Okay, let's go to school. If I'm wrong, you explain how. I'm open.
First of all, this is a one-time shot. It never happens again in the history of humanity. This is the largest economy on Earth with the biggest debt. We pay it off in one-fell-swoop, and the taxes that go to paying interest on the debt disappear. Is that inflationary either monetarily or price-wise? Not much if at all.
The USD supply is approximately $10 trillion in M2, right?
What's the debt? The US national governmental (federal) debt is $14-15 trillion, right?
Are we worried about Bernanke? I'm not because the NEED Act is going to claw back* (if I have anything to say about it). It's going to enable us to rollback Bernanke's decisions to allow toxic derivatives into the National Debt to whatever extent that he has. Again:
So, the global supply of USD in M2 goes up $14-15 T (less Fed holdings) in M0.
All the Treasuries held by the Fed won't need to be purchased. So you can subtract those. I don't know the current number, but it could be $1.5-2 T give or take some.
What's the rate of inflation? What will it become once $13 T is in liquid form? Whatever it will be, it will freeze there.
Look, if you want to exempt/grandfather in Savings Bonds* of a certain age (say all such bonds purchase before today), it wouldn't hurt my feelings; but I think it would be a waste of time and energy. I don't want to panic the old folks though. In fact, my plan is to remove the stresses they are feeling. If we explain things correctly to them, I believe they'd see that our plan will take care of them much better than Newt Gingrich's (Wall Street shill).
So, China suddenly finds itself facing NEED Act "United States Money" rather than $1+ T in Treasuries. It could try to liquidate first, but then it would just get "cheaper" for the US to buy them. If it were to stand pat, it would have money that wouldn't inflate or deflate in the US. That's their problem. If I were Chinese, I wouldn't give a damn. I'd copy the US or join it (literally).
Oh, and anyone who doesn't want to "sell," we write it off – default*. I mean it. We'll be saving the world (including them) whether they'll know it or not (and especially if they try to sabotage). I mean, countries could try to pull all sorts of maneuvers even if the face of the Treasuries says they can't.
So, let's say that the supply doubles. We're in a liquidity trap now. That ends instantly. The Bernanke-banksters don't control all the Treasuries. There's hot money. It goes out globally looking for investments – not Treasuries anymore because there's no such thing (I hope). Look at all the places in the world that are starving for dollars. As I said though, if it's inflationary, it only happens once. It can't runaway. It can't become hyper. It's over.
We could use this NEED Act to limit how much of it could be invested in food-commodity futures* over certain timeframes to avoid food price-inflation.
Do we try to wring out via taxes any excess supply to avoid all price inflation, as you mentioned? We could certainly raise taxes* on the superrich to pay back the Social Security Trust Fund from whenst it was robbed by George W. Bush's tax cuts for the rich (for the very purpose of forcing austerity to force entitlement cuts to force privatization of Social Security investments to further enrich the greedy monsters on Wall Street). Do you follow that? Those men take the houses of old widows. We've seen it.
I'd focus internally to start. I'd do exactly what the bill is designed to do. I'd work on infrastructure, etc.
Look, the US has all the land it needs to feed its population. We have the water (we need to fund* solar, wind, geothermal, and all the other things that will end AGW). We don't have to worry. We can manage our natural resources much better and show the rest of the world how to follow suit. Infrastructure improvements can, and should, include vertical, organic (yes, we need to save the planet from Monsanto, et al.), green houses*, etc., near cities. Look at the construction jobs that would create. Think of the ripple effect.
We are in a depression, which is getting worse. QE has helped a little, and I mean a little. It has been pushing on a string. It shouldn't have been designed that way, and Bernanke knew it back when. It was a criminal decision not to pipe up about needing strings attached to the loans to the Wall Street banksters to force them to lend the money. He says he didn't have that kind of authority. I say that the quick, crazy, illegal decisions that Henry Paulson made with Bernanke and others right there in the loop show that Bernanke had plenty of power he didn't use for Main Street. They've done a multi-year PR campaign to make him a nice guy. Well, maybe he was a dupe. Maybe he did get caught like a deer in the headlights, but I think he saved the banksters' skins on purpose when he knew he didn't have to. Did he go to anyone to say that Congress and the President need to act with emergency legislation? He did not. Did he threaten to resign if nothing proper is done? He did not. What he did do was jack up the interest rate to pay the banksters to park the borrowed funds at the Fed. He has some rationalizing excuse for that, but it was so pathetic that I didn't even absorb it. I get tired of memorizing all the shenanigans.
