There is a deep flaw in the $1 trillion coin scheme of the modern monetary theorists: and I think the flaw dooms modern monetary theory (MMT) entirely. For those who are unfamiliar with the $1 trillion coin scheme, this is a brief statement of the logic:
— Congress has provided the authority, in legislation passed during the 1990s, for the US Mint to create platinum proof coins with arbitrary fiat face value having no relationship to the value of the platinum used in these coins. The US code also provides for the Treasury periodically sweeping the Mint’s account at the Federal Reserve Bank for profits earned from coin seigniorage generally. These profits are then booked as miscellaneous receipts (revenue) to the Treasury and go into the TGA, closing the revenue gap between spending and tax revenues. Platinum coins with huge face values e.g. $2 Trillion, would close the revenue gap entirely, and technically end deficit spending, while still retaining the gap between tax revenues and spending. If used routinely to close the revenue gap, such jumbo coin seigniorage would reduce the national debt to zero, and remove it as an issue in US politics. In addition, the existence of jumbo coin seigniorage as an option, removes the tension between the mandated debt ceiling and the 14th Amendment. It is the countervailing factor I mentioned earlier, because it provides a way to spend Congressional appropriations without issuing further debt.
The post provides lots of additional links to the thinking of the small group of non-mainstream economists who support the idea and are actively trying to educate the public on its implications.
The implications of this scheme appear to be truly significant: if the reasoning outlined in their writings are correct, the theorists of the modern monetary school have shown, not just in theory, but as a simple practical operation, that the Fascist State effectively has nearly unlimited capacity to fund its operations without taxes or other sources of revenue, and without driving the nation deeper into debt.
While some on the Left will welcome this argument as a solution to funding social safety net programs in a time of increasingly fiscally conservative public opinion, those who are committed to an anti-statist program will immediately recognize the grave implications of this argument: MMTers are arguing that the state has almost unlimited money capacity to divert social resources to wholly unproductive uses, like wars of aggression and global dominance, through its monopoly over the issue of currency.
The MMTers, however, are trying to solve the wrong problem: they are trying to figure out how to finance the Fascist State at a time when there is growing concern about deficit spending. But, the problem of Fascist State deficits has nothing to do with financing state expenditures; rather, the expenditures themselves are driven by the need to stabilize a world economy suffering chronic global overproduction. And, those expenditures necessary for stabilizing interventions are entirely financed by capital itself out of the surplus value it squeezes from the working class.
Simply stated: the problem is not lack of means for Fascist State spending, it is lack of outlets for profitable investment — a surfeit of capital. Fascist State expenditures don’t inject “money-demand” into the economy, the spending removes excess capital from the economy. This excess capital is squandered, consumed unproductively on things like military build-ups, etc. It really does not matter what the capital is wasted on, so long as it does not increase wages or investment.
MMT provides an answer to Fascist State revenue by creating money ex nihilo, but this leaves the excess capital in circulation. Over-investment is not curtailed, but additional money-demand appears out of nowhere — this actually exacerbates the over-production.
The result: the excess money-demand causes inflation, while the over-production creates a deepening stagnation. Much like the Great Stagflation of the 1970s depression, you end up with excess money-demand side by side with excess capital, generating both rising prices and falling investment.
MMT only looks at the consumption side, while ignoring excess capital. And, superficially, this appears to makes sense, because there is no excess capital in an absolute sense — that is, there is need for more investment to satisfy human needs. There is poverty, and this poverty implies a shortage of all the things society needs to meet its basic needs. There is unemployment, and a mass of labor power made idle through no fault of its own.
The problem, however, is not the excess means of production, and means of consumption, nor even the surplus population of workers, but that this surfeit of means and labor power cannot function as capital — cannot be employed profitably, hence the excess is absolute only in relation to profitable investment opportunities.
My hypothesis suggests stagflation of the 1970s was suppressed by the Reagan deficits of the 1980s — which began the Great Moderation. The Reagan deficits added the missing component to money printing, by removing much of the excess capital and consuming it unproductively.
More significantly, my hypothesis suggests, and reinforces my belief, that, from the standpoint of the capitalist mode of production there is not too much debt, but too little. That, to “fix” the current crisis and depression, more, not less debt is necessary.
Moreover, this new debt must be in dollars, and can only take this form, because it is the only currency universally recognized as money. This hypothesis predicts, in other words, an oncoming global currency crisis and the eventual replacement of all currencies by the dollar.
If the Tea Party is successful in capping or significantly slowing federal deficit, and consumer debt does not significantly increase, the result will be a collapse in more or less rapid succession of existing currencies and a rescue attempt by the Federal Reserve. The Fed will have to begin purchasing non-dollar denominated assets in some new “Mother of all QEs”.
The key to realizing this problem with MMT was the acknowledgement by its theorists that some form of sterilization had to happen. Money had to be removed from the system even as it was being pumped in by government spending. They proposed a reverse QE program where the Fed would sell the assets it has already purchased in QE and QE2.
The problem with this is:
- these assets are limited, and,
- these assets were bought at prices well above mark to market.
The Fed could sell the assets, but it would have to take a massive haircut on them, and interest rates would rise, I think. Moreover, that would only solve the problem until 2013 or so.
