013, Pago Pago, American Samoa

The Revealed Republican Agenda for America

Republicans notions of progress are to seriously shrink government, ax the social safety net, privatize Medicare and Social Security for the wolves on Wall Street, keep taxes low and otherwise secure the interests of the oligarchy and then lean back and do nothing but wait for supply side trickle down economics to work. Is this a reasonable approach to the problems of America?

______

On Necessary Conditions for Progress

Many of us know pretty well what the ills of our nation and economy are and have good notions on how to address them, but the fact is that is not happening. Good leadership, which is lacking, could easily give those ideas and proposals better focus and direction. Why is such leadership lacking in these circumstances? Here is a proposed answer: The time is not ripe. The Republican party, as protectors of the status quo and the oligarchy, is still too pervasive and strong, although it is painting itself into a corner with the American people. Americans are slowly wising up to the notion that Republicans too much act against their group and financial interests. Will such leadership emerge if the Republicans fragment and crumble like the Soviet empire? Will progressivism then have a chance?



On Freedom
Kimball Corson
05/13/2013, Pago Pago, American Samoa

On Freedom

What is it? Too many conservative take it to mean the right to make and keep money. Have you noticed that, at base, the very definition of freedom for Republicans, as revealed by their behavior, turns on the right to make money any way you want and the right to keep it: free market capitalism - no regulations to restrain profits - no government intrusion on ones predatory behavior - freedom from taxes - no requirement to support a social safety net - no antitrust laws -no aid to education - no enforcement of the laws on fraud - basically nothing that blocks grabbing another dollar. That is conservative freedom, as revealed by their preferences.

Surely freedom should mean more than the protection of Greed. The protection of civil liberties should be essential for real Freedom, but Republicans and too many Democrats give not a whit for such liberties. It is more the right to follow the money trail to grab some.

Freedom is the ability to live unencumbered from exploitation -- not the freedom to exploit

How Bad Law Leads to Corruption of the Economy
Kimball Corson
05/10/2013, Pago Pago, American Samoa

How Bad Law Leads to Corruption of the Economy

Our economy is rife with monopolistic elements causing producers to earn monopoly returns over and above reasonable profits. We have seen that glaringly and recently in regard to price variations in standard medical procedures. Competition is compromised by government misregulation, inherent market defects in rare cases and competitor abuses and collusions in many others.

The antitrust laws are dead. The death they suffered was from modification because they were too effective at being enforceed by lawyers acting as private attorney generals. If regulators are the captives of those they regulate, what alternative is there except to provide appropriate incentives to private lawyers representing those injured by such monopolistic elements and abuses. The modification sprang from Richard Posner's observation - in the true spirit of the University of Chicago (I was a student of Posner's) -- that, in his view, Sec. 1 of the Sherman Act did not protect competitors or consumers, but only competition, a narrowing tantamount to emasculation. Once, under his remarkable influence, this view spread, antitrust died.

No one is seriously interested in competition. Injured competitors are interested in their own injuries. Ditto consumers. But, with the antitrust laws compromised to the point of disutility and the FTCA precluding private standing what is left? Consumer interests, too, like those of competitors, have been undermined by the attending bogus argument that price competition is alive and well no matter what. Such competition is deemed enough. But it really isn't. Not close. Worse, not even what is left is much enforced. This is a farce on wheels in all directions.

Our present public system of regulation and law enforcement is broken. It is not working. After the crash of the financial system in in 2008, the FBI said it had never seen fraud and violations of the law on such a massive and national scale before and it was prepared to work with the Justice Department to prosecute as many violations as possible. However, the SEC intervened at the aegis of those controlling the financial markets and said it had the primary enforcement responsibility in financial markets. The FBI was basically told to stand down again. Thereafter, the SEC did nothing or next to it in regard to enforcement, contending the frauds were too difficult and expensive to prove.

To effectuate the needed private enforcement system, several things need to or should occur. First the tons of garbage regulations that clog the CFR's, which are too often ignored in the breach and unenforced effectively by regulators controlled by those they regulate needs to be given a serious haircut. Much should be thrown out the window. Second, a minimalistic set of new and effective laws needs to replacement them that are characterized by bright lines and plain language. Those laws, among other things, should do several things. First they need to simplify and restate the law of fraud to require no more than a negligent misrepresentation and caused injury in fact. Second, the antitrust laws need to be restated to protect not only competition, but - as before -- competitors and consumers alike injured by violations. Finally, private standing needs to be afforded under the FTCA with fee awards and multiple damages.