Anyway, I'd hire William K. Black* to put together the dream team of his choosing because no one on Earth knows more about how to deal with that kind of criminality than he does. I'd give him his head and carte blanche.
What do I want to fix without austerity:
Is it too hard or complex? Hell no it isn't. What really bothers me is how easy it would all be.
*Potential Legislation Additions
It's a difference in style. I'm not giving up on you, not that even if I were to, it would mean you couldn't press on. You're a bright guy, and everybody here knows it.
Look, Ellen read the book ("Bank Management & Financial Services"), and the book gave her a particular impression that makes perfect sense from the US GAAP standpoint. Only banking doesn't follow only one standard and especially not non-banking, business funding accounting.
It's a textbook, but textbooks don't include Steve Keen's perfectly correct observations about how the Money-Multiplier Theory of the Austrians doesn't explain everything (if anything, in Steve's view).
So, how to explain to Ellen without insulting her intelligence and without being arrogant to the point where we might find out that the standard's she's expressed is used a great deal in certain bank settings. I, for one, have not been in every bank to see firsthand how every bank funds loans; but, we are not dealing with that but rather only the question of whether or not all loans must be funded by bank borrowings. So, if there are sufficient exceptions to that rule, it isn't a rule for all banks.
Anyway, I went out to see what I could find that may help.
First, in Britain, they don't even use reserves. We knew that.
Second, how do they and other banks create credit without borrowing? That's the question.
Here's what Paul Tucker had to say:
Money, or bank intermediation
So far I have focused entirely on credit. Where does this leave money (or Money), the starting point for much traditional monetary analysis?
Well, much that I have said about banks – their capacity, in the short run, to lever up their balance sheets and expand credit at willÍ¾ their role in providing liquidity insurance to investment vehicles and corporates – turns precisely on their liabilities being money. And for this reason, banks are after all decisively different from other intermediaries.
As transactions balances and so the means of exchange in our payments system, the moneyness of bank deposits lies at the core of credit intermediation. Subject only but crucially to confidence in their soundness, banks extend credit by simply increasing the borrowing customer's current account, which can be paid away to wherever the borrower wants by the bank 'writing a cheque on itself'. That is, banks extend credit by creating money. This 'money creation' process is 10 constrained: by their need to manage the liquidity risk – from the withdrawal of deposits and the drawdown of backup lines – to which it exposes them. 15 Adequate capital and liquidity, including for stressed circumstances, are the essential ingredients for maintaining confidence. 16
EXECUTIVE DIRECTOR, MARKETS AND
A MEMBER OF THE MONETARY POLICY COMMITTEE
Monetary Policy and the Markets Conference,
Thursday 13 December 2007
"...writing a cheque on itself...." bingo. There's the thin-air creation of money (credit or debt money) – "nice" work if you can get it. Really though, it's nasty; and we want to kill it. It's completely unfair and explains the stranglehold these guys have on us. Oh, there's all the other talk there: "...constrained: by their need to manage the liquidity risk – from the withdrawal of deposits and the drawdown of backup lines – to which it exposes them. 15 Adequate capital and liquidity, including for stressed circumstances, are the essential ingredients for maintaining confidence. 16." Bull!!! "To big to fail" does away with all of that nonsense, and we here know it only too well. That's why we are going to be hated. We're here exposing them. We are truth-tellers.
The Wikipedia says:
The Monetary Policy Committee (MPC) is a committee of the Bank of England, which meets for two and a half days every month to decide the official interest rate in the United Kingdom (the Bank of England Base Rate). It is also responsible for directing other aspects of the government's monetary policy framework, such as quantitative easing. The Committee comprises eight members, along with the Governor of the Bank of England (as of 2011 Mervyn King), and is responsible primarily for keeping the Consumer Price Index (CPI) measure of inflation close to a target set by the government (2% as of 2011).
Announced on 6 May 1997, only five days after that year's General Election, and officially given operational responsibility for setting interest rates in the Bank of England Act 1998, the Committee was designed to be independent of political interference and thus to add credibility to interest rate decisions. Each member has one vote, for which they are held to account: full minutes of each meeting are published within two weeks, and members are regularly called before the Treasury Select Committee, as well as speaking to wider audiences at events during the year.
I think Paul Tucker's statement is highly authoritative. I really do.
Do you think we can put this issue to rest now?
At the very least, I would think Ellen could contact the authors (Peter Rose and Sylvia Hudgins) to put that to them to see exactly where their stated standards apply. I'd like to know.
Happy now, Joe? I hope so. Really!