There was always an inherent danger in quantitative easing that the Fed had to exit sooner or later and would take a loss on these assets. QE was a gamble that the value of the assets would recover with improving economic conditions, particularly home prices. The assets themselves are entirely fictitious — they are claims on profits which may never materialize. Without a genuine recovery of profits, these claims are worthless.
So, from the standpoint of the Fascist State and the need to prop up the existing relations of production, not only must the debt ceiling be raised, there can be no significant slowing of Washington deficits — and even these two are not enough. There is a crying need for dollar denominated debt over that which is currently being created by Washington. The more Washington debt creation is slowed, the more urgent dollar denominated debt creation elsewhere becomes.
I want to thank Kevin Carson for his response, Jehu Eaves’ Critique of My Work, to my series, A critical examination of Kevin Carson’s Mutualism, in which I attempt to clarify Marx’s theory in relation to Kevin’s own mutualist theory.
As always, the attempt to find common ground across diverse communist trends running through Anarchism, Libertarianism and Marxism is confounded by differences in methods, focus and interpretations of historical events. Marx’s own efforts were singularly unique and often pose as much an obstacle to his would be followers as to his opponents. I am only coming to grip with his material myself by comparing his views with assertions made by others of those views, such as that offered by Kevin, and, particularly, by Marx’s alleged sympathizers among Marxists.
In examining Kevin’s argument, my desire was to remove, insofar as it is possible, the merely historical (that is, accidental or chance) elements of Marx’s own argument regarding social development to lay bare what is essential to his theory. This, of course, assumes, first, that I actually understand his essential argument; and, second, that I have grasped it sufficiently to paraphrase it in something approaching an intelligible fashion. I can honestly say each assumption is a work in progress.
When writing the series, I began with the working assumption that Kevin’s and Marx’s models did not differ as history. That, as a matter of actual historical facts, I would assume both agreed on all the basic material available for examination. Based on this assumption, I purposely set out to push this idea to its most extreme limits until I hit an obstacle that could not be ignored and would have to be directly addressed.
I felt confident that when I hit the point where Kevin and Marx actually diverged in their respective arguments, I would be dealing not with a matter of historical fact, but of theory. And, this appeared to me to be a well grounded effort because Kevin has such a grasp of history and the material under discussion that where the two diverged would likely be not a matter of the material, but its interpretation.
Moreover, once I read Kevin’s Studies in Mutualist Political Economy it quickly became obvious to me that assuming Marx’s agreement with Kevin on matters of purely historical fact was in fact the antidote to much of the nonsensical trash that passes for Marxism today. Bluntly stated, it is far easier to get to the essential core of Marx’s theory by examining the writing of opponents like Kevin, than it is through study of most of those who claim to be his followers.
When stripped of all the purely historical material, Kevin unerringly identified the essential difference between Marx’s historical materialist theory and the three major communist trends:
In Anti-Dühring, Engels vehemently denied that force was necessary at any stage of the process; indeed, that it did little even to further the process significantly.
He quotes Engels’ offending statement from Anti-Duhring:
…even if we exclude all possibility of robbery, force and fraud, even if we assume that all private property was originally based on the owner’s own labour, and that throughout the whole subsequent process there was only exchange of equal values for equal values, the progressive development of production and exchange nevertheless brings us of necessity to the present capitalist mode of production, to the monpolization of the means of production and the means of subsistence in the hands of a numerically small class, to the degradation into propertyless proletarians of the other class, constituting the immense majority, to the periodic alternation of speculative production booms and commercial crises and to the whole of the present anarchy of production. The whole process can be explained by purely economic causes; at no point whatever are robbery, force, the state or political interference of any kind necessary.
This argument, put forward in its most profound and unapologetic form by Engels in Anti-Duhring, is the rock on which 21st Century critical theory founders. It is a rebuke, above all, to most, if not all, current iterations of Marxist theory, because it admits no compromise with even the most free and democratic State. Engels proposes that even if we assume a State founded on democratic control through the universal suffrage of a vast proletarian majority, such a state must, of necessity, still express in political form the actual subjugation of that population to the system of wage slavery. And, it must express this subjugation, since it rests, not on the abolition of wage slavery, but the proletariat’s utter dependence on it. For historical materialist theory, this must be true even if the capitalist class forms only a negligible minority of the population.
Democracy is not an ideal form of State to which realization communists must aspire, it is itself the very State that must be broken.
I want to address some questions raised by commenters to Reddit r/anarchism regarding my post, “Open Letter to Certain Members of the Libertarian Party: Please, stop being assholes”.
It was not my intention to pick a fight on the merits of mainstream Libertarianism — I am solely concerned with the problem of antipolitics; which is to say, I am solely concerned with crafting a message to the majority of voters that dismantling the state is in their interest.
If you cannot craft a message that contains this idea and lock onto to it like a pit-bull you leave yourself vulnerable to fascist opponents.
The core proposition I am advancing is that the population looks to the fascist state to preserve and protect their interests. I don’t intend to define those interests for people, I only want to draw some outline of the parameters based on actual characteristics.
First, people have to eat — in our society, you eat one of two ways: out of the proceeds of your labor, or out of your revenue from your stock of capital. The vast majority — 99 percent — of the population depend entirely on their labor, or, absent this, some form of public subsistence.
