College was no better. We did get to discuss things like why student health should give out contraceptives to women for free, or whether coed dorms were a good idea. But we NEVER talked about all the Cold War funding that had our best professors designing war crimes, or why only about 10 people out of 7,000 staff could bring themselves to publicly oppose the insanity of Vietnam. Etc!
Any hopes that I was going to get to vote on anything important were quickly dashed as an adult. Politics had become absolutely narcissistic by the time I was old enough to vote. I have dozens of examples but the most telling is that at one point, the DFL party took time out from its busy agenda of ignoring the crimes of for-profit medicine, the destruction of owner-operated agriculture, and the sell-out of the party of Farmers and Laborers to the scum of Wall Street, and an assortment of other life-and-death issues, so that they could pass a resolution declaring their state convention to be "fragrance free." I flashed back to the momentous decision I had once participated in involving the color a crepe paper to be hung in a school gym and came to the conclusion that voting in USA had become permanently stuck in irrelevance.
Democracy means very little if you are never given the chance to vote on anything more important than scent-free political conventions. Of course, I believe the most important subject is the state of the economy, and the most important economic question is who controls monetary policy. A meaningful democracy would force the head of the Federal Reserve to get the job in an election. Then HE could appoint the President. Considering that the Presidency has been recently occupied by an Alzheimer's patient in Reagan and an utterly incurious buffoon in W., it's pretty obvious that office isn't allowed close to any important decisions anymore either.
And yes, I know that I am suggesting the slaying of perhaps the most sacred cow in all of finance capital's political herd—the completely self-serving notion that the central banks of the world should be "independent"—which means free of democratic controls. Until conditions of the workplace and the rules of economics are regulated democratically, we are stuck in a situation where elections mean nothing and politics is little more than show business done by people who are terrible at it.
PAUL MCCULLEY: We Need To Rethink The Doctrine Of Central Bank Independence Because The World Has ChangedSam Ro | Mar. 26, 2012
The idea of central bank independence is one of the most sacred principles in all of finance.
However, Paul McCulley thinks it's time to break this rule. McCulley, a fellow at the Global Interdependence Center and form senior partner at PIMCO, presented his argument today at the Banque de France in a paper titled Does Central Bank Independence Frustrate the Optimal Fiscal-Monetary Policy Mix in a Liquidity Trap?.
"We need to actually rethink the mix between monetary and fiscal policy," McCulley told Bloomberg's Mike McKee. "The doctrine of central bank independence, which is truly a religious matter, doesn't hold at all times."
Prior to the financial crisis, central banks had the capacity to fine tune the economy every six weeks or so by adjusting interest rates, said McCulley. Central bank independence works "as long as the private sector is elastic to changes in short-term interest rates."
Lately, however, the private sector hasn't been as responsive to monetary policy.
"A liquidity trap is when the private sector doesn't want credit at any price. And the evidence of that is we've taken the price to zero and we still have a massive amount of debt problems in the household sector. So once you've reached the liquidity trap, the world changes."
There are certain circumstance where you should have more cooperation between fiscal and monetary authorities. Now is one of those times, argues McCulley. more
Michael Hudson on the Federal Reserve SystemBy Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College
An interview with Michael Hudson published on the Russian website Terra America (TA).
What is the place of the Federal Reserve System in the American financial and economic structure?
Prior to the Federal Reserve’s founding in 1913, U.S. monetary policy was conducted by the Treasury. Like the Fed, it had district sub-treasuries that performed nearly all the financial functions that the Fed later took over: providing credit to move the crops in autumn, managing government debt, and so forth.
But after the severe 1907 financial crisis, a National Monetary Commission was reformed. Under the then-Republican administration, it recognized a need for more active government intervention to prevent future financial crises. It also recognized the desirability of moving away from the Anglo-Dutch-American system of “merchant banking” based on short-term lending against collateral in place, or for shipping of goods already produced. The National Monetary Commission’s longest volumes were on the great German industrial banks, and Republican policy aimed at bringing banking into the industrial era, to provide long-term funding after the model of German and other Central European banks.
However, the leading bankers sought to use the crisis as an opportunity to grab power for Wall Street, away from the Treasury. In this sense, the Fed was founded in large part to take monetary control away from Washington’s elected officials and appointees, and privatize the supply of money and credit.
So its place in the U.S. financial and economic structure is to allocate credit, primarily to serve Wall Street financial interests. That explains the insistence on the financial class here and abroad in insisting on an “independent” central bank. It means that instead of serving the public interest, it serves the interests of the banking class. The hoped-for transformation of commercial banking into long-term industrial banking was not achieved.
Can we imagine the global economic system without Federal Reserve today? If yes/no, why?
As David Kinley’s book for the National Monetary Commission pointed out a century ago, nearly all the financial functions performed by the Fed already were performed by the national Treasury. In more recent times, Milton Friedman and his University of Chicago colleagues suggested that the entire Fed could be reduced to a single desk inside the Treasury. The “Chicago Plan” of the 1930s urged Treasury control, as does Congressman Dennis Kucinich’s current bank reform.