Third, those injured by market participants acting in violation of these laws need to be able to hire private attorneys and sue. Fourth, the law should specify that when such attorneys are successful in proving a violation and caused injury, then reasonable attorneys fees should also be recoverable along with multiple damages by the client. The attorneys would in effect become "private attorney generals" as before under the antitrust laws.

Regulators and public law enforcement officials have proved themselves to be wholly inadequate. However, they would still be entitled to try when and where they want to, but without recovering attorneys fees or actual damages already recovered by private counsel for the same violation.

This scheme 1) marginalizes regulators who are invariably controlled by those regulated and too often have their hands out and 2) utilizes otherwise underutilized resources -- private attorneys properly incentitivezed - to get the job done. A Constitutional amendment would be nice to require all laws to use bright lines and plain language. Laws that did not would be subject to judicial declarations of unconstitutionality.

Congressional tinkering with the law and CFR's at the aegis of lobbyists would be seriously compromised. Court's could uphold the new "bright line/plain language" law. Congress would be more relegated to largely doing other things and the courts could address the issues less fettered. They have given up too much turf to the other branches of government already.

Where regulation seems required, as in markets that fail in and of themselves, as with health care as Kenneth Arrow has shown, nationalization might well be the preferred course. Americans pay twice as much per capita for health care as those in the other OECD advanced nations, receive only 68 percent as much doctor attention and have significantly worse health care outcomes, all, as recent studies show. Where markets cannot work, they should be nationalized.

Banking is open for discussion. Why the franchise to create new money and then earn net interest income on it should be given to bankers who, unlike private lenders, suffer no opportunity cost on money truly lent, is not at all clear. Worse, in regard to banks, we have the tail of the dog wagging the economy. Lobbying and buy off efforts should be shoved aside. We should not put up with it.

Changes are need. Many understand what they are. For Congress, it is business as usual. Pocket lining proceeds apace. The electorate unfortunately is befuddled and does not understand except in terms that are too general and lack focus. A major push on several fronts is necessary. What I have outlined here is one of them and a major one at that.

Post Script: Look at the problem from the other end: how many frauds and economic wrongs are done to us each year for which we have no effective remedy or recourse. We get murdered in increments. The law of equity states every wrong has a remedy, but what a joke that is when the bar is set impossibly high in to many directions. That problem is my target here.

On Exploring in Old Age
Kimball Corson
05/07/2013, Pago Pago, American Samoa

On Exploring in Old Age

My eyes are windows into the lives of others and how they live within their smaller families, their extended families, their places or homes and in their villages, in their places of worship and then in their islands or nations. Welcomed in well enough, I am hesitant and must be cautious not to disturb because in truth I am only here for today and then gone tomorrow. I wish to leave no hole or gap for where I was. I am the quintessential observer, a voyeur on life's differences, nuisances and beliefs. It is not my place to disturb or even leave a personal footprint of note.

I myself have lived such a life -- a full and interactive life; too full, I thought at times ---but it is now time for me to see how others do it in the arrays of possibilities spread out across the globe. A sort of emotional and interactive sightseeing tour to accompany the varied scenery and settings presented. How truly rich and varied this life is with its endless permutations, structures, patterns and ways. The only thing fixed is the existence of differences. The only thing permanent is change. There is a quiet, certain and prevailing belief within each culture that its patterns, beliefs, religions and ways are the best. But that view always fails my equally silent on-going comparisons. The only enduring commonalities I can attest to are abuses of various kinds, care for one another, the consumption of food, the elimination of waste and the pervasiveness of and need for community, shelter and human interaction. Perhaps the love of uniforms could be added. Much else is up for grabs.

So I keep my emotional and carbon footprints to a minimum and always move on and forward; never backward. The world is too big and varied to look or go back and my lifespan too short.