Second, people fight for their interests with every means available to them — political, economic, etc. All divisions in society are political, and all battles have the objective to gain control of and wield power on behalf of these interests. The history of the fascist state is nothing more than history of this universal competition over control of the coercive powers of the state in order to use these coercive power to enforce definite interests within society — to impose these interests on society as a whole.
In this sense, there is not an iota of difference between the Koch Brothers and AFL-CIO. And, our goal as anti-statists against both the Koch Brothers and the AFL-CIO is identical: we want to deny them this coercive state power. We do not favor the political power of the Koch Brothers against the AFL-CIO, nor the AFL-CIO against the Koch Brothers.
The corollary of this position is that we want to abolish both laws that protect the monopoly property rights of the Koch Brothers and laws that protect the labor rights of the members of the AFL-CIO. On the surface, this appears brutally indifferent to the circumstances of every member of society — it is no wonder people are against it. It is brutally indifferent to class conflict, to race, to religion, to sexual preference, to national origin, to all differences among us.
So, Rand Paul is entirely correct to be against the 1964 Civil Rights Act, but not because it was unconstitutional or such nonsense, but because antistatists are against all laws, law itself, and the coercive functions of the state.
Antistatists believe the state does not end conflict and division within society, but sustains and reinforces these conflicts and divisions. The conflict between wage labor and capital could not for moment continue today, if it were not for the constant intervention of the state into the economy. While we may differ over the cause of the conflict between wage labor and capital, we entirely agree the state facilitates it. We agree that the role of the fascist state is to manage the conflict, not abolish it.
Our indifference to the circumstances of wage labor or capital in relation to the state, does not result from a common view of the conflict; it results from a common view of the role of the state in sustaining division and conflict and making its continuation possible.
Every antistatist has her own view of what society looks like after the state is abolished — some have several contradictory views. If those views had any impact whatsoever on the trajectory of human society, they might be of some significance. The fact is, all the views, all the models, all the blueprints for a new society are meaningless — mankind will take no notice of them. In the aftermath of the abolition of the state people will create their lives as they see fit based on conditions they discover empirically. So, it is not a matter of debate over differing visions of a post-state society that should concern us, but creating the post-state society.
That is, figuring out how to abolish the fascist state.
In my opinion, this comes down to the practical problem of convincing a working majority of the population that dismantling the state is in their interest — how ever they define this interest. (We do not seek to define it for them.) In the post, I argued you can begin by telling the wage laborer that if she votes for you you will strip every labor protection from her. I leave it to you to decide whether this is a promising strategy.
The other political approach is to show why abolishing the state will improve her life. And, by showing, I do not mean charts, blogs or books — I mean a platform that really will work for her, that will improve her life. Like, for instance, abolishing the national security state, and, with this, abolishing all her taxes, and reducing her hours of work. You might disagree with me on the specific proposals, but you get my drift. Practical improvements in people’s lives must be demonstrated.
Some people, either because they want to prove themselves more radical than everyone else, or because they serve some interest, imagine they must put forth the most aggressive program against the economic interest of the majority of voters.
Folks, this ain’t going to work, and it only helps the fascists hold onto power.
If, Barack Obama is “defending grandmothers and social security”, while antistatists are frontally attacking it — who wins this argument? If Barack Obama is “defending the environment”, while antistatists are issuing blistering attacks on the EPA, who wins? Our argument is that Social Security is a failure, because it does not end the inscecurity of seniors. The EPA is a failure, because it does not end the damage to the environment.
These programs are failures because they do not address the problems that forced them to be created in the first place.
So, that was my argument. I chose to present it the way I did in order to get people to read it and think about the issues I raised. It was not a diatribe against “rightwing libertarianism”, as some believe, but an argument against all three communist (antistatist) trends and the failed political strategy of one of more promising vehicles for political struggle against the state. I believe the term, “rightwing libertarianism” is a silly term: if you want to abolish the state you are a social revolutionary — pure and simple, no qualifications.
Something has got to change, folks.
I spent the day parsing Kenneth Rapoza’s article at Forbes.com, “What a US Default, Downgrade Might Look Like”. Boy, it is some scary stuff, if you are a weak-kneed congressman from a red state — the kind who has to choose between his instincts and visions of total global meltdown should he push the wrong button. Says Rapoza:
“If the US doesn’t raise the debt ceiling…it will be unable to borrow to meet short term obligations.
Rapoza doesn’t say why this is true, nor does he discuss any other alternatives to borrowing. We are expected to swallow his party line. Couldn’t the US just print the money it needs? Couldn’t it prioritize payments to meet its debt service obligations? Couldn’t it simply defer payments or force its creditors to restructure Federal debt? Rapoza doesn’t explain why the Congress’ failure to raise the debt ceiling has to end in default. Instead, he just jumps to his nightmare scenario:
“A short-term default would be a disaster for the US economy, and ruin its legacy as global safe haven.
Rapoza conjures up the woeful fate of Greece, which now has “the worst credit rating in Europe.” He is suggesting the US will suffer the same fate: we too will have the “worst credit rating in Europe” — only we are not in Europe. Moreover, all other debt is rated against US debt — not just other US entities, but all other debt in the world market. To give one example: the suggestion was made the other day by Sean Egan of Philadelphia-based Egan-Jones Ratings that the Fed will have to backstop Europe
All things being equal, the most likely source of support for the ECB is the U.S. via Ben Bernanke, who during the first signs of the crisis, ginned up more than $580 billion in dollar swaps in 2008 and 2009 with central banks around the world. These lines went out in a size and with a velocity never before seen in the Federal Reserve system, but were repaid. The swap lines have been extended through August 2012. The dollar-liquidity swap lines are with four major central banks—the ECB, The Bank of England, The Swiss National Bank and the Bank of Canada. The lines with the ECB are unlimited. The rationale was that there is no credit risk, because they are short-term, and the ECB was interposing itself between the sick European member banks and the Fed.