There is no inherent need for a monetary agency to exist outside of the national government, except to serve the interests of the financial class as distinct from those of government, industry and labor. And the banking sector’s business plan is to load down real estate, labor, industry and the government with as much interest-bearing debt as possible.
Some people in the US (especially supporters of the congressman Ron Paul) believe that the Federal Reserve is the reason of serious problems within the American financial system. Do you agree with this claim?
The Fed is a reason for serious problems, but not the only reason. Unfortunately, Ron Paul’s proposal opposes paper credit itself, whether issued by the Fed or the Treasury. He wants to return to the gold standard and clash government spending – in effect, to create an economy without government. So what he actually advocates is not only the end of the Fed, but the end of a functioning credit and tax system. The idea is otherworldly and has no possible chance of being enacted, because it would cause a vast debt default as a result of plunging prices, incomes and employment.
Contrary to most of European central banks the Federal Reserve is quite autonomous and has some private aspects. Doesn’t it give too much power to this financial structure? Or maybe this power is part of the checks and balances within the American political system? If yes, what is its precise role and place?
The Federal Reserve is private in name only. Its heads are appointed by Washington, but Wall Street has veto power over it (as it has over the appointment of major Treasury and other regulatory agency officials). So the problem is not that the Fed is technically owned by its stockholders, but that Wall Street has gained overpowering control over government itself.
The financial sector has sought to dismantle checks and balances, making it protect Wall Street even as financial interests diverge from the promoting of economic growth and rising living standards.
What is the priority for the Fed leadership: solving national American problems or serving the interests of the global system?
The Fed is officially supposed to perform two functions: First, to promote “price stability.” This means in practice, fight against wage inflation and preserve sufficient unemployment so that wages will not increase. The “prices” that are supposed to stabilize are the price of labor (wages) and commodity prices.
Meanwhile, the Fed seeks to inflate asset prices, above all real estate prices. Under Alan Greenspan, the aim of the Bubble Economy was to inflate housing prices by enough so thathomeowners could borrow the interest to pay the bankers each year, and even enough to spend on consumer goods that their stagnant wage levels were not sufficient to buy. The result was to vastly increase the volume of debt – and debt service became a rising element of prices throughout the economy. Debt-leveraged housing prices ended up absorbing about 40 percent of typical family budgets, and a rising share of corporate income as well, leaving less for spending on current production of consumer goods and capital goods.
The second function the Fed was supposed to perform was to promote full employment. Mr. Greenspan made it clear that he believes that this is incompatible with the ideal of price stability. He pointed out before Congress that the virtue of loading down homeowners, college students and others with debt was that they were afraid to go on strike or even complain about working conditions or seek higher wages, for fear of being fired and missing a mortgage payment or credit-card payment. Going on strike or losing as job would threaten them with loss of a home, and an immediate increase in the credit-card interest rates and penalties that they had to pay. So the Fed became the leading administrator in Wall Street’s war against labor.
Under Mr. Greenspan’s tenure and that of his successor, Ben Bernanke, the Fed has overseen the greatest shift of wealth n American history since the Robber Barons.
Finally, the Fed has taken over the functions of government by threatening to close down the economy if the government does not bail out the banks at taxpayer expense, and protect the wealthy 1% against losing money. more
Deadbeat Nation: Why the Public Should Cut Off Wall Street's CreditRichard (RJ) Eskow 03/27/2012
We've spent billions of dollars -- perhaps trillions -- to rescue big banks. But instead of dialing back on the risky behavior that shattered the economy in 2008, they're doubling down on it. And when their bill comes due we won't just be asked to pay it again. We'll be asked to take the blame for it again, too.
But who are the real deadbeats in this country? Banks acted recklessly in the years leading up to the financial crisis -- and ran up a bill which the rest of us have been paying since 2008. And guess what? They're doing it again.
Take student loans. Americans owe more than a trillion dollars in student loans, a figure that's growing by $50 to $60 billion every month. Now we've learned that as many as 27% of these loans are delinquent, meaning they're more than thirty days past due. That amounts to roughly $270 billion in troubled loans -- most of which have been guaranteed by the US taxpayer.
We've already rescued American banks with hundreds of billions in public money, saving them from the consequences of their incompetent underwriting of mortgage loans. Now we're about to do the same thing with student loans, many of which were money-making ventures for those same banks.
Politicians "privatized" Sallie Mae, the government-sponsored enterprise (GSE) created to help students borrow for their education. Its greed-crazed executives promptly went on a spending spree, using their government backing to pay themselves inflated salaries and buying corporate jets so they could travel in luxury. Yet, without irony, their backers and shills shrieked "socialism!" when wiser heads wanted to stop private-sector skimming at the expense of our nation's students. (See "Sallie Mae's jets.")
And now that their loans are going bad, who will pick up the tab? It won't be those high-flying executives. And Wall Street won't be held accountable for the fact that today's graduates face the worst employment situation in recent memory, even though that's a direct result of bank malfeasance. Instead the public will pay the tab for this consequence of the banks' behavior, just as it has paid for so many others. more