Blythe Masters: a Banking Corporate Villain Up Close
Kimball Corson
05/06/2013, Pago Pago, American Samoa

Blythe Masters: a Banking Corporate Villain Up Close

She is a senior old hand at JP Morgan Chase and a dishonest rat. A math/economics wizz out of Cambridge. Masters, the head of JP Morgan's commodities business, is known as a pioneer in the use of credit derivatives, financial products that played a starring role in the 2008 financial crisis. Her success at JP Morgan stemmed from her vision in the 1990s that these products could transform the banking industry by allowing the financial system to earn much greater profits at the price of much greater systemic risk.

She became a managing director at 28, then the youngest woman in the bank's history to reach that rank. Derivatives seemed "creative" and also appealed to Ms. Masters because of her quantitative background, she once said. By separating certain risks from an underlying asset, derivatives seemed to offer a way for a bank to make more loans than it otherwise would be able to.

She made a breakthrough when Exxon, a longtime client, asked for a credit line. To offload the risk without actually selling the loan, Ms. Masters arranged a deal with the European Bank for Reconstruction and Development in London, in which the bank would get fees in exchange for assuming the risk of default while J.P Morgan would keep the interest earnings.

The deal was known as a credit default swap.

Soon, the Masters and team at JP Morgan began talking to regulators about the new product. In 1996, the Federal Reserve essentially and stupidly gave its blessing with a statement suggesting that banks could use credit derivatives to reduce their capital reserves. This could be done by swapping out the default risk on loans outstanding so as to treat those loans as new reserves. As one banker put it, 'Suddenly, we had unlimited capital to lend.'

But the grand promise of derivatives came undone in the financial crisis of 2008. The contracts ended up making embattled institutions even more vulnerable to mounting losses. Warren E. Buffett called derivatives "financial weapons of mass destruction." And that made Ms. Masters a "destroyer of worlds," as a September 2008 article in The Guardian declared.

But it seems Masters picadillos don't end there. Now the claim is she has lied under oath and criminally obstructed an investigation of JP Morgan Chase. Here's how, with a bit of background first.

In the energy market investigation, the enforcement staff of the Federal Energy Regulatory Commission (FERC) intends to recommend that the agency pursue an action against JP Morgan over its energy trading in California and Michigan electric markets.

Its 70-page report also took aim at a top bank executive, Blythe Masters. The regulatory document cites her supposed "knowledge and approval of the schemes" carried out by a group of energy traders in Houston. The agency's investigators claimed that Ms. Masters had "falsely" denied under oath her awareness of the problems and said that she and others at JP Morgan had made "scores of false and misleading statements and material omissions" to authorities.

JP Morgan, of course, claims that it and Masters are as innocent as the driven snow and is preparing a further response. Yet under "pressure to generate large profits," the agency's investigators said, traders in Houston devised a workaround. Adopting eight different "schemes" between September 2010 and June 2011, the traders offered the energy at prices "calculated to falsely appear attractive" to state energy authorities. The effort prompted authorities in California and Michigan to dole out about $83 million in "excessive" payments to JP Morgan, the investigators said. The behavior had "harmful effects" on the markets, according to the document.

For now, according to the report, the enforcement officials plan to recommend that the commission hold the traders and Ms. Masters "individually liable." While Ms. Masters was "less involved in the day-to-day decisions," investigators nonetheless noted that she received PowerPoint presentations and e-mails outlining the energy trading strategies. The bank and Masters, investigators said, then "planned and executed a systematic cover-up" of documents that exposed the strategy, including bogus profit and loss statements.

In the March report, the government investigators also complained about what they said was obstruction of justice by Ms. Masters. After the state authorities began to object to the strategy, Ms. Masters "personally participated in JP Morgan's efforts to block" the state authorities "from understanding the reasons behind JP Morgan's bidding schemes," the document said.

The investigators also referenced an April 2011 e-mail in which Ms. Masters ordered a "rewrite" of an internal document that raised questions about whether the bank had run afoul of the law. The new wording stated that "JP Morgan does not believe that it violated FERC's policies."

This gal is a money grubbing bitch on wheels. She even looks toxic.

Contracts and Torts
Kimball Corson
04/27/2013, Pago Pago, American Samoa

Contracts and Torts

They govern the world of human behavior subject to legal process. Contracts govern the world of behavior with agreements and torts, the world of behavior without them. Classical contract law is abrogated by supervening tort notions to better enhance fairness, especially in this age of declining literacy.