This implies, all debt — even pristine German debt — ultimately rests on the full faith and credit of the United States; downgrade US debt, European debt markets implode. If people no longer have faith in US debt, there is no debt to speak of any longer — because Europe cannot backstop its bank deposits. Once a bank run began, there would be no entity capable of “shock and awe” intervention — like TARP — except the Federal Reserve Bank.
So, Mr. Rapoza is, to put it mildly, overstating the rating impact of a US refusal to raise the debt ceiling. The rating agencies will not call BS on the US. It will never happen — even if the US never paid a penny of debt service again for all of eternity. The US debt ceiling vote is a revolver pointed at the heads of the plutocracy, Clint Eastwood style — do they feel lucky?
“Well, do you, punk?”
Anyone who thinks US debt will be downgraded only has to look at the asset ledger of American banks — mark to fantasy accounting. Still, Rapoza plods his way along his already discredited argument — a campfire tale to scare the junior campers Lake Woebeuntous: “My God, the US is in worse shape than Greece — if you add up all its obligations due until the sun blinks out of existence.” He quotes the head pimp at PimpCo, Bill Gross,
“We owe more than Greece…or any other developed country. We’ve got a problem…”
Bill the Pimp adds,
“…and we have to get after it quickly.”
So, you see, there is no time left for debate. The sky is falling. No time to examine the argument or facts of the case. If we don’t fix this, mankind as we know it will be extinct in two weeks. Hand the suckers in Congress a three page draft of a fragment of an idea of a plan to address the crisis, and yell, “Fire.”
I once saw a guy lose $20 to a three card monte gang on a street corner in New York using this very same technique. I am not exaggerating about that — I really saw it. As soon as he lost his money, someone in the back of the crowd yelled, “Police are coming.” The poor mark stared in bewilderment as the gang quickly scooped up the implements and scooted. Shit was funny.
Okay — now we have the bleak prospects of a nation hurtling to its economic and financial doom — let’s offer a glimmer of hope. So, Rapoza writes:
“The US does have a problem, but it has something Greece never had, nor any country in the world… AAA credit status”
Can’t you sheeple get it? The one hope we have of avoiding Armageddon is the very thing the Tea Party is threatening to destroy — our national FICO score! Imagine what it will cost to borrow, if we don’t borrow, to service the obligations what we have already borrowed We can still save the day, but it will be difficult at best:
“The US Treasury Department has a lot it can do…but before it does any of those things, it needs the debt ceiling to be raised”
So we have an impending extinction level event that will blot out the sun forever and render the planet uninhabitable. Timmy Geithner can fix it, but he really needs to borrow your credit card — and soon. Those idiots in the Tea Party, however, are preventing him from getting access to your bank accounts, social security number, and 401K. If they keep up their antics:
“…the government would have to stop, limit, or delay payments on a broad range of legal obligations… including Social Security and Medicare benefits, military salaries, and interest on the national debt… which is paid to big, market maker banks… not to mention the government of China…”
Did, Rapoza forget anyone? Let’s see: he aimed a fear message at seniors, and everyone who has a living grandparent, the sick, military families anyone who has every had money in a bank, or a 401K — and, of course, the Chinese. That may not be everybody, but it sure is a fair slice of the voting public. Oh, I almost forgot:
“Defaulting … including coupon payments to bond holders, would cause severe hardship for the US economy.”
Now, it includes everybody — on the entire planet! Everyone who directly or indirectly has business with anyone in the United States. We’re all going to die! Say your prayers, and grab your ass — this will be worse than Hiroshima.
“Those who survive will envy the dead.” —Our Lady of the Rosary
And, it is all the fault of those creationists in the Tea Party — damned fools think they are going to heaven anyway, so they don’t care. According to Rapoza,
There are two things investors consider when buying government bonds. They are essentially making two bets. One bet is on the government’s ability to pay that debt within the maturity of the bond, so whether it is 10 or 30 years, investors are betting that the government will make good on its promise to service its debt and pay it in full throughout the life of the bond. The second bet is political. Investors are hoping that the government doesn’t suddenly change its political and economic system entirely (emphasis added) and, as a result, opt out on paying bondholders. When it comes to the US, investors know they are investing in a political system that will remain sound.
In plain-speak: investors are betting Washington never stops inflationary economic growth. “Inflationary economic growth” is just a fancy economist term meaning Washington gets you to work longer and harder for less income. It should be clear, that debt creation is not a side-show to this policy: IT IS HOW THE POLICY WORKS. Essentially, it means you end up working more time just to pay off past debts, and less time feeding yourself and your kids. I wish I had one of those “red-pill, blue-pill” Matrix thingies, to get this into the heads of every so-called progressive and Marxist: Every additional dime of debt service means a dime of more work with less income. Rapoza writes,
“When it comes to the US, investors know they are investing in a political system that will remain sound.”
