Bill Black: The Democrats need to stop being deficit hawks
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Bill Black has written a brilliant article basically explaining how the Democratic Party is on the verge of moving into the position of lead Deficit Terrorist given Republican hypocrisy on the matter. neweconomicperspectives.org/2016/03/dem... At some point Democrats need to recognize that deficits are a problem to Republicans only when the Democrats are in office. Republicans ultimately require fake dynamic scoring to retain their fiscally conservatively positions. They are hell bent on creating deficits by boosting the incomes of the wealthy who have the highest propensities to save. They raise hell against "Democratic deficits" to get Democrats to pursue unpopular policies to correct. So instead of dealing with the nonsense upfront, Democrats retreat into a trap where they are attacked. When Democrats insist that taxes have to go up or other government spending needs to be cut in order for new government spending to be allowed, it is always easier for Republicans to label Democrats as Socialists and much harder for Democrats to advance the Progressive agenda. Democrats need to worry about balancing the economy, not the budget. That's the fiscally responsible course of action.
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Carlitos Wrote:Bill Black has written a brilliant article basically explaining how the Democratic Party is on the verge of moving into the position of lead Deficit Terrorist given Republican hypocrisy on the matter. neweconomicperspectives.org/2016/03/dem... At some point Democrats need to recognize that deficits are a problem to Republicans only when the Democrats are in office. Republicans ultimately require fake dynamic scoring to retain their fiscally conservatively positions. They are hell bent on creating deficits by boosting the incomes of the wealthy who have the highest propensities to save. They raise hell against "Democratic deficits" to get Democrats to pursue unpopular policies to correct. So instead of dealing with the nonsense upfront, Democrats retreat into a trap where they are attacked. When Democrats insist that taxes have to go up or other government spending needs to be cut in order for new government spending to be allowed, it is always easier for Republicans to label Democrats as Socialists and much harder for Democrats to advance the Progressive agenda. Democrats need to worry about balancing the economy, not the budget. That's the fiscally responsible course of action. Carlitos, My ideas are all about money velocity. Trillions of dollars are tied up in derivatives. That does nothing to increase the velocity of money and it amplifies the effect of reducing the deficit. If you don't address derivative any spending you propose will end up in the hands of the people that will put it in derivatives. Larger income gap and another correction that will further cripple growth because at the bottom of the correction big money will buy the devalued stocks to build another correction. That's like trying to put out the fire by throwing gasoline on it. The ratio of earning to spending can be altered by reducing earning as well as increasing spending. So far earnings are hurting. You have to increase the spending side. That can be done by attacking derivatives and gambling and the rigged stock market. Sophisticated investors are front running and privileged to certain types of trading both of which allow them to stagnate more money in derivatives. Without guiding taxes more money will end up in the control of the wealthy. Modern economists are losing sight of a true economy: money being used to facilitate the trade in goods and services. Why is that?
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"You have to increase the spending side." Full stop. Right there. That is exactly what I'm talking about: adding to total spending. If you want wealthy people to stop receiving government handouts and support, more power to you. Market outcomes are a consequence of institutional settings. The private financial sector is a lot more trouble than it is worth. In the 70s, a bunch of dumb saving and loan "banks", with very tight regulation limiting what they were allowed to do, lower population, higher taxes, higher interest rates, and less technology, managed more housing starts than what is considered sustainable today with less regulation, an infinite number of things of banks are allowed to do, higher population, lower taxes, lower interest rates, and more technology. That number of housing starts in the early 70s is today considered completely unsustainable. Here's the data from the U.S. Census Bureau to prove it: census.gov/construction/nrc/pdf/startsa... The main driver for derivatives are modern U.S. "banks"; instead of taxing derivatives, maybe we should be looking at banning the main participants in the derivatives market, i.e. U.S. "banks." Why tax what you should outlaw?
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A derivative is a contract that specifies if X happens Y pays Z, but if W happens Z pays Y. That's it. Yes, that's like gambling. Aside from the costs (fees) of entering into that trade, no dollars change hands until Y or W happens. Prices reflect expectations about what participants think will happen. This says nothing about actual Money Velocity. The fall off we have experienced comes from the massive demand leakages (aggregate savings attempts): we have a bizarrely unequal income distribution of new income gains in the economy (and rich people have the highest propensity to save incomes). The CFMA did not just prevent federal regulation, but insidiously outlawed any state regulation. Again, the major participants in OTC derivatives are "banks." Banks should make loans and take deposits. The end. What the hell are they doing with any sort of financial market trading desks in the first place? Their investors, without government support, should be doing the "trading," not the banks. So the financial sector is all screwed up from top to bottom. Don't get me started. We are dealing with an authoritarian form of financial Socialism for rich people and no society on Earth has ever distributed so much to the top for so little in return. The best way to fix the banks is to limit their activities to public purpose and regulate them for public purpose and to fix the balance sheet of American workers by lowering their taxes or raising government spending that directly benefits them so they can make their credit card and mortgage payments to banks.
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