But now, the Achilles heel of torts -- the beleaguered claim of fraud -- is failing in the world of behavior without contracts. Fraud, with its classical, nine multiple elements, is too hard and expensive to prove so too much of it occurs without remedial consequence. Wall Street earns its living off that fact. The classical nine elements required to prove fraud are:

(1) a representation;
(2) its falsity;
(3) its materiality;
(4) the speaker's knowledge of its falsity or ignorance of its truth;
(5) the speaker's intent that it be acted upon by the recipient in a manner reasonably contemplated;
(6) the hearer's ignorance of its falsity;
(7) the hearer's reliance on its truth;
(8) the right to rely on it;
(9) the plaintiff's consequent and proximate injury.

4, 5 and 6 are the rub. I think they should be dropped as affirmative elements of proof -- especially 5 -- except perhaps allow 6 as an affirmative defense in some cases. False statements and reliance should mostly do. Justice would be better served. More crooks would pay up in civil suits and criminally, more would also go to jail. Wall Street would get a hair cut. Constructive fraud should have the same adjustments where there is no affirmative misrepresentation, but a constructive one in the circumstances, instead. However, it should not be enough to prove fraud that a Wall Street broker's lips were moving.

Fraud is more important than many realize because there is often fraud in the inducement to form a contract or agreement. The two worlds overlap there, with torts prevailing.

The law needs fixing. It is out of balance and bad behavior is more prevalent than it should be. Courts allow it because 1) the law is out of kilter as I explain and 2) courts tend too much to defer to the class of larger businesses that engage in fraud, the propertied and monied interests (which too often slip judges money and favors).

The Verities
Kimball Corson
04/25/2013, Pago Pago, American Samoa

The Verities of Life

No good deed goes unpunished.
No good idea remains well received.
No success comes without failure.
No effort remains uncompromised.
No justice comes but by accident.
No happiness comes with effort.
No hatred survives without anger.
No great love survives boredom.
No institution survives unchanged.
No politician becomes a statesman.
No newness can survive ageing.
No goodness can exist without evil.
No pain can exist without pleasure.
No integrity survives compromise.

What Policymakers Don't Understand that's Important
Kimball Corson
04/12/2013, Pago Pago, American Samoa

What Policymakers Don't Understand that's Important

Bernanke, for example, understands Milton Friedman's helicopter drop of money. He has studied Friedman, but he was not, like I was, an actual student of Friedman's.

Friedman argued that if helicopters flew over and dropped money for all to grab, after the necessary time for a new general equilibrium to be reached, prices will have risen in proportion to the additional quantity of money dropped. The quantity theory of money equation, MV= PT, would reflect the higher prices and the larger money supply. Real, non-monetary variables would ultimately be unchanged.

While many still thinks in these terms, a few also realize that under modern monetary theory, a new bank "loan," for example, simply consists of a new and positive entry in a borrower's demand deposit account. That is how new money is in fact created. It is destroyed when the "loan" is paid back. Substantively, nothing more is involved except for the "loan" documentation paperwork. But too few connect and relate the two ideas. They mistakenly continues to think the government cannot directly and substantially increase spending in the economy unless it engages in deficit spending or cuts taxes. Printing currency in large quantities, most realize, is not something modern governments directly do to get more money for the government expenditures thought needed for counter cyclical policy.

What should be realized here is Bernanke could combine these two ideas -- a helicopter drop of money and how new money is created by banks -- so as to have a helicopter drop of "demand deposit accounting entries," as it were, bolstering everyone's checking account by the same amount, thereby quite directly and substantially increasing consumer spending and aggregate demand, and do so without more deficit spending or taxes being cut. A negative non-income tax, if you will.This could be done by an order from the Fed to all member banks directing them to make such equal deposit accounting entries for all demand deposit accounts and then providing each bank with the reserve account deposits at the Fed to do so.

Now the Friedmanites at this point, with Bernanke wondering, would argue that prices will rise proportionately by doing that, generating inflation. But will that happen? And did Friedman really believe that personally? I think not and here is why:

But look at the present situation. The rich and corporations are sitting on tremendous money or cash hoards -- some $2 trillion dollars plus --that they have pulled from circulation in the economy; plant and equipment are sitting idle in substantial quantities; and we have almost enough of our working age population not employed to start a new economy of about the same size as ours. So the prospect of monetary inflation is not exactly breathing down our necks. If the economy where fully employed, yes, inflation could be a problem, but not so much with the economy in its present doldrums, even if it has developed a discernible pulse lately. In fact, deflation remains the more worrisome prospect, with so much money being horded from circulation and so many idle resources at hand, including so many people who are not working.