Translation: Americans are idiots and will never catch on to the scam. However, when Congress began publicly talking about the idea of default this was not a good sign. Rapoza writes,
Until Ryan, there has never been talk of any real possibilities of a short-term default. Bond holders at bulge bracket banks said off record that Ryan’s comment was “the dumbest thing they have ever heard.”
(According to Wikipedia, “The term ‘bulge bracket’ frequently refers to the group of investment banks considered to be the largest and most profitable in the world…”)
Now, with the default cat out of the bag, Rapoza ticks off a series of deliberately confusing events that allegedly would ensue following a US default:
One can only imagine what would happen if the US government missed a payment now. In short, it would be much worse. Bond prices would fall [yields would jump] higher. Interest rates on short-term loans would jump like a gazelle. Gold and oil prices would push higher, causing inflation in big emerging markets like China and Brazil, and pressuring gasoline prices in the US.
Why would this happen? Rapoza has no idea; he is just repeating what was told to him, because he is a parrot masquerading as a journalist. So let’s go down this list.
Bond prices would fall? Why would they fall? First, the bond market is a wholly owned subsidiary of the Federal Reserve Bank. Why would bonds prices fall when the Fed can create as much money as it needs to buy up every bond out there? A fall in bond prices would amount to a run on the Federal Reserve Bank, which has unlimited capacity to satisfy demand for bonds. The Fed could backstop itself, and all other banks on the planet at the same time — just as it did during the financial crisis of 2008. As Marshall Auerback and Rob Parenteau put it in a 2010 post, the Fed could slam bond vigilantes faces in the concrete as often as necessary until they get the message:
Then, every time some big swinging dick bond trader tries to push [bond yields] above 3.5% by shorting Treasuries, the Fed slams their face into the concrete by having the open market desk buy the hell out of UST until the 10 year yield is back to 3.5%. Burn Fido enough times, yank his chain enough times, and like the Dog Whisperer, he gets it and stops.
So, bond prices, at least in theory, need not fall. However, the Fed might stand on the sideline to let them fall just to deliver a message to Congress: “Raise the debt ceiling or else!” Which is to say, the Federal Reserve could start dictating terms to Congress.
Since, yields are simply the inverse of prices, without falling prices, you don’t get higher yields. Moreover, as was shown by the financial crisis, instability in the global economy induces investors (speculators) to move into the dollar. Now, why would this be true?
Simple: only the US has unlimited capacity to print currency to satisfy bondholders. No other nation has this capacity. This is why, ultimately, European banks must be backstopped by the Fed. So, the much vaunted bond vigilantes are, in reality, another campfire horror story to scare the junior campers. It is designed to dump so much scary and confusing information into your lap, you will simply lie down and let your rapist have his way. The information is not designed to encourage debate, but to avoid it.
The next scary-horror-thriller-terror-tale is that gold and gasoline prices with skyrocket. So, let me ask you: when is the last time you bought gold? Yesterday? Last week? How much of it did you buy? A couple of pounds of it, or a necklace? So much for gold prices, right?
Gasoline, of course, you probably buy twice a week or more — so this just might be a problem for you. So, let me ask you another question: what happens if Congress doesn’t increase the debt ceiling? The correct answer: The economy slides deeper into depression, as suddenly Federal spending drops just like state and local spending. When the economy contracts, demand for goods falls — gasoline is a good, just like shoes. If the debt ceiling is not raised gas prices will drop because speculators foresee less demand.
In fact, Rapoza, in his desire to make his bankster masters happy, has given in to outright fraudulent arguments. If you have been keeping track, you would have noticed that gasoline prices — and the prices for everything — has risen with increasing US debt. As each iteration of quantitative easing has been announced, commodities of every sort have reached new peaks. Prices have been driven along by the growth of US debt, and Fed quantitative easing — and food riots have broken out everywhere. A contributing factor in Egypt’s revolution were price increases spurred by Fed quantitative easing. Rapoza, however, would have us believe that inflation is caused by NOT CREATING new debt — again, this guy is not to be trusted.
Rapoza doesn’t have an argument with the internal consistency to stand on its own: he is relying entirely on throwing too much allegedly sophisticated information at you. This blizzard of confusing pseudo-factoids is meant to stand in place of an argument. He continues:
A default, let alone a credit downgrade if a default of any length were to happen, would have catastrophic economic consequences, potentially including the loss of millions of American jobs. It could lead to the loss of jobs, primarily, because as the US credit rating goes from AAA to AA — which would be the most likely downgrade — credit default swaps, or insurance on bonds, would increase for corporate bond issuers. That means it would cost companies more money to borrow. Many companies, seeing their bond prices fall, would likely be forced to offer the market higher interest rates to bring them back to the table. Higher borrowing costs is not good for growth. The job market, already hit or miss, would likely be put on pause.
As usual, Rapoza cites no source for his job loss estimate, nor any real hard number of how many millions of jobs would be lost. Is “millions” ten million? Is it twenty million? Fifty million? Two million? The US economy creates a million jobs a week even in a depression. So, are we talking about a loss of week’s worth of jobs or six months’ worth of jobs? Again, this is scary-horror-thriller-terror-talk.
