Scampering off the fiscal cliff -- the lemming theory of history

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    transcripts.cnn.com/TRANSCRIPTS/1211/14/cnr.07.html

    WHITFIELD: ... Coming up next, a CNN exclusive: Investing giant Warren Buffett speaks with our Poppy Harlow in the first interview since the presidential election -- what he says about President Obama's second term ...

    WHITFIELD: CNN's Poppy Harlow has just conducted an exclusive interview with Warren Buffett, CEO of Berkshire Hathaway. As the nation inches closer to the fiscal cliff, she talks money, taxes and the economy with the man some say is the most successful investor in America.

    Poppy Harlow joining us now from Omaha, Nebraska.

    Poppy, first off, what did Buffett tell you about the fiscal cliff or at least his interpretation of it?

    POPPY HARLOW, CNN CORRESPONDENT: I think this is very important, Fredricka, because his answer really surprised me. So many have been very, very alarmist about what it will mean for the U.S. economy if we do go over that fiscal cliff and see those massive spending cuts and massive tax hikes ...

    (BEGIN VIDEO CLIP)

    HARLOW: What is the likelihood of the United States falling into a recession if we go over the cliff?

    WARREN BUFFETT, CHAIRMAN & CEO, BERKSHIRE HATHAWAY: I don't think that's going to happen ...

    HARLOW: Even if we go over for two months, does that dip this economy back into recession?

    BUFFETT: I don't think so.

    HARLOW: You don't think so. That's interesting because the CBO [Congressional Budget Office] believes that ...

    BUFFETT: ... You know, we had Hurricane Sandy, which disrupted the economy for a period. We had Katrina many years ago.

    There are things that will disrupt the economy. I mean, 9/11 was an extraordinary case, but we have a very resilient economy. We've had one for hundreds of years and the fact that they can't get along for the month of January or something is not going to torpedo the economy.

    (END VIDEO CLIP)

    HARLOW: And, Fredricka, I also talked to him about that meeting that the President had today [11-14-12] with CEOs from American businesses and, look, he told me, I think the President needs to take a very hard line in this second term ... [in] negotiations over the fiscal cliff and over taxes.

    FREDRICKA WHITFIELD, ANCHOR, "CNN NEWSROOM": And, in fact, as we talk about taxes, you know, Buffett is known for supporting higher taxes for wealthy people, just like himself.

    You know, you asked him some very tough specific questions about what he thinks wealthy people should pay. What did he say?

    HARLOW: ... I asked him point blank for some specifics on especially capital gains taxes when it comes to investments and the on the profits from investments.

    We wanted specifics from him and here's what he said.

    (BEGIN VIDEO CLIP)

    HARLOW: Are you saying there is no taxation level that's to high?

    BUFFETT: Well ...

    HARLOW: Whether it is capital gains or investment or income?

    BUFFETT: We certainly prospered with capital gains rates more than double what they are currently.

    HARLOW: So, we would be fine with 30 percent capital gains?

    BUFFETT: Oh, I think sure ...

    HARLOW: What about income tax?

    BUFFETT: Well, income taxes, you know, they were as high as 90 percent during my lifetime. Now, very few people got up there, but I saw lots of people paying, you know, federal tax rates of 50 percent and they went to work every day.

    HARLOW: So, at this point, there is no level you're calling ...

    BUFFETT: Well, I think they can be significantly higher than they are ...

    (END VIDEO CLIP)

    WHITFIELD: ... All right, up next, economist and author Ben Stein joining me live ...

    WHITFIELD: January 1st [2013], the beginning of a new year and for the U.S., a day that could seen painful tax increases and drastic spending cuts ...

    (BEGIN VIDEO CLIP)

    PRESIDENT BARACK OBAMA: I know the math pretty well. And it really is arithmetic, not calculus.

    (END VIDEO CLIP)

    WHITFIELD: Let's bring in the author of the book "how to really ruin your financial life and portfolio," Ben Stein. Ben, good to see you.

    STEIN: Nice to see you.

    WHITFIELD: A high stakes meeting slated for this Friday [11-16-12]. What can the President afford to give up in these negotiations and how about congressional Republicans? What can they give up?

    STEIN: I think the ideal solution would be to keep the tax increases, to keep the tax increases in place. Mr. Buffett is completely correct. We need higher taxes. We need higher taxes than the one contemplated in the fiscal cliff ...

    WHITFIELD: so we're talking about compromise because you mentioned two things that the opposite sides don't really want.

    STEIN: I know.

    WHITFIELD: Solvable, quote, "I'm confident it can be done." I recognize we will have to compromise, period.

    The operative word, "compromise." Are we going to see that this go- round?

    STEIN: I'm not sure we'll see it this go-round. We might have to go over the fiscal cliff for a while.

    Even with the fiscal cliff, we're still going to have a budget deficit next year of -- on the order, very rough order of $500 billion, one of the five largest budget deficits of all time.

    So, we obviously got to go even farther than the fiscal cliff in terms of raising taxes. I hate it. I hate paying taxes. I'm like any other citizen. I don't like paying taxes, but we have got to do it.

    And Mr. Obama is completely right. I'm not a fan of Mr. Obama. I didn't vote for him, but he's completely right. It is arithmetic, not complex arithmetic. We have to get more money into the system.

    WHITFIELD: There were people that agreed with that approach, even though they didn't vote for him. Maybe he was talking about you.

    Patty Murray had this to say about the looming fiscal cliff. Let's listen in.

    (BEGIN VIDEO CLIP)

    SENATOR PATTY MURRAY (D), WASHINGTON: I think the Republicans have a decision today. They need to decide whether they're going to stay and protect the wealthiest Americans from participating in this challenge that we have, and if they do that, then we have no other choice but to go into next year when all the Bush tax cuts expire and start over.

    I don't want to do that. I don't think we should do that. But that's what they could force us to do.

    (END VIDEO CLIP)

    WHITFIELD: Your response to that?

    STEIN: I think we may very well have to do that and I don't understand for the life of me why the Republican Party, to which I have belonged for a lot longer than most of the people in Congress, is so adamant about protecting the wealthiest people in the country.

    Most of those people are Democrats anyway. What do we care about protecting them? We have got to get more tax revenue.

    Look, in my neighborhood, many of the people have two or three or four Bentleys. Do you think it is going to hurt them a lot to have one fewer Bentley? How many meals can a person eat each day?

    We can tax the rich more. It is not going to hurt them, not going to hurt the economy ...

    WHITFIELD: Ben Stein, thanks so much. Good to see you.

    STEIN: Thank you.

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    money.cnn.com/2012/11/14/investing/buffett-fiscal-cliff/index.html?iid=Lead

    Buffett not worried about fiscal cliff

    By Maureen Farrell @CNNMoneyInvest November 14, 2012:

    NEW YORK (CNNMoney) -- Warren Buffett is not worried about the fiscal cliff.

    While it's not ideal, the founder of Berkshire Hathaway (BRKA, Fortune 500) thinks that President Obama must be willing to keep pushing for higher taxes on the wealthy, even if it triggers the fiscal cliff that would lead to the automatic onset of tax increases and spending cuts on Jan.1.

    The U.S. economy, he said, can weather it for a month or two. "We're not going to permanently cripple ourselves," Buffett told CNN's Poppy Harlow in an exclusive interview at Berkshire Hathaway's Omaha headquarters Wednesday.

    Buffett shrugged off the Congressional Budget Office's warnings that failure to address the fiscal cliff by Dec. 31 [2012] could lead to a recession. "We have a very resilient economy," he said. "The fact that [lawmakers] can't get along for the month of January is not going to torpedo the economy."

    He also advocated a twist on the so-called Buffett Rule, which would force anyone who makes more than $1 million per year to pay a minimum tax rate of 30%.

    Buffett said Wednesday that a new U.S. tax system should be progressive for the ultra-rich, meaning that anyone with an annual income of $10 million should pay more than someone earning $250,000 per year, currently the highest tax bracket for married couples.