However, if such inflation were to raise its ugly head, the solution is simple and easy. Forget efforts to mop up excess reserves as Bernanke has talked about, by increasing banks' reserve requirements or having large Fed bond sales from the Fed's New York open window. The government could simply reverse its effort (or "helicopter 'deposits' drop") and impose an equal and positive non-income tax on all deposit accounts and then not spend or destroy the proceeds. This is a quick and effective means to check such inflationary pressures. Of course, the Fed would have to coordinate with the Treasury, but technically that should be doable, at least in theory.

Bernanke and too many economists don't get this. They don't really understand money. Even back then, I think Friedman implicitly understood the suggestion here, but kept quiet about it because it was too inconsistent with his personal politics. But he said enough privately and taught enough in classes, looking back, to persuade me that he did. But does Bernanke? Or most in Washington? What is suggested here is a much stronger idea actually on how to powerfully regulate aggregate demand much more directly without changing taxes or increasing or decreasing deficit spending. Of course, some policymaker's would have to set their ideologies aside and get up to speed on modern monetary theory. I know. I know. That's asking a lot.

The Republican Lie that America is Broke
Kimball Corson
04/10/2013, Pago Pago, American Samoa

A "must read" for every American. Read it twice to be sure you got it all. Rarely is so much truth so well packaged into so succinct a piece. Truths we all need to understand if we are ever going to fix what is broken in Washington, D.C.
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The Biggest Republican Lie -- 'America Is Broke'

by Robert Creamer

The big lie in American politics today is that "America is broke" or "in this time of austerity we have to tighten our belts." America is not broke. We are not in a time of "scarcity" and when we buy into this fallacy, we contribute to political decisions that actually will do damage to our standard of living and that of our children.

This lie is used relentlessly to argue that "America just can't afford" investments in education, or infrastructure, or jobs programs. It is used as the justification for the need to cut Social Security benefits, shift the cost of Medicare to senior citizens, increase the costs families bear to send children to college, or cut back on food for low-income children.

The fact is that for ordinary people times are tough. Median per-person income for ordinary Americans hasn't increased for 20 years. And the federal, state and local governments are short of revenue.

But America is not broke -- far from it. Ask the gang on Wall Street. Ask the bankers whose recklessness caused a massive financial collapse, yet continued to get multi-million dollar bonuses, if America is broke.

The reality is our economy is producing a higher gross domestic product per capita -- the best measure of the sum of goods and services produced by our economy per person -- than at any other time in American history. Gross domestic product per capita slumped after the Great Recession that was caused by the recklessness of the big Wall Street banks. Then it once again began to increase and has now reached record levels.

Overall, America is still the wealthiest nation in the world -- and wealthier today than it has ever been.

In fact per capita gross domestic product increased over eight times between 1900 and 2008. That means the standard of living of the average American today is over eight times higher than it was in 1900. Average Americans today consume eight times more goods and services than they did at the beginning of the last century. We are eight times wealthier today than we were then.

And note that GDP per capita has increased six fold since Social Security was passed in 1935 and 2.3 fold since Medicare was passed in 1965. Demographic trends, like the number of seniors in society, have been massively outstripped by increases in our per capita gross domestic product -- or standard of living. Those who claim that while we might have been able to afford Social Security and Medicare when they were passed, we just can't afford them anymore, are just plain wrong.

So if per capita gross domestic product keeps going up, how could it be possible that the median income of ordinary Americans hasn't increased in twenty years? And why do we have such big budget deficits? Why do we feel so broke in our everyday lives?

The answer is that we are not living in a time of scarcity. We have been living in a time of enormous inequality. Look at a guy like John Paulson. In 2007, as the financial crisis descended, he made $4 billion in personal income betting against subprime mortgages that helped sink the rest of the economy. In 2011 he made a record $5 billion in personal income as the manager of a hedge fund.

In 2011, Mr. Paulson made as much as 100,000 of his fellow citizens who earned $50,000 per year.