The object, of course, is to avoid questions like: “What can we do to offset or avoid these job losses.” Rapoza is essentially arguing that the US public debt must increase constantly just to stay in the same place on employment. There is, he argues, no choice but to constantly increase US public debt if we are to avoid catastrophic jobs losses. If earlier Rapoza argues investor confidence is tied to job growth, now he argues job growth requires increasing debt to investors. The circle is complete: investors demand inflationary job growth, because inflationary job growth demands we borrow from investors. The flip side of his argument, of course, is that the accumulation of new debt itself is not sustainable over any reasonable period of time. And, the corollary of this latter argument is that job creation is not sustainable over any reasonable period of time.
Notice also how Rapoza argues the job losses would result from increased borrowing cost borne by the “job creators”, i.e., corporations. He proposes a domino effect: The downgrade of US public debt, increases insurance on corporate bonds, increasing corporate borrowing costs. Rapoza could make this argument stick but he would need to prove corporations have created a single net job in the US in the last 30 years. If Rapoza could show us figures proving US corporations created any net new jobs in the US economy in the past 30 years – BINGO! – he wins.
In fact, only a relatively small number of information age start up companies have created net new jobs in the US, and, when taken together, overall job growth is net negative. Essentially Rapoza is making the argument the US should raise its debt ceiling and borrow more to keep interests rates low so corporations can create jobs in — China? Folks, I am not making up Rapoza’s argument. You can follow my chain of reasoning based on his own words. The debt ceiling should be raised so companies can borrow at low interest rates here to export productive capital overseas.
Okay. Let’s go on. Rapoza says:
Many mutual funds and sovereign wealth funds (SWF) would instantly be forced to either change their investing covenants from AAA-only, to allow for the purchase of AA bonds. Many funds are only allowed to invest in AAA debt. If the US got downgraded, says Sara Zervos, who manges $14.03 billion in international bonds at Oppenheimer Funds in New York, every SWF and teacher’s pension fund in the country would be forced to change their rules. “You couldn’t possibly have a mass exodus out of US Treasurys like that, it would be a disaster,” she says. “I can’t image that a technical default would lead to a downgrade because that credit rating is based on the ability to pay,” she says. “Losing our triple A status would be a very big deal.”
There is no question US treasuries are the largest single form of wealth on the planet, so let’s just imagine every holder trying to sell at once. Clearly, a US downgrade, even if some lunatic at a rating agency took himself seriously enough to announce a downgrade on US debt, would be ignored by the markets. If, for no other reason, than the lack of buyers for the treasuries, and the lack of liquidity to facilitate the transaction. Only the Fed could provide such a facility, and it could provide it only in dollars.
So note what Sara Zervos, of Oppenheimer Funds, says:
“You couldn’t possibly have a mass exodus out of US Treasurys like that it would be a disaster…”
Although Ms. Zervos says it would be impossible to exit US bonds, Rapoza positions the quote to make it appear she is predicting an actual disaster. The operative phrase is this:
“You couldn’t possibly have a mass exodus out of US Treasurys…”
It’s like the scene from the Richard Gere movie, An Officer and a Gentleman, where he tearfully admits “I got no where else to go!” Bondholders got nowhere else to go. Global holders of US treasuries are screaming,
“Don’t you do it! Don’t you do…I got nowhere else to go… I got nowhere else…”
And they are saying this to you. The same bastards who took down your job, the value of your home, your retirement, and your children’s future, are now trying to scare you into continuing to play their Ponzi scheme, because they got nowhere else to go.
And be sure to piss on their graves after its all over.
If the Libertarian Party ever figures out how to de-link stateless society from unrestrained rule of capitalism, they will be a real third party. I have never seen a group so willing to step on its own message and create hostility to its ideas among the population as the Libertarian Party.
This is the essential Libertarian Party message: “Yes. Elect us and we will strip every protection from you in the most aggressive and predatory fashion we can manage.”
Jesus Christ, how is this message supposed to appeal to anyone? You want to turn public water supplies over to private predators? You want to strip workers of basic protections? This is where you want to begin dismantling the State?
Well, I hope that works for you — it ain’t working for anyone I know. You cannot exploit antisocial sentiments to change society.
In Massachusetts for two decades now Libertarians have been trying to get rid of the so-called temporary income tax surcharge. Like any tax, this “temporary tax” one has become a permanent burden on the citizens. How can the population not support this? Because the spokespersons for the effort are the most primitive thinking pro-capitalist ideologues. They want to dismantle the state to hurt the mass of people, not to make the economic position of the majority better. In their narrow view, everyone in society is a parasite sucking on the tit of the “producers”, i.e., Capital. So, they (honestly, it appears) think dismantling the State must hurt that mass of society.
And this is their essential argument to the majority of society: “We will get rid of you parasites.” People already think without government GM will be paying $0.50 an hour for labor again. How, in god’s name, is this argument going to appeal to anyone?
Rand Paul made deliberately provocative statements about the Civil Rights Act; in doing this he only reinforced the image of Libertarians as complete reactionaries — not innovative revolutionaries. How did Rand Paul not know Washington was waiting eagerly for him to make a silly statement like that. Washington knows the idea of abolishing the state is just radical enough to be completely misunderstood, and they exploit every mistake by advocates to demonstrate this.