    Corporate taxes and taxes on capital gains and stock dividends could all be increased without stifling growth, said Buffett. "I lived through the 1950s and 60s with rates far higher for capital gains taxes, and corporate taxes at 52%, and our economy boomed,' he said.

    Buffett laughed off concerns that higher capital gains taxes could change how individuals invest in stocks or bonds. "Never in 60 years of managing money have I come up with an idea and had someone say 'I'd do it but the tax rates are too high'."

    Buffett also said he sees the economy improving and that jobs will eventually follow. During the presidential campaign, both Obama and his Republican challenger Mitt Romney came up with scenarios for creating 12 million jobs over the next four years. Buffett wouldn't rule that out. "We will gain a lot of jobs in the next four years. I can promise you that."

    Meanwhile, housing is recovering at a tepid pace, which Buffett said is the right speed. "We wouldn't want a big boom. We were building way more houses than we were creating households. Now we've created more households than houses." ...

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    transcripts.cnn.com/TRANSCRIPTS/1211/14/sitroom.01.html

    BLITZER: ... Warren Buffett has made billions and billions of dollars by being way ahead of the curve. So what does he think of a looming fiscal cliff? In an exclusive interview, he tells our Poppy Harlow how a crisis can be avoided standby.

    BLITZER: Now to a CNN exclusive. Warren Buffett has weathered plenty of economic storms over the last few years, but the fiscal cliff is a new one looming just weeks away.

    CNN's Poppy Harlow spoke with the oracle of Omaha to see if he could shed any new light on what might happen. Poppy, what does Warren Buffett say about this potential financial economic crisis?

    POPPY HARLOW, CNN CORRESPONDENT: Well, you know, Wolf, his position on it really actually surprised me. He's far less alarmist than most when it comes to the fiscal cliff.

    You know, just before the election Warren Buffett said he thinks there's a fairly good chance that we could fall over that fiscal cliff.

    And he -- now that we do have a new Congress and we know what the makeup of Congress is going to be, who the next President is going to be, I asked him does that change his assessment. Here's his take.

    (BEGIN VIDEO CLIP)

    WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: I don't know whether we'll go over it. It really depends very much, you know, on the Republicans in Congress. It doesn't take the whole group in Congress to avoid that.

    I mean, if 25 Republicans decide that they'll put country above party and sign up for something that makes sense, we don't need to go over the fiscal cliff.

    HARLOW: That's interesting. You say it really depends on the Republicans in Congress. What about the President? He's taking a very hard line going into these negotiations starting on Friday asking off the bat for $1.6 trillion in tax increases. What is the likelihood of the United States falling into a recession if we go over the cliff?

    BUFFETT: I don't think that's going to happen. I think that if we go past January 1st [2013], I don't know whether it will be January 10th or February 1st, but we are not going to permanently cripple ourselves because 535 people can't get along.

    HARLOW: Even if we go over for two months, does that dip this economy back into recession?

    BUFFETT: I don't think so.

    (END VIDEO CLIP)

    HARLOW: Interesting take there, Wolf. He really told me he wants the President to take a very hard line going into these discussions, which will begin on Friday.

    A few other bits of news for you, when it comes to taxes, taxing the rich, corporate taxes, he told me he believes that the wealthy in this country should pay significantly more taxes that 30 percent capital gains tax double where we are now wouldn't be too high, 50 percent plus personal income tax wouldn't be too high ...

    [Tea Party Republicans in the House may be strongly motivated to push the country over the fiscal cliff by their oath to Grover Norquist; After the Big Splat, they again can vote to lower taxes, again convincing low information voters with tea bags for brains of their dedication to small government.]

    cliff
    corporatemyopia.com/2012/11/over-the-fiscal-cliff/

    What House Republicans Believe

    Their gerrymandered safe seats -- produced by packing as many Democrats into as few districts as possible -- make them immune to a general election challenge.

    But an unintended consequence of predatory map drawing is that the lunatic right wing can beat them in the primary elections; they can be "primaried."

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    Top -- Home

    www.mail-archive.com/vortex-l@eskimo.com/msg25278.html

    In April, 2008, Commentator 1 wrote:

    [Why does the stock market go up faced with the prospect of reduced consumer spending?]

    1. Increase in energy cost will drive up food and other commodity prices, which will reduce consumer spending.

    2. Increased cost of personal transportation will reduce consumer spending.

    3. The collapse of the housing market will reduce consumer spending.

    4. Loss of jobs will reduce consumer spending.

    Consumer spending determines the profit of companies. So, why then is the stock market going up?

    Commentator 2 wrote:

    One approach to this question is to view stock market performance as extrinsic, a symptom of something else. Stalin ordered the economist Kontratieff (Kondratiev) to prove that capitalism had a one-way ticket to destruction. Instead, Kondratieff proved with data that capitalism has ups and downs. For this, Stalin sent him to Siberia.

    Alan Greenspan, who, in "Age of Turbulence", reveals himself as a fan of Joseph Schumpeter, which makes Greenspan a believer in Kondratieff -- which goes far in explaining the actions of the Federal Reserve during the current Kondratieff trough war.

    Greenspan's winking at the sub-prime loan business shows his confidence that nothing can derail the Kondratieff upswing, glorifying the genius of the Bush administration which is able to have an apparent recession and a war at the same time.

    The Kondratieff Wave averages about 55 years. Of course shorter and longer cycles are superimposed on it. The problem with Schumpeter's attribution of the Kondratieff Wave to an innovation cycle is the same problem associated with the positive correlation between ice cream sales and the number of drownings: correlation is not causation. This is made clear by the correlation of the K-wave with a war cycle:

    1794, Ohio, The Battle of Fallen Timbers

    1846, Oregon, "Fifty-Four Forty or Fight" ---- Mexico, "Remember the Alamo"

    1898, Havana Harbor, "Remember The Maine"

    1950, Korea, "Better Dead than Red" (1953 -- The U. S. overthrows the government of Mohammad Mossadeq in Iran.)

    2001, New York City, Twin Towers, "Bring our enemies to justice, or bring justice to our enemies" (2003 -- The U. S. overthrows the government of Saddam Hussein in Iraq.)

    The above are all K-wave trough wars, hearalding the start of an economic upswing.

    Then, 15 to 20 years later, there is always the downside, the bitter wars:

    1812, Beginning of the end of the Napoleonic Wars

    1861, End of slavery in the United States, "A house divided against itself cannot stand."

    1914 (to 1945), This war lasted 31 years, similar to the Thirty Years War (1618 - 1648) in savagery and fanaticism (from trench warfare slaughter to the death camps) -- End of the state system formalized by the Congress of Vienna in 1815

    1964, Vietnam, End of the struggle in south-east Asia for the remains of the Japanese, French, and British empires

    2018 - 2023, Start of the next war of bitterness. Can we avoid this appointment in Samarra? Did Putin tell Bush that he would use force to defend Iran? Were the Russians able to turn bin Laden on us? Or was this just an especially savage move by whomever did 911 in the never-ending Great Game? In any case, the Kazakh War of 2020 will be no joke for the American people.

    This is sort of a lemming theory of history. I'm sure if lemmings could talk, they would have very good reasons for plunging into the ocean.

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    astrotabletalk.blogspot.com/2008/11/lemming-theory-of-history.html

    In November, 2008, Commentator 3 wrote:

    The Lemming Theory of History

    I think that conspiracy theory, in the sense of world events being secretly controlled by small groups of people, is similar in principle to the old-fashioned 'great man' view of history, which Tolstoy attempted to discredit in his novel War and Peace.

    According to this theory, history is largely shaped by great men like Napoleon: 'highly influential individuals who, due to either their personal charisma, intelligence and wisdom or Machiavellianism, used power in a way that had a decisive historical impact.'

    Tolstoy's most effective presentation of his case was in describing the nature of battles, of which he had first hand experience. What we might learn in a history book is Napoleon's brilliant victory at such-and-such a battle, brought about by the orders he gave. What Tolstoy points out in detail is the huge disparity between the orders that were given, and the course of events on the ground.