Ordinary people haven't had a raise in 20 years, while the wealthiest among us have accumulated unthinkable riches. As a percentage of national income, corporate profits have risen to their highest levels since the 1950's -- 14.2 percent in the third quarter of last year. At the same time, the percentage of national income going to wages dropped to 61.7 percent -- almost to its low point in 1966.

And we are living in a time of scarcity for government budgets because Republicans in Congress slashed taxes on the wealthy, opened up new loopholes for big corporations, and obstructed policies that would put everyone back to work and generate new tax revenue.

Ask our friend Mr. Paulson how Republican tax policies affected him. Had he somehow managed to make his $5 billion laying bricks or sweeping floors, he would have paid taxes at a rate of 35 percent on the bulk of that income. Instead, he paid at a rate of only 15 percent, since he earned his money by speculating as a hedge fund manager instead of making a useful good or service. Makes sense, right?

Remember that just over 12 years ago, under Bill Clinton, America had budget surpluses as far as the eye could see and the most prosperous economy in human history. Then George Bush and the Republicans cut taxes for the wealthy, conducted two wars on a credit card and intentionally tried to increase budget deficits so they could justify shrinking the size of the public sector and allowing big corporations and the wealthy to have a larger and larger share of the pie.

Republicans were not the least bit shy in explaining why they helped create deficits. By starving government of money, they forced the perception that "we're broke" and can't "afford" critical public sector outlays. As anti-government crusader Grover Norquist once explained, by cutting tax revenue, he hoped to shrink the size of government small enough to be "drowned in a bathtub."

And the thing that is most outrageous is that far from "not being able to afford" expenditures like new roads, bridges or mass transit system -- or "not being able to afford" investments in educating the next generation -- our refusal to do so will actually reduce our standard of living -- right now, and in the future.

What really reduces our standard of living -- our per capita gross domestic product -- is when able workers, plant and equipment sit idle without producing goods and services. Unemployment costs our standard of living goods and services that we will never recoup.

Does it make sense that we let roads and bridges crumble while able-bodied people who are perfectly willing to rebuild them instead spend their days pounding the pavement looking for work? That's just plain stupid.

And it turns out that the other thing that really reduces our standard of living is when we create even more economic inequality by cutting Social Security benefits, or reducing the power of unions to demand good wages, or cutting teacher's salaries -- because when we do that we put less money in the pockets of consumers, money that they use to buy products and incentivize companies to invest in more production and more hiring that create economic growth.

The bottom line is that cutting Social Security benefits with Republican proposals like the "chained" CPI will actually reduce economic growth.

We need to get our "fiscal house in order." But all proposals to do that are not created equal. The principle test for whether proposals make sense is whether they increase or reduce economic inequality -- whether they put more income in the pockets of ordinary people, or allow it to concentrate in the hands of the John Paulson's of the world.

Let's put our fiscal house in order by eliminating the cap that protects higher income taxpayers from having to pay Social Security taxes on income over $108,000. Does it make sense that someone who makes the median wage of $50,000 has to pay Social Security taxes on 100 percent of their income and someone who makes $500,000 has to pay Social Security taxes on only about a fifth of their income -- or that someone like our friend John Paulson pays Social Security taxes on only .002 percent of his income?

Or let's do it by eliminating tax loopholes like the ones that save people like Paulson hundreds of millions because he is a speculator instead of a secretary.

Let's do it by ending tax subsidies to oil companies that are among the most profitable enterprises in human history.

Let's do it by requiring Medicare to negotiate with drug companies to get the best price on pharmaceuticals. Right now Medicare is prevented by law from negotiating for the best price. Medicare is required by a law passed by the Republicans to allow the drug companies to chump the taxpayers into paying rates sometimes twice as high as the price that the same companies charge people in other countries.

Let's put our fiscal house in order by changing the way we finance health care and stop paying 40 percent more per capita for health care than any other country and getting results that rank only 37th in the world.

Let's cut deficits by creating economic growth through a major program to develop alternative energy and rebuild our infrastructure.

Let's prepare our economy for the future by passing proposals like President Obama's initiative to provide universal pre-school education and cutting the cost of sending kids to college.

And for God's sake, let's stop repeating the great lie that "America is broke" or that "we have to make cuts in this time of scarcity." By repeating this big lie, pundits and policy makers help justify policies that actually will reduce our standard of living and the economic prospects of generations to come.

 

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