Compare Rand Paul’s idiot outburst to Obama’s complete discipline and attention to his message. Fascists know message matters. A Fascist knows his message must address the perceived needs of the population. Who in the population wants to work for $2.00 an hour? Who wants to let BP turn the Gulf of Mexico into an oily swamp — Obama does, but you will never hear those words out of his mouth! Instead, the Libertarian Party says it for him! My god, are you assholes brain-dead? Even as BP was doing everything it could to kill the Gulf, Obama was speaking about doing everything he could do to avoid the catastrophe. And, what were Libertarians doing? Complaining about the Clean Water Act. You guys are stunningly ignorant.
Every time the Libertarian Party issues a statement, they damage the cause of a stateless society. A stateless society will immediately improve the well-being of the overwhelming majority of society — or it is a pipe dream, folks. No one in their right mind is going to vote themselves a pay cut. No one in their right mind wants water fountains labeled “colored only”. If your message carries even the hint of such abominations, you have to be more aggressive than everyone else in kicking those assholes out. Because people already think that without government White Citizens Councils will be running the South again. If you allow these mistaken views any credibility, you are screwed, marginalized, and worthless to the cause.
Everyone who is against the state has to be on the same message: a stateless society will improve the lot of every member of society. And, if you really don’t believe this, you need to leave the movement, because you are an antisocial asshole. If you don’t agree that ending the state improves things for everyone, then you want to dismantle the state to HURT the majority of people — and that is fucked.
If you think a stateless society will lead to segregation and $0.50 an hour wages, and you still want to do this, you need to seek professional help.
I have been reading a recent debate between an Anarchist and a Marxist and it strikes me as amazing that two people with such opposing views both manage to miss the point. Communism is NOT the aim of mankind — it is an entirely insignificant transit point; how both debaters manage to forget this is staggering. Of course, both spent an enormous amount of time rehashing the 19th Century. (Yes. They cleared up that dispute — NOT.)
Proudhon, Bakunin, Marx and Lenin likely never had as many differences in real life as these two had quoting them. I am sure Proudhon was never as confused about what Marx believed as these two were about what either believed. Why frigging debate if you can’t even agree on basic facts? Does it make sense to debate what fact are facts?
Okay, we have the Paris Commune — Proudhonists ran it, Marx thought it was the bees knees — how the heck can you argue over it? The whole life of the Commune was about 60 days; but Marxists and Anarchists have spent the next 140 years arguing about it. Really people? 140 year argument over a two month failed experiment? Yes, the French take their politics seriously, but this is ridiculous. I took a PoliSci-101 course that lasted longer than the Commune. This really isn’t about differences over the Paris Commune, this is a bunch of dominant male types who each want the other to submit. This is all about who gets to fuck whom in the ass — and who has to bend over.. Admit it. The Paris Commune has nothing to do with this. Marxists and Anarchists get in a room, and immediately they have to unzip their flys and compare wee-wees.
There ain’t a dime’s worth of difference between Marxists, Anarchists and Libertarians. They are all marginal and insignificant. They make up for their complete insignificance by proving how pure they are, and how corrupt or stupid the other two are.
While each are trying to prove how more against the State they are than the next guy working people are voting for GOP or Democrat fascists. CLUELESS! The last thing a worker wants in this country is for you to take her Fascist State away. The Fascist State can abuse her, humiliate her, spy on her, and send her child home in a body bag; but as long as the check is in the mail, she’s all good.
The failure to understand how important it is to the worker that the Fascist State continue at all costs is the what is killing communism. We keep operating on the assumption that the workers have to be dragged kicking and screaming into the voting booth. It ain’t so. The proletariat is as much a political class as the bourgeoisie — and this implies each fights for control of the State.
Anarchist don’t want to recognize this fact; so they reject politics. Marxist cannot see the implications of this fact; so they embrace it. We have to recognize both the fact and its implication — if we want to move forward. The proletariat will be the last defender of the Fascist State. Ask a 99er, if you do not believe me, they are crying for help. Ask a home owner under water. Ask a public employee. Our people are being crushed by Capital, and are looking to Washington to save them! The irony of that shit is stunning: the Fascist State exists only to make it possible for the worker to be crushed. And, this is not something that can be argued away — you cannot convince the unemployed that Washington cannot help them.
Just try it sometime and prove it for yourself.
Anarchists have to learn you cannot build a non-exploitative society from below or as a series of small communities, syndicates, etc. Not in present society, where raw materials come from Africa, components come from Asia, and finished products roll off the line in Germany, to be sold in Altlanta. There is a single global instrument of production and it is global. You will not convince the vast majority of the society to go back to the pre-industrial age. Marxists have to explicitly recognize the implication of political action: it is antithetical to human development and voluntary association.
How you thread the needle on this is beyond me. Political action is both necessary and the opposite of what we are trying to accomplish. But, if you are not willing to even face the question, how do you ever find the answer to it?
Marx’s bottom line, worst case scenario was total global economic meltdown all at once and simultaneously in every nation. The mass of proletarians, facing an extinction level event, would figure it out. He spells this out in the German Ideology in 1846. He really doesn’t pull any punches on his argument. It is bleak and terrifying. Essentially, he says: “You will figure it out, or you will die — in any case that is where capitalism is headed.”
Everything he speaks about after this is just trying to avoid the worst case scenario — how to avoid it by political action. Perhaps, “avoid” is the wrong word — “anticipate” the outcome through political action of the proletariat. His differences with the Anarchists simply revolves around this, but, for us, it is of no significance whatsoever. If the railroads where still the cutting edge of technology, there might be a basis for argument between Anarchist and Marxist.