    The outcome of the battle, in other words, had nothing to do with the orders given by the 'great man'. The victorious Russian general Kutuzov in War and Peace goes to sleep in his tent during a battle [Borodino], having the wisdom to know that any orders he gives won't make any difference.

    It's not that 'great men', or small powerful groups of people, do not make a difference. They can, if they seize the moment. But it is soon gone in the wider current of forces that shape society. In the last analysis, I think it is this wider current, the collective will of society, that has the most power.

    Barack Obama may make a difference to America. But he is in the position he is in because there is a collective longing for certain types of change that he has been able to respond to and articulate. There have always been leaders and influential groups of people. Sometimes they are able to rise above the collective and shape it, for better or for worse, at least for a while. But they are like temporary islands in an ocean.

    The ongoing world financial crisis, and plunge into recession, is a good example of the unconscious collective having the upper hand. A huge force has swept through the world, and gone are our usual illusions that anyone is in control ...

    These blind collective forces ... haven't come out of nowhere. They have been building for years through the reckless, herd-like actions of the banking system, the politicians who are supposed to regulate it, and the millions of people who have borrowed far more than they should have ...

    Hence my title 'The Lemming Theory of History', ... The lemmings go over the cliff because all the other lemmings are, and they are being pushed on from behind. Even if you have been financially prudent over the last decade, you are still having to go over the cliff, you are still being affected by the recession.

    So individuals, or even, if you want, secret conspiring groups can make a difference for a period, even for decades, while the currents are with them. But the bigger trends are fundamentally collectively determined ...

    Commentator 4 wrote:

    Studying quantum chromodynamics and many other theories has led me to the conclusion that the world is full of random, self-generating, and self-coherent effects, but the whole of the equation is unfathomable because you can't see the picture when you are in the frame!

    Yes, there are trends, and powerful "cabals" and nefarious, evil people, but there is really no way it could ALL be orchestrated into some over-arching design. ["no way"? -- another illusion?]

    People who do think so are further entrenching their egotism by supposing that human powers are supreme. The human mind is designed to see patterns, and will impose them where none exist. The "lemming theory" is also called "consensual reality" or "bias of the majority" or "socially acceptable behaviour."

    Commentator 5 said:

    Well, I would say that the powerful and rich do conspire to control and amass more wealth ... I think the financial crisis was a conspiracy in that it is the final and ultimate expression of all that the rich and powerful have been scheming to do, starting with Reagan ...

    Reagan, Bush and their big business cronies didn't cause the crash per se, but they created the perfect conditions for it to happen..Big men, who are able to set the agenda, do change the course of history. I don't think that's disputable. Napoleon might not have controlled what went on during the heat of the battle, but he made sure to choose the ground his men fought on and gave them a starting advantage. Why do you think he won so many battles? Luck?

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    Commentor 7 wrote:

    `Childhood's End' [by Arthur Clarke] is the definitive book on hive mind. The Overlords are nursemaids to hatching Uberminds, themselves being never able to unite into such.

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    Commentor 8 wrote:

    The best evidence for hive minds are in hives -- bee hives and ant colonies. Among larger animals, the best evidence is in the coordinated movement of schools of fish and flocks of birds. Here is an astounding video of starling flocks:

    www.youtube.com/watch?v=XH-groCeKbE

    Despite this, I doubt that birds or fish have any extrasensory communication. I suppose they communicate by ordinary senses, and they signal by sound or movement. However, their ability to respond with speed and precision to signals from others members of the flock is astounding.

    {But] there is no leader.

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    Commentor 8 wrote:

    ... there is no leader.

    Commentor 9 wrote:

    Indeed! Commentor 8 has hit [the nail on the head].

    For those who are still curious about this behavior, take a closer look at some of the individual birds within these gargantuan flocks as they swirl and morph about in the air. Whomever we might presume are the dominant leader birds, their "leadership" is quickly rendered irrelevant seconds later as the entire flock changes direction.

    There must be some other kind of universal behavioral pattern perceived within each and every single starling that is more likely responsible for managing this collective behavior we perceive within the flock.

    Sometime ago researchers tried to develop accurate computer simulations of Slime Mould behavior. Initially all of their computer algorithms assumed there had to be a collection of dominant mold "cells" that must be directing the behavior of all the rest of the mold cells.

    Eventually, they discovered they had made an incorrect assumption. All they really needed to do was program in a few simple behavioral rules into each and every slime mold cell. Once that was done they were able to better model the intricate web-like patterns slime molds make.

    What is interesting about this emergent behavior is the fact that it is thought that the nerve cells comprising our complex brains also follow a collection of simple behavior rules.

    A philosophical question we might wish to ponder is: Does every single nerve cell within our own brains possess a unique sense of consciousness, their own "self" awareness? I vote yes ...

    I'm inferring that our sense of self-awareness is actually the manifestation of a collective hive mind derived from the activity of all our nerve cells working together as a unit -- as a brain. And if that is the case, why stop with our own brains?

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    Commentor 10 wrote:

    ... It's obvious that each bird takes it's cues from the others in one way or another, otherwise there would be no flock at all.

    Commentor 9 wrote:

    The flock appears to be the leader.

    Here's a great You Tube flick of a small flock of starlings defending themselves against an attack by a hawk. The behavior of the "flock" in making, what appears from our perspective, singular decisions becomes more apparent.

    www.youtube.com/watch?v=b8eZJnbDHIg

    Of course each of the individual starlings is reacting collectively by bunching up closer together to stymie the Hawk, but that's the whole point. Visually speaking, it appears to be the resulting collective behavior that is most startling and apparent ...

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    Commentor 11 wrote:

    Last week it was my luck and great pleasure to stand by the side of a country road in deepening dusk, and watch perhaps 200 birds wheel and gyre for 3 1/2 minutes. They formed a wildly malleable globe, elongating on any axis at random, while moving on another axis.

    There was no single leader. Several times a bird would break out in a new direction, and his near neighbors follow, forming a pointed protuberance which however soon sank back into the mass. Real direction change seemed to be more of a mass decision, with all turning nearly together, and the lack of perfect sync causing the shape changes.

    I saw birds inside the globe sometimes going in quite a different direction, with no effect on the greater number. I do not clearly recall whether the apparent density was greater in the center (uniform blob of birds) or at the edges (hollow globe), but I think the latter.

    At the end, the flight pattern gradually lowered, accompanied with greatly increased chatter: then rather suddenly they all swooped to the cat tails below.

    I think they were having a ball, drunk with the power of flight, sociability and life. Two days later they were gone, off South probably. Getting cold here.

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    Commentor 11 wrote:

    Real direction change seemed to be more of a mass decision, with all turning nearly together, and the lack of perfect sync causing the shape changes. I saw birds inside the globe sometimes going in quite a different direction, with no effect on the greater number.

    Commentor 8 wrote:

    What you probably did not see was two or more birds whacking together. People have watched thousands of hours of birds flocking, live and on video. As far as I know, no one has ever seen that happen. That is what is so amazing about flocking, and it is why we get the feeling there must be some sort of ESP involved.

    Animals do have accidents from time to time. Squirrels sometimes fall out of trees, for example.

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    Commentor 9 wrote:

    Of course each of the individual starlings is reacting collectively by bunching up closer together to stymie the Hawk, but that's the whole point. Visually speaking, it appears to be the resulting collective behavior that is most startling and apparent.

    Commentor 12 wrote:

    Cool video. As a group, the starling flock seems to have as much intelligence, or more intelligence than, a slug. At that point the question of whether they're acting under a collective consciousness becomes a little academic.

    The flock (as one thing) would seem to be as or more intelligent than an actual living creature. A reductionist approach here would be to try to explain that thing in terms of its parts alone. A mystic approach would be to assert telepathy.

    A third possibility is to say that there's something weird going on and that the thing being observed seems to be more than the sum of its parts; and that whatever is going on is worth investigating. It takes great aim to hit the non-reductive, non-mystical sweet spot, assuming it's worth attempting.

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    Commentor 10 wrote:

    The point I have been trying to make, is that no telepathy is required for this, just sharp eyes and a sense of self preservation.

    Commentor 9 wrote:

    Just millions of years of evolution. Humans do something with "culture" which also evolves.

    I don't know that the birds have a "sense of self preservation." They just do what they do, and what they do is conditioned by genetics (this is probably not learned behavior), and that has an `effect' of genetic preservation.

    The birds react to an incoming object, and they are sensitive to each other's movements, obviously.

    Human beings can display some similar traits, and it can be eerily like telepathy. Essentially, when we do this, it's `like' mindreading; it can be mindblowing for those who haven't encountered it.

    There is an exercise I saw at a Landmark Education Communications Course introduction. It's called the "Colors Exercise." People work in pairs. One of the pair says, "at random," -- it isn't random, of course, but that's the instruction -- the name of a color, Red, Yellow, Blue, Green.

    The job of the other person is just to echo that back. So this starts out as "Red, Red, Green, Green, Blue, Blue," etc., or the like with the initiator being followed by the imitating partner.

    The same excercise was done in a Relationships seminar. And every time I've seen this done, this is what happens: the two people, after a time, start saying the name of the color together, with high accuracy. That is not the instruction; it just happens.

    Great minds think alike, could be the saying; but, of course, this is just the ordinary human mind! We can "think alike," in unexpected ways. My own theory is that the intense visual concentration that accompanies this exercise, people are sitting face-to-face, watching each other, leads to an "entrainment" of the two mental processes, through observation of much more than what is said ...

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    Commentor 10 wrote:

    The point I have been trying to make, is that no telepathy is required for this, just sharp eyes and a sense of self preservation.

    Commentor 8 wrote:

    Probably. But you never know with birds. They can sense magnetism, for example, which they use to migrate. Who knows what else they can sense.

    It is not inconceivable they use some sort of RF signaling.

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    Commentator 10 wrote:

    Great minds think alike, could be the saying, but, of course, this is just the ordinary human mind! We can "think alike," in unexpected ways.

    Commentator 13 wrote:

    There are obvious communication links between human beings. Visual, very high bandwidth. Audio, relative low bandwidth, with most information being contained in "tone." (and this would precede language, per se, developmentally, i.e., as evolved. Language content (as text), low bandwidth, it would mostly serve as confirmation of information being transmitted and received at high bandwidth through visual cues and tone.

    What is not normally noticed is what I called "entrainment," where we anticipate what the other person thinks, because we are thinking using roughly the same information and response patterns. We do this in understanding the spoken word, all the time, i.e., anticipate what the other person is about to say. We often -- maybe even usually -- have it exactly right. We don't have to think about it, and there would be no time to do so.

    Where rapport is weak, i.e., entrainment is weak, these predictions can be off.

    If there is a physical communications medium, it would not ordinarily be called "telepathy," but my point was that it can seem so. When the mechanism I've described is operating, full-blown, it *seems* like mindreading. The "colors exercise" blows people's minds.

    Landmark doesn't emphasize that. It's used in training to show how there is communication that isn't about text. It's about "presence," the presence of what Landmark calls the Self, which is not individual, though, again, that is not emphasized. The Self is the collective human intelligence, it appears to operate on an entirely different level than the individual.

    The individual intelligence is concerned with individual survival, mostly, or at least about survival of a closely-defined group. The Self is not personally attached. How to awaken this Self is the focus of much Landmark work, beginning with the Advanced Course. It's transformative, it is not merely some "improvement" (which would be judged within the "realm of survival").

    In the Advanced Course, the activity of Self is called the "realm of enrollment," because of the effect as to expression and the inspiration of others. The whole next course is called the Self Expression and Leadership Program, and is about developing community projects -- not about Landmark! -- using the technology developed.

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    Pay off the national debt NOW!

    www.cleveland.com/business/index.ssf/2012/11/fed_chairman_ben_bernanke_warn.html

    ARTICLE from The Plain Dealer on November 20, 2012, By the Associated Press business staff

    Fed Chairman Ben Bernanke warns Congress to avoid 'fiscal cliff'

    WASHINGTON -- Federal Reserve Chairman Ben Bernanke on Tuesday [11-20-12] urged Congress and the Obama administration to strike a budget deal to avert tax increases and spending cuts that could trigger a recession next year. Without a deal, the measures known as the "fiscal cliff" will take effect in January [2013].

    Bernanke also said Congress must raise the federal debt limit to prevent the government from defaulting on Treasury's debt. He said a failure to do so would impose heavy costs on the economy ...

    -----------

    Commentator 6 wrote:

    Paying over $400 billion per year interest on the national debt debt as it continues to grow should be repugnant to all of us -- what a waste of our tax dollars. So, here is a proposal in the tradition of President Abraham Lincoln:

    Immediately pay off the entire U. S. debt with electronic (and printed when necessary) U. S. Treasury bills, "electronic greenbacks." These treasury notes will pay no interest; and will be "stored" in the U. S. Treasury until the debt-holders give the U. S. Treasury their account numbers for "electronic greenback" direct deposit.

    The new greenbacks will be legal tender in the U. S. and must be accepted abroad by U. S. agencies, contractors, and banks chartered in the U. S. no matter where they are operating.

    -----------------

    theamericanscholar.org/how-to-pay-for-what-we-need/

    FEATURE ARTICLE from The American Scholar, 1-1-12, By Richard Striner

    [Can greenbacks save the economy?]

    Congress could create money, as it did during the Civil War, funding public projects that shock the economy back to life.

    Just after the election of 2008, the Nobel laureate liberal economist Paul Krugman ... drifted back to the maxims of John Maynard Keynes -- maxims he called "more relevant than ever" -- [but] our thoughts could be turning to the older and in some respects wiser innovations of President Lincoln and the Republican Congress during the Civil War.

    Here's the gist of it: using the monetary methods of Lincoln ... we could pay for a faster recovery and a great many worthy projects without higher taxes, without more national debt, and believe it or not, without inflation. How? By letting Congress exercise a little-known power that is used (very quietly indeed) by the Federal Reserve: the power to create new money ...

    Federal Reserve Chairman Ben S. Bernanke: In an interview with 60 Minutes on March 15, 2009 [by] Scott Pelley ...

    Bernanke: "... The banks have accounts with the Fed - so, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It's much more akin to printing money."

    Pelley: "You've been printing money?"

    Bernanke: "Well, effectively."

    If the Federal Reserve can create new money, couldn't Congress do the very same thing? The answer is yes, and here's the precedent: the Legal Tender Act of 1862, in which the Republican-controlled Congress authorized creation of "United States Notes," known as greenbacks, that were printed up and spent into use.

    The U.S. Constitution has no provision for this practice, but it does authorize the minting of coins ...

    Three main factors explain the success of the Legal Tender Act:

    First: the underlying strength of the Northern economy.

    Second: the fortuitous timing of the law. It went into effect during the months of Union military success in the spring of 1862, floating the greenbacks on a buoyant mood of confidence in victory.

    The third reason was the enactment of a comprehensive tax law on July 1, 1862, which soaked up much of the inflationary pressure produced by the greenbacks. The Union ultimately raised half again as much war revenue from taxes as from the issuance of paper money ...

    Notwithstanding the overall success of the Union greenbacks -- and notwithstanding the importance of the 1871 Supreme Court decision in the case of Knox v. Lee, which declared the Legal Tender Act constitutional -- Civil War greenbacks were slowly withdrawn from circulation (and were redeemed in gold beginning in 1879).

    Some people, many of them farmers who wanted government and not banks to control the currency, protested against this policy and founded the Greenback Party in 1874. Some social reformers recommended financing federal relief measures with greenbacks during the Gilded Age.

    In 1894, a maverick Ohio businessman named Jacob Coxey led an "army" of unemployed Civil War veterans to Grover Cleveland's Washington in the middle of an economic depression. They demanded a multimillion-dollar "Good Roads" bill that would wipe out unemployment through job-creating public works. The finance method they proposed: greenbacks ...

