How to Get Rid of $37 Trillion of Debt

No, we’re not kidding.  Much.  This could actually work . . . at least until people catch on that the whole cryptocurrency craze is what Charles MacKay would have called an extraordinary popular delusion and a madness of crowds.  This sort of thing, of course, formed the subject of MacKay’s 1841 book titled . . . well, Extraordinary Popular Delusions and the Madness of Crowds.

Inflation v. Employment, or, Cotton is King

Regular Readers of this blog may have gotten the idea that we’re not exactly enamored of Keynesian economics.  If so, they have the right idea: we’re not.  And there are a lot of very good reasons for it.  For today, however, we’ll confine ourselves to the alleged tradeoff between inflation and employment.

Double Trouble in the Bubble

As we saw in the previous posting on this subject, how the British government chose to finance the Napoleonic Wars embodied what amounts to legal counterfeiting as a primary source of financing government operations — something Ebenezer Scrooge, pre- and post-reformation would have had a hard time swallowing.  Had the Ghost of Christmas Yet To Come shown Scrooge where John Maynard Keynes would take the bizarre belief that government can actually create wealth out of nothing, maybe he would have been inspired to do something about preventing the spread of such an insane idea.

Testing the Keynesian Hypothesis

It’s common to say when something bad happens that “It could be worse.”  Of course it could be worse.  It could also be better.  Anybody can make something worse.  The real trick is to make something better.

A “Debt Tsunami”

As we saw in the previous posting on this subject, the global debt crisis has reached epic proportions.  Naturally, this is being blamed on the pandemic, but that ignores the fact that the situation existed long before the pandemic.  This “suggests” (to put it mildly) that the pandemic simply exposed the rather large flaws in the existing system and exacerbated an already bad situation.

A New Philosophy of Public Debt

Back in 1943, as Keynesian monetary policy was completing its first decade, Dr. Harold Glenn Moulton, president of the Brookings Institution, published a pamphlet, The New Philosophy of Public Debt.  Although today Brookings is solid Keynesian in its approach, while Moulton was at the helm it presented an alternative to what many regarded as Keynes’s unwise, even dangerous monetary and fiscal policy.

(Another) Global Debt Crisis

Back in the early nineteenth century following the Napoleonic Wars and the dissolution of much of the Spanish Empire, the new republics of Central and South America found they had a problem: no tax base, and thus no way to meet government expenditures.  This was doubly a problem, because in order to demonstrate their legitimacy, the new governments had to assume all the obligations of the old government as well as meet their own current needs.

The Crisis of Democracy?

Last week in the Wall Street Journal Walter Russell Mead gave his opinion that the “Crisis of Democracy” in the modern world is a bit exaggerated (“The “Crisis of Democracy” Is Overhyped,” WSJ, 08/28/18, A-13).  According to Mead, the democracies are, if not precisely doing-just-fine-thank-you, at least doing better than the non-democracies.

The New Greek Myth

Recently Alexis Tsipras, the Prime Minister of Greece, has declared the end of the bailout of the country, proclaiming a “day of liberation.”  Greece has completed a three-year emergency loan program worth €61.9 billion to tackle its debt crisis.  It was part of the biggest bailout in history, totaling approximately €289 billion, which will take the country decades to repay.  Cuts in public spending, especially for social welfare programs, will continue.

Stimulus and the Global Financial Crisis

Every now and then we get some questions or comments to which we can respond.  Oh, we don’t mean like the troll who, in response to our comment about how it’s better that government should go to the people for its money rather than the other way around, shrieked that there should be no government at all, that it’s a thief, that anarchy is the only ethical system!!!!!!!

Filling the Bill

A couple of days ago on FaceBook we reposted a piece from a few years ago on why central bank reform is so important.  We tossed around a few specialized financial and banking terms (just to make us look important, of course), and didn’t think any more about it.  Then one of our favorite readers asked a question:

Misunderstanding Debt

Almost exactly a month ago, on September 8, there were some comments in the Washington Post from Francis X. Cavanaugh, author of The Truth About the National Debt: Five Myths and One Reality (1996), in which he argues that a $5 trillion national debt is not really cause for concern, but perhaps there should be some reining in of spending . . . like before the debt rises to $10 or even $15 trillion!!  (It's just short of $20 trillion when we looked yesterday.)

Where’s the Recovery?

On the Opinion page in yesterday’s Wall Street Journal, the title, “The Reasons Behind the Obama Non-Recovery” (p. A13) caught our eye.  The argument by a Harvard professor of economics was that because recovery from all past depressions/recessions has always been relatively rapid, President Obama is responsible for a slow recovery because he increased non-productive government spending that made the rich richer, instead of figuring out ways to make business more profitable to make the rich richer.

Saving the Middle Class

According to a new study by the Pew Research Center, “The American Middle Class is Losing Ground,” the number of “middle class” households is now less than those in the “upper class” and “lower class” combined.  We put “name of class” in quotes, because we just have a gut reaction to being described as belonging to a class in a legally classless society.  We’ll try not to do it again, at least today.  We’ve made our point.

Solving the Greek Debt Crisis, XII: The Key to Economic Recovery

Yesterday we noted that there is one key factor that cannot be omitted from the proposed program to put Greece on an even keel economically.  Regular readers of this blog already know what this is: an aggressive program of expanded capital ownership.  Why?

Solving the Greek Debt Crisis, XI: Working With Debt

Yesterday we saw how the United States implemented a plan to replace its various debt-backed currencies (United States Notes, National Bank Notes, and the Treasury Notes of 1890) with debt-backed Federal Reserve Bank Notes, and replace the debt-backed Federal Reserve Bank Notes with asset-backed Federal Reserve Notes.

Solving the Greek Debt Crisis, X: From Debt to Asset Backing

Last Thursday, as a build up to explaining how to straighten out the Greek debt crisis, we looked at the problem the United States had in the 19^th century with its basket of debt-, semi-debt-, and asset-backed currencies.  This confused financial system was in part responsible for the Panics of 1873 and 1893, and the resulting Great Depressions of 1873-1878 and 1893-1898, respectively, and wholly responsible for the Panic of 1907, “The Bankers’ Panic.”

Solving the Greek Debt Crisis, IX: Return to “Sound Money”

Yesterday we looked at how Hjalmar Schacht, the “Old Wizard” with the unlikely middle name of “Horace Greeley” (no, really — he was born in New York City while his parents briefly lived there), stabilized the German currency in the 1920s, putting an end to the hyperinflation that followed World War I.  Of course, on the downside, this laid the foundation of the German resurgence that in less than a decade took the country from absolute zero to nearly conquering the world, but that’s a different issue.  The point to keep in mind is that it is possible to turn even a complete economic basket case completely around in less than a decade.

Solving the Greek Debt Crisis, VIII: Specific Monetary Reforms

If we believe the reaction on the U.S. stock market, the financial powers-that-be are jubilant about the alleged solution to the Greek debt crisis.  Of course, once people realize that there hasn’t actually been a solution implemented, only talk about one (and it might not even work . . . make that, we know it won’t work), we can expect yet another wild plunge in the market.

Solving the Greek Debt Crisis, VII: Property and Money

Making every child, woman, and man productive is key to solving the Greek — or any other — debt crisis.  Figuring out how to make everybody productive, or at least providing the opportunity and means whereby they can become productive is quite another.  (We say “opportunity,” for everyone should be free to decide not to be productive, assuming that no one else is compelled to support anyone who freely chooses not to be productive.)