I say “might”, because in action there was no difference — as shown by the Commune, when reality takes over bullshit ends. But, the railroads are not cutting edge technology, and 70 percent of the population do not live on farms anymore. We are no longer in Kansas.
The conquest of political power by the proletariat is NOT on the agenda — in almost every nation, the proletariat is now the largest class. Political power is held entirely by this class, through the Fascist State — a state founded on wage slavery, but, ruled by the slaves as slaves, and for the perfection of their enslavement.
To my mind the question is “How does political action lead to the abolition of political action, i.e., abolition of the State.” And, I am serious about this: gone are the courts, democracy, the minimum wage, OSHA standards, the Marines, Social Security, the whole nine yards — everything must go.
Try to explain that to the average workers and be prepared to be called a lunatic — it doesn’t even figure in politics. You might as well argue for the mandatory conversion of Southern Baptists to Islam. Tell the average worker that money is completely unnecessary in present day society and watch the smoke rise off her head.
“Well, how would we eat?” She’ll ask, as if she eats money.
The articles I wrote were thought pieces — what does anti-politics look like? How do you use the State to abolish itself? How do you use political action to put an end to politics?
The libertarians are correct that you have to run against the Fascist State. But they are silly to think you can start with the minimum wage. What nonsense — this works for no one but a tiny handful of wealthy owners of capital. If you want to run against the Fascist State set Social Security in opposition to the vast military empire of the Fascist State. Which do you think people will choose? Set Medicare against debt service.
You have to prove getting rid of the Fascist State ends poverty and unemployment — not makes the misery of the population greater. Libertarians are also giving a Stateless society a really bad name. People are confusing it with untrammeled rule of Capital, not the abolition of wage slavery. If that is how you want your message to be understood, fine. But, don’t be surprised when you are frustrated.
Try going to the black community saying: “We want to get rid of public schools first, then dismantle the empire that’s starving you?” Black people are all about public education — teaching a slave to read was once illegal, folks. I can’t imagine why Libertarians want to make it easy for Democrats to tighten a hold on black people, unless they hope to appeal to the racist reaction among whites.
So, I have a question: Do Libertarians have a “Southern Strategy” too?
I got this message while writing this post:
ASAJ1874: ReThePeople the people need to boycott the voting booth and instead help the system collapse under it’s own bloated weight.
My response was succinct:
@ASAJ1874 When you get that to work, let me know.
Come on people, wake up!
How Libertarians, Anarchists and Marxists can dismantle the Fascist State (and end unemployment) in 24 months
Today the Bureau of Labor Statistics (BLS) published its most recent data on hiring and firings during the month of May (PDF link) showing 4.1 million workers were hired in May.
The conclusion to be drawn from this data? Job creation isn’t the problem, unemployment is the problem — and this can be fixed very simply by reducing hours of work. Americans are being played like a tennis ball between the two parties with Democrats demanding “Job creation”, while Republicans denounce restrictions on “Job creators”. Both are a load of crap — there is no job creation problem in the US economy; the problem is the 40 hours work week. And, it is a bigger problem than Libertarians, Anarchists and Marxist appear to grasp.
Consider, that, by reducing hours of work the following things could be accomplished:
- At the rate jobs are being created all unemployed — including all the hidden unemployed and discouraged workers — would have jobs in six months or less.
- In the next six months, Washington would have to begin dismantling all overseas bases, and slashing its fleets and military forces.
- Six months after that, we could turn off the last light in the White House.
Briefly stated, within 18-24 months, the largest military empire in human history could be dismantled and sold off for scrap simply by reducing hours of work. This is why no Washington politician dare suggest a reduction in hours of work to end unemployment — at all costs work must not be reduced.
Ask yourself this question: Why has not a single economist ever calculated the wage impact of a labor supply shock created by a reduction in hours of work? Because, they are all directly or indirectly on the government payroll. The largest single direct employer of economists is Washington. There is no significant second place in this category.
Ask economists of any ideological persuasion – Keynesian, neoclassical, Austrian, post-Keynesian, monetarist – and you get the same answer: of all the solutions to unemployment, it is never permissible to suggest reduction of hours of work. This rule must be observed absolutely, and in no uncertain terms. All references to such a solution must be ridiculed and ignored. Because it is the one solution that sounds the death knell for the Fascist State and its global empire. Not a single living economist passed Intro to Economics (econ101) without being subject to a scathing denunciation of reduced hours of work. No effort was spared to erase the idea from economics at all the major universities. The attempt was more pervasive than anti-communist blacklisting in the 1950s. Every edition to Samuelson’s “Economics” printed since 1947 carried an argument against this idea, in which it was ridiculed and summarily dismissed. This was simply because reducing hours of work made Fascist State control over the economy superfluous — and robbed the state of resources. Economic and fiscal policy only works when there is a mass of unemployed fixed and circulating capital (factories, raw material and ancillary goods) coupled with a large mass of unemployed workers who can be put to work by the Fascist State for whatever ends it sees fit.
Libertarians, Anarchists and Marxists reject a reduction of hours of work only by rejecting the only realistic possibility for freedom from the State — leaving society to suffer under its continued domination! The signal symptom of the failure of Libertarianism, Anarchism and Marxism is their uniform ignorance of this fact.