    The Great Depression led some distinguished American economists to recommend reviving the greenback method. Their program was trumped by the influence of John Maynard Keynes, whose 'General Theory of Employment, Interest, and Money' hit the shelves in 1936. The result of our adherence to some form of Keynesianism ever since has been a staggering national debt.

    Conservatives and liberals alike should step back from conventional thinking [which does not] touch sufficiently on the central point that we ought to be considering now: the nature of money ...

    The conventions of our money supply are so arcane that explanation is daunting. Journalist William Greider once observed that the American process of money creation is "a powerful mystery to most citizens." ...

    In `Secrets of the Temple: How the Federal Reserve Runs the Country,' Greider quoted the head of the Federal Reserve Bank of New York, who went so far as to assert that "no President really understands these things." If that's true, it's nothing less than a major civic tragedy ...

    Where does modern money come from? And what does it consist of?

    Generations ago, the coined money created by our government consisted of gold and silver -- precious metal that was clearly private property -- an internationally portable treasure that was brought to the mint on occasion by its owners, then stamped into coin and given back ...

    In 1934, when monetary gold was largely removed from circulation through the Gold Reserve Act (it was melted into bullion and eventually shipped to Fort Knox), its possessors got paper currency in exchange.

    But the precious-metal standards are defunct as the basis for our money. And even in their heyday, money created by the gold and silver standard amounted to less of the total money supply than that created in a different way.

    The ... truth is that most of our money supply is not created by the federal government, as most people seem to believe, but instead by banks.

    Centuries ago -- as early as the founding of the Bank of England in 1694 -- money lenders figured out a clever way to make double, triple, or quadruple use of the coin deposits that they received from their customers.

    The bankers made loans in the form of paper bank notes emblazoned with a clear-sounding promise: "payable to the bearer on demand." But bankers issued far more of these notes (via loans) than they could ever redeem at one time. That is to say, the volume of bank notes in circulation vastly exceeded the coin deposits "on reserve." [the more notes, the more interest income for the bankers]

    The bankers figured it was unlikely that everyone possessing a banknote would storm into the bank at the same time, demanding redemption in cold hard coin. Under normal circumstances ... these moneylenders won their gamble ...

    The privately issued bank notes expanded the money supply, not as legal tender (under law, people weren't required to accept them) but as a purchasing power that functioned as a surrogate for money ...

    In the United States by the 1870s most banks began to shift from the issuance of bank notes to "checkable deposits" -- modern-day checking accounts.

    Instead of giving a borrower a loan in the form of bank notes, bankers would give borrowers a checkbook and say that the loan had been credited to their account as a new deposit. All they had to do was write checks, and then the bank would redeem the checks in coin from its cash reserves when the checks were presented at the bank ...

    From checking deposits, this practice evolved into the lines of credit that we all know and use every day, with our credit cards, cash cards, online bill paying, and so on ...

    Consider how it works. Write a check, and then presto, you have paid: you have made a real purchase. A sale has been recorded in the books ... Swipe the credit card, and once again, you have paid. When the bank extends credit, it creates new purchasing power.

    But the mechanics of the process are as deceptive as they were long ago, when many people who read the promise "payable to the bearer on demand" presumed that behind every banknote was cash, real coin of the realm, in the very same amount.

    In fact, cash is unimportant in the ledger transactions that constitute the juggling act today.

    Consider an example of present-day banking practices, carefully expounded by a widely used economics text, `Economics: Principles and Policy,' by William J. Baumol and Alan S. Blinder. "Even a single bank can create money," these economists explain, and they give a quick example to illustrate:

    A man deposits $100,000 of cash in his checking account. So "the bank now has acquired $100,000 more in cash reserves, and $100,000 more in checking deposits." It would sound as if these two different monetary terms -- the $100,000 worth of "cash reserves" and the $100,000 of "checking deposits" -- are interchangeable ways of referring to the same amount of money. But they are not: these banking terms ... represent an accounting trick whereby the $100,000 can be doubled into two equal units of $100,000 apiece.

    Since the Federal Reserve's "reserve requirement" is (in this example) represented to be 20 percent, the bank's "required reserves rise by $20,000, leaving $80,000 in excess reserves." And so the bank lends the $80,000 to another customer.

    But remember: the original depositor can still write checks to the tune of $100,000. What has happened here is pure sleight of hand, and the two economists sum it up quickly: "There is now $100,000 in checking deposits and $80,000 of cash in circulation, making a total of $180,000. The money-creation process has begun."

    Thus commercial banks are allowed in our system to make double use of checking deposits. The legal principle is simple: like insurance companies, the banks are obliged under law to pay money on demand to their customers in certain situations. Consequently, as long as these banks can make good on their promise to pay -- never mind how -- the methods they use to shift money around are almost none of our business, at least in the eyes of the law ...

    Banking regulation at the federal level has a long and interesting history. It began with the chartering of banks by Congress: The First and Second Banks of the United States (chartered respectively in 1791 and 1816), the national banks chartered by Congress in 1863 (which were regulated by the Comptroller of the Currency), and the Federal Reserve System, created by Congress in 1913.

    The Fed was (and is) a hybrid public-private institution that was designed to be a "lender of last resort" in a banking crisis. The regulatory powers of the Fed (as applied to member banks) would be steadily increased down the years ...

    Most of our money is created by the banks in the process of lending. The tangible stuff that we keep in our pockets and use as legal tender -- the coins produced at the U.S. Mint and the Federal Reserve Notes produced at the Bureau of Engraving and Printing -- gets furnished by the Treasury to banks (when they need it) in exchange for securities that function as collateral.

    Such physical money plays a secondary role in our economy. The cash transactions that we make in the course of the day are insignificant compared with our direct electronic transactions.

    So, through the method that is known in economics as fractional reserve banking, this creation of our money supply by the banks takes place with Uncle Sam as a cooperative assistant.

    The term "fractional reserve" refers to the existing money that the banks have to keep on hand to pay depositors and creditors, which constitutes a fraction of the brand-new money that the banks are creating through their lending and credit operations.

    Consider the extraordinary magnitude of this process. Recall our first example: a deposit of $100,000 generates $80,000 more. Now suppose that the borrower who takes out the loan -- the $80,000 -- deposits this newly created money in a different bank. Presuming the same reserve rate of 20 percent, this $80,000 could support yet another loan to the tune of $64,000. And so on, until at last, at the end of the chain, the first deposit has led through a multiplication of loans to $400,000.

    But the principle starts at the top, with the Federal Reserve, which can add to the "excess reserves" of the system by creating new money through "credit." The staff of the Federal Reserve once explained the process in a 1939 guidebook titled `The Federal Reserve System: Its Purposes and Functions.' One sentence in the book, deleted from subsequent editions, reads,

    "Federal Reserve Bank Credit does not consist of funds that the Reserve authorities get somewhere to lend, but constitutes funds that they are empowered to create." ...

    The Fed created credit that was used to buy bonds -- preexisting bonds -- from the portfolios of banks. The money that was paid for these bonds led to larger excess reserves in the banking system, and these excess reserves led to purchases of newer government bonds ...

    William Greider describes the almost circular mechanics of the process:

    To ensure a successful bond sale, the Fed expanded bank reserves by buying up outstanding government securities. The commercial banks lent the expanded money supply to private customers who would in turn lend it to the government by buying the new Treasury issues.

    The customers then sold their new government securities to the commercial banks -- and [the banks] eventually sold them back to the Fed when the central bank was again required to expand the money supply. In a roundabout way, the government was borrowing its own money -- and paying a fixed fee to middlemen for the privilege ...

    [And now the taxpayers are forking over more than $400 billion every year to the money lenders as interest on the federal debt; that's more than $4 trillion over ten years] ...

    During the Great Depression, several important American economists protested against fractional reserve banking. One was Irving Fisher of Yale ... In 1936, Fisher wrote that "everyone except the banker who lends money lends pre-existing money, not money of his own creation. The government should take away from banks all control over money creation."

    Henry C. Simons of the University of Chicago condemned "the usurpation by private institutions (deposit banks) of the basic state function of providing the medium of circulation."

    John R. Commons, a past president of the American Economic Association, recommended in 1934 that "in order to create the consumer demand, on which business depends for sales, the government itself must create new money and go completely over the head of the entire banking system by paying it out directly to the unemployed, either as relief or for construction of public works." ...

    Greenback spending could have made a great difference in the way Roosevelt's New Deal was financed. An amendment to the Agricultural Adjustment Act of 1933 gave the president authority to issue new greenback currency, but the doctrines of John Maynard Keynes prevailed ...

    The greenback tradition these days is little more than a relic. Now and then a heretical writer has attempted to revive the tradition; in the 1990s, for example, a retired businessman and engineer named William F. Hixson wrote that "it never makes sense for the government to permit banks to create money and then borrow it from them at interest, since the government can create money just as cheaply and efficiently for itself and then have the use of it without a debt to repay and without any burden of interest." ...

    Among the powers that Congress has granted to the Federal Reserve -- beginning with the Banking Act of 1935 -- is the power to set the reserve requirements for banks.

    In 1980, this authority was expanded to include the reserves of all "depository institutions," from commercial banks to savings and loans to credit unions.

    By raising the reserve requirements (as the Federal Reserve began to do under Paul Volcker's chairmanship in the early 1980s), the Federal Reserve can counteract inflation by pulling more money out of the excess reserves, which will tighten up the money supply by reducing banks' power to lend, thus fighting inflation ...

    We shouldn't have to choose between the all-or-nothing options of bank-created money and money created by the government, not if we can employ the best of both.

    Instead of canceling the power of banks to create new money, we could add to the expansion of our money supply with new money that the government creates ...

    Here is how the process might work: Congress would legislate a limited creation of money to be spent through direct appropriation. The new appropriated funds would then be sent by the government through direct electronic deposit to employee or vendor accounts in commercial banks, where the funds would immediately be convertible to cash ...

    As these deposits augment the excess reserves of the banking system -- creating some potential for inflation -- the Federal Reserve would begin to raise reserve requirements ...

    This amounts to the system that we have in place now, except that Congress -- in addition to the Fed -- would have the power to create new money out of nothing. Greenbacks should be issued now by executuve order]

    This would constitute a very neat division of labor: the Fed would create the new money for private investment, and Congress would create the new money to underwrite our public investments ...

    The United States is not broke -- and we should laugh at the delusion that we are. The potential for abundance is everywhere around us, but it stagnates for sheer lack of funding. We have contracted our nation's power to produce and consume just to prove that we can live within our means. And that's a formula for economic ruin ...

    Why shouldn't the American people have additional funds to be used for such impeccable purposes as national security, infrastructure maintenance, public safety, environmental protection, and research to counteract global climate change -- funds created by the government without more taxes or debt?

    Does the principle seem too good to be true -- a mere mirage, something for nothing?

    Think it over, for the system that we have right now is an exercise of mind over matter. The system I propose would give the people and their leaders an equal share in money creation with the bankers who are seeking private profit.

    It's a profitable game, the creation of money, and we need more players at the table.

    Top -- Home

    arlissbunny.wordpress.com/2012/11/25/modern-monetary-theory-vs-the-fiscal-cliff/

    Modern Monetary Theory vs the Fiscal Cliff

    Arliss Bunny's Blog

    Sunday, 25 November 2012 by arlissbunny

    I am writing an educational post today which will attempt to describe, in the simplest terms possible, Modern Monetary Theory (MMT) and its place in the current national conversation ...

    The Federal deficit is not big ENOUGH.

    There. I said it. Go back and read it again just in case you missed the emphatic nature of this statement ...

    Given the potentially society-changing negotiations going on in Washington right now, this seems a reasonable time to point out that no matter what they decide, they are likely to be wrong because, as anyone who has paid informed attention to the monetary crisis in Europe knows, austerity measures are a death knell for already stressed economies.

    Nation states that are locked into a fixed currency, like all those who participate in the Euro, have turned over the control of their economies to forces which have no interest in acting in the best interest of each individual country. But, and this is important, the United States is NOT in this position.

    Fiat Currency

    Once upon a time the US was the prime signatory to the Bretton Woods Monetary System wherein forty-four allied nations agreed to tie their currencies to the US dollar at a fixed rate. The US dollar was tied to gold ...

    Eventually though, because gold is a limited commodity, being tied to the gold standard began to seriously impinge upon the US economy so, in 1971 President Nixon, with the so-called 'Nixon Shock', took the US out of Bretton Woods and off the gold standard. This was a huge deal, bigger even than I can describe.

    The United States now had a pure, fiat currency (meaning that the currency does not, in itself, have intrinsic value) and that the US, as the issuer of said currency, had new and significantly increased power to make much broader discretionary decisions in terms of economic policy. But a funny thing happened. US monetary policy makers didn't really do much with their new found freedom.

    To begin to explain this I must first make something very, Very, VERY clear -- a US federal budget is nothing what-so-ever like your personal household or business budget in any way, shape or form ...

    It is not like your family budget. Period. Do you see why? You don't do you.

    Well, you are in good company. Most of the country and, to the best of my knowledge, every single member of the House of Representatives, is right there with you.

    Here's a hint. You have to work for your money. A business has to produce goods, or services ... in order to have any. The US government is an issuer of currency. They don't have to earn it. They print it.

    Let's just stay focused on the simple fact that the big difference between the US government and you or me is that they will never run out of the currency needed to cover their debts.

    One of the most interesting things about fiat currency is that taxes are not actually a requirement. Neither is there a need to sell bonds or borrow currency. Do you know what happens when you pay your bill to the IRS in cash? They shred it ...

    The only real purpose of taxes is to drive value into the economy. Taxes are a way to move value back from the private sector into the public sector.

    Deficits are the opposite. Deficits are a way to leave value in the private sector. For example: if the Department of Defense spends $100 buying a wrench then the private company that sold it to them, let's call this company Schmoing, gets that $100. The value has transferred from the public into the private sector.

    If Schmoing then turns around and pays their wrench supplier, ACE Hardware, $15 for the wrench, $15 of the value transferrs to ACE and $85 stays with Schmoing. If ACE then turns around and pays the actual maker of the wrench, a firm in China called Wrenches!, $5 for the wrench then $5 of the original $100 has now moved outside of the US economy.

    When tax time rolls around, Schmoing and ACE both pay taxes against the profit they made on the sale of the wrench. ACE pays $1 and -- now here you know this is just imaginary because in the real world Schmoing would pay nothing -- ... Schmoing pays $9.

    So, of the original $100, the government received $10 back in taxes and $5 went out internationally (to China) leaving an $85 federal deficit. But that money didn't evaporate. It is still here, in our economy, in the private sector ...

    Sectors

    Just as math is math, accounting is accounting. There must be balance in the balance sheet. Understanding that the balance is more macro than we commonly think is why it is so difficult for us to accept that a federal deficit is a good thing.

    The federal government isn't balancing a federal budget -- they are balancing an economy. These are very different things. If they were balancing a budget, like certain legislators keep insisting is a necessity, then the worry would be that income (taxes) and outgo (government spending) are balanced. This is ... wrong.

    Our economy is divided into three sectors and it is these sectors which need to be in balance. The three sectors are the private sector (individuals and business), the public sector (local, state and federal governments) and the non-domestic sector ...

    As always in accounting, one sector's asset is another sector's liability. This is seen in the example given above when the $90 liability of the public sector becomes the $85 asset of the private sector and the $5 asset of the non-domestic sector.

    Modern Monetary Theory has, therefore, two rules: all sectors cannot be in surplus at the same time; and all sectors cannot be in deficit at the same time. Accounting has these same rules. This is nothing new ...

    It just isn't what we have been taught. We have been taught to view the US budget as if it were separate from you and me, an independent entity which required internal balance.

    Instead, Modern Monetary Theory proves that the public and private sectors are two of the three legs upon which this meta entity, the US economy, stands ...

    So why are Italy and Greece in so much trouble with their deficits? That's obvious. Neither country has control over its currency. [Their] currency itself is, indeed, limited and has become ... a commodity. In the overall European Union ecosystem, ... Germany has boomed at the cost of Greece and Italy ...

    In the mid 1990's, Italy ... was not in crisis. They were a fully functioning economy, and they paid their debts in Lira ...

    Today, Italy ... [has] a debt crisis. Why? Well, it's the Euro, of course. Italy is at the mercy of the Euro and there is no advantage to the Euro in favoring Italy so Italy is drowning under a bad debt they cannot pay with limited Euros.

    What we want here in the US is what Modern Monetary Theory theorists refer to as a good deficit. A good deficit is one which operates in an unconstrained way ...

    By contrast, ... fiscal austerity directly impedes the growth of the private sector.

    New wealth is only created by the issuing monetary authority ... Let's say Schmoing sells that $85 wrench to Borthrop-Humman instead of the federal government. The value has passed from Borthrop-Humman to Schmoing but it remains in the private sector. It is not new wealth ...

    Even if Schmoing built the wrench from scratch, all the components were purchased from within the private sector and on the balance sheet the value still remains there. None of it is new.

    BAM! *splat* *train wooshes by* Yeah, I know. I felt that way too. I always thought that because we built the thingie we were creating the wealth. My bad. I forgot that we may be building the thingie, the wrench in this case, but it has no monetary value.

    There is no money to pay for the wrench unless the issuing authority has issued said currency into the system and that can only be done by taking less out in taxes and/or pushing more in with government spending.

    Professor Stephanie Kelton, Research Scholar at the Levy Economics Institute and one of the leading authorities on Modern Monetary Theory has this to say.

    Let's focus in on a specific period of time. The period in the late 1990s and early 2000s when for the first time in decades the US government ran budget surpluses. Many people would inherently think that would be a good thing. It shows fiscal responsibility. Not only did they balance the budget, but they put it in surplus.

    Meanwhile, our current account [export] deficits were huge. The rest of the world was running large positive balances against the US. That reduced US private-sector savings. Surpluses fell. It pushed the private sector into deficit on an unprecedented scale.

    The private sector went from surviving above the zero line to being pushed below zero. And the private sector remained there for a period of years, spending more than its income, borrowing to do it. And it was all fueled by a massive bubble economy that ended in recession, which drove the public sector's balance back into deficit where it belongs.

    When an economy is already in recession what it needs most desperately is new wealth; and, with a fiat currency, that can only come from the issuing authority ...

    The odd thing about the US is that we have made choices to try to resolve our crisis without using the single most powerful weapon we have at our disposal [our fiat currency].

    With any fiat currency there are only three things to watch for, and none of them is deficit spending. The three economic delimiters are inflation, exchange rates and unemployment ...

    Modern Monetary Theory theorists have long known [that] if you are the issuer of the currency, you do not have to be at the mercy of bond vigilantes.

    As I said many paragraphs back, the US DOES NOT NEED TO SELL BONDS OR BORROW CURRENCY IN ORDER TO SPEND. These are habits and levers we employ as part of fiscal policy but they are not a necessity in terms of financing expenditures. [The money lenders, kleptocrats, do not want you to know this. They like collecting over $400 billion per year in interest payments from the taxpayers,]

    It is interesting to know that the Secretary of the Treasury can order to be struck the currency of his choosing and deposit it in the federal accounts. Just like that. Congress would melt down in a fit of apoplexy, but it would be legal. The money gets injected into the economy and people go back to work.

    In fact, it would be easy and fast to open up the spigot and return the economy to 'full' employment (approximately 3.7% unemployment) within the next two or three years at the most. An economy only gets inflationary, too hot, if new wealth continues to be pumped into the economy after the employment goal is achieved. Up until that time, ... the supply remains in excess of the demand so inflation does not become a factor.

    Again, from Professor Kelton,

    Inflation is when demand outstrips supply. In the 1970's this was because there was a sudden commodity shortage. [Titan Oil says "We are not in the oil business; we are in the oil shortage business."] The supply of oil was choked down to a trickle by the newly formed OPEC. Every product that used petrochemicals was affected ...

    Americans, with their huge gas-guzzling cars, waited in lines for gasoline. The economy could not take the shock. Unemployment rose at the same time prices spiked. Stag-flation was the new buzzword. This period is a classic example of what is called 'demand-pull inflation.'

    Money is not a commodity. It is not intrinsically limited. It is in no way comparable to oil (or gold). There is no reason that the US government should not be spending money to drive employment. The US dollar is not at risk of ... [inflation] and both short and long-term bond rates are at or just barely above zero ...

    Final Thoughts ...

    Over the next few weeks and months, the President and legislators from both Houses are going to be fighting over an imaginary 'crisis' they have dubbed the fiscal cliff.

    This battle is entirely unnecessary. Our leadership is so used to thinking in terms of the gold standard that they still don't know that a whole new age has dawned. The emphasis of Modern Monetary Theory is in the power of the State to move within a substantially increased policy space which is largely unconstrained by monetary limitations ...

    -------------

    Connemtator 15 wrote:

    The rules of Monopoly are instructive. If the banker runs out of money for the players, the instructions say to just cut up some paper and write the amounts on them as needed ...

    -------------

    neweconomicperspectives.org/2011/05/what-happens-when-government-tightens.html

    What Happens When the Government Tightens its Belt?

    Posted on May 27, 2011

    By Stephanie Kelton

    neweconomicperspectives.org/2011/06/what-happens-when-government-tightens.html

    What Happens When the Government Tightens its Belt? (Part II)

    Posted on June 3, 2011

    By Stephanie Kelton

    In an open economy, income flows into and out of the domestic economy ...

    Each country keeps track of these payments using a balance of payments (BOP) account, which summarizes the international monetary transactions that take place between the home country and the rest of the world.

    The balance of payments has two primary components -- the current account and the capital account -- and we can use either one to show whether, on balance, money is flowing into or out of a country.

    Beginning with the simple identity for GDP in a closed economy, we have:

    [1] Y = C + I + G, where:

    Y = GDP [Gross Domestic Product] = National Income

    C = Consumption

    I = Investment

    G = Government Expenditure

    [Also, let]

    S = Savings

    T = Taxes

    It simply recognizes that the total amount of money spent buying newly produced goods and services will yield an equivalent income to the sellers of these products. Thus, it demonstrates that expenditures are a source of income.

    Once earned, income can be allocated in one of three ways. At the end of the day, all income (Y) will be spent (C), saved (S) or used in payment of taxes (T):

    [2] Y = C + S + T

    Since they are equivalent expressions for Y, we can set equation [1] equal to equation [2], giving us:

    C + I + G = C + S + T

    Or, after canceling (C) from both sides and moving terms around:

    [3] (S - I) = (G - T)

    [3] (Savings - Investments)

    = (Government Expenditure - Taxes)

    Equation [3] shows that there is a direct relationship between what's happening in the private sector (S - I) and what's happening in the public sector (G - T).

    When we incorporate international flows, we transform the closed-economy accounting identity:

    [4] Domestic Private Balance = Government Deficit

    into the open-economy accounting identity shown below:

    [5] Domestic Private Balance

    = Government Deficit + Current Account Balance

    or, equivalently,

    [6] Domestic Private Balance

    = Government Surplus + Capital Account Balance

    When the current account balance is positive, it means that we in the private sector (households and domestic firms) are accumulating net financial claims on foreigners. When it is negative, they are accumulating net financial claims on us. Thus, a positive current account implies a negative capital account and vice versa.

    Let's initially hold the public sector's balance constant at zero (i.e. let's assume the government is balancing its budget so that G = T).

    [Government Expenditure = Taxes]

    With the government budget in balance, ... the private sector's financial position will simply reflect the capital account.

    [From [5] and [6] we obtain

    [7] Government Deficit + Current Account Balance

    = Government Surplus + Capital Account Balance

    [7] 0 + Current Account Balance = 0 + Capital Account Balance

    [7] Current Account Balance = Capital Account Balance]

    If the current account is in surplus, the capital account shows an equivalent deficit:

    Sticking with (G = T), we can show how a current account deficit impacts the private sector's financial position.

    [6] Private Balance = 0 + Capital Account Balance

    As the capital account moves from deficit into surplus, we see that the private sector's financial position moves from surplus into deficit.

    But does this all of this hold true in the real world, or is it some kind of economic chicanery? Let's check the facts.

    Equations [5] and [6] above are not based on economic theory. They are accounting identities that always "add up" in the real world.

    So let's firm up the discussion about the implications of government "belt tightening" by running through some examples using from real world data: (All of the data comes from the National Income and Product Accounts (NIPA) and the Flow of Funds.)

    Let's begin with the data from 1998 (Q3), when the public sector deficit was just 0.01% of GDP and the current account deficit was 2.56% of GDP.

    Plugging these numbers into equation [5] above, the identity tells us that the private sector's balance must have been:

    [5] Private Balance = 0.01% + (-2.56%) = -2.55%

    Here, we can see that the private sector's financial position was deteriorating because it was making large (net) payments to foreigners. Because this loss of financial resources was not offset by the public sector, the private sector's financial position deteriorated.

    To see how a bigger government deficit would have improved the private sector's financial position, let's look at the data from 1988 (Q1):

    As a percent of GDP, the current account balance was 2.59%, nearly the same as before, while the government's deficit came in at a much higher 4.2% of GDP. We can use Equation [5] to see effect of the larger budget deficit:

    [5] Private Balance = 4.2% + (-2.59%) = 1.61%

    In this period, the private sector ends up with a surplus because the government's deficit was large enough to more than offset the negative effect of the current account deficit.

    Whenever the government's deficit is too small to offset a deficit in the current account, the private sector will experience a net loss ...

    So let's go back to President Obama's comment and the reason I wrote this blog in the first place. The President said:

    "Small businesses and families are tightening their belts. Their government should, too."

    Wrong! When we tighten our belts, it means that we are trying to build up our savings. We do this by spending less. But spending drives our economy. Sales create jobs. So unless Obama has a secret plan to reverse three decades of current account deficits, the Government needs to loosen its belt when we tighten ours. If it doesn't, then millions of us will lose our shirts.

    ["three decades of current account deficits" -- where did the money go?

    The kleptocracy wins again: Oil wars have made trillions for the owners of oil wells, leaving the public holding the bag.

    The Iraq War was an outstanding success. Taking Iraqui oil off the world market was a great benefit to owners of oil wells who made trillions

    search.barnesandnoble.com/House-of-Bush-House-of-Saud/Craig-Unger/e/9780743253390/

    See Craig Unger's book: "House of Bush, House of Saud,"

    March 19, 2003

    War on Iraq begins.

    Oil is selling for about $25 per barrel.

    archives.econ.utah.edu/archives/a-list/2003w19/msg00037.htm

    www.nathanielturner.com/liberationofbaghdad.htm

    www.democraticunderground.com/discuss/duboard.php%3Faz%3Dview_all%26address%3D103x8909

    May 22 2008

    guardian.co.uk/business/2008/may/22/oil.bubble.economics

    From The Economist

    Over the past six years the price of a barrel of crude oil has risen from around $20 a barrel to $135 a barrel today.

    February 25, 2003

    en.wikipedia.org/wiki/Eric_Shinseki

    ``Chief of Staff of the Army, General Eric Shinseki, told the Senate Armed Services Committee that he thought an occupying force of several hundred thousand men would be needed to stabilize postwar Iraq ...''

    His judgment was ridiculed by Defense Secretary Donald Rumsfeld, among others. The general then found himself marginalized until he retired''

    After Baghdad was conquered, the Iraqui borders were not secured; and hundreds of "terrorists" poured into Iraq from Saudi Arabia to blow up the Iraqui oil pipelines, taking Iraqui oil off world markets.]

    ----------

    www.pbs.org/newshour/bb/business/july-dec12/krugman_12-04.html

    CONVERSATION Transcript AIR DATE: Dec. 4, 2012

    SUMMARY ...

    Gwen Ifill talks to Paul Krugman about why he thinks reducing the deficit too fast could push the economy back into recession.

    GWEN IFILL: And returning to our series of conversations on what to do about the nation's taxes, spending and debt ...

    Paul Krugman is a Nobel Prize-winning economist at Princeton University and a columnist for The New York Times. He joins us now ...

    PAUL KRUGMAN: The deficit right now is [a phantom menace] ...

    The fiscal cliff is a very different story. That's about reducing the deficit too fast.

    GWEN IFILL: In fact, you call it an austerity bomb. Describe that, what you mean by that.

    PAUL KRUGMAN: ... Well, what's happening is that we are scheduled, unless something is done, basically to do to ourselves gratuitously what has been happening to some of the European economies.

    We're going to have substantial spending cuts [and] substantial tax increases at a time when the economy is still very weak. And, of course, that's a recipe for sliding back into recession ...

    GWEN IFILL: What about inflation adjustments for Social Security? ...

    PAUL KRUGMAN: It does save, but ... it's surprisingly small. I rolled my own estimate and said that's $180 billion over the next 10 years ...

    The actual inflation rates faced by seniors is, if anything, a bit higher than the official inflation rate. So, you are again inflicting some serious hardship for very little money.

    All of these things that have occupied all our attention are not actually where the big bucks are. The big bucks are in making high-income people pay higher taxes and in ... addressing health care costs, which the Affordable Care Act does; and [which] none of the things that we're talking about now will ... do ...

    GWEN IFILL: The president has also proposed something that John Boehner calls silliness ... which is taking the idea of the debt ceiling off of Congress' plate ...

    PAUL KRUGMAN: ... Where do spending and tax revenue come from? They come from bills voted by Congress.

    So, the way that the debt ceiling works is that Congress can actually vote to not tax enough to pay for the spending it proposes, and then it can refuse to allow the government to borrow the money to make up the difference between its own spending bills and its own tax bills. This is crazy ...

    The Republicans are attempting to do government by blackmail ... Give us what we want, or we will tank the economy.

    Nice little economy you have got here. Shame if something were to happen to it ...

    GWEN IFILL: So, let's just assume for a moment that we do go over the cliff, as you suspect. Where do we land? ...

    PAUL KRUGMAN: Well ... most of the Bush tax cuts will survive ...

    There's a lot of things that the Democrats want -- extension of the payroll tax, expanded unemployment benefits, more stimulus in general -- that probably won't happen if we go over the cliff ...

    GWEN IFILL: Paul Krugman of PrincetonUniversity and The New York Times, thanks so much for joining us ...

    ------------

    blogs.berkeley.edu/2012/12/04/why-its-hard-to-replace-the-fiscal-cliff-metaphor/

    Commentator 14 wrote:

    Economists like Paul Krugman ... have rejected the fiscal cliff metaphor ...

    Krugman points out that the idea of the fiscal cliff is tied to an economically false argument about the dangers of the deficit.

    He argues instead that the deficit is too small and that we need to invest more, not less, in the development of the economy.

    The real danger, he argues is that what is called the "fiscal cliff" is really an "austerity bomb." The result would be dangerous cuts in necessary economic investments and safety nets, which would hurt many people and the economy as a whole as well, just as austerity programs in Europe have done ...

    -------------

    [Here is another example of the kleptocracy in action: After the bear raid of 1937, in March 1938, Joseph Kennedy, first chairman of the Securities Exchange Commission, formed under the administration of F. D. Roosevelt (FDR), had the SEC adopt the uptick rule, more formally known as rule 10a-1, which (loosely) said that you could only sell short a stock following an uptick in its price.

    July 6, 2007

    www.stockhouse.com/Bullboards/MessageDetailThread.aspx?p=0&m=22806088&r=0&s=PBX&t=LIST

    en.wikipedia.org/wiki/Uptick_rule

    On July 6, 2007 The SEC eliminated the uptick rule. The fall of the Dow Jones industrial average, during the Great Bear Raid of 2008, from 14,164 on October 9, 2007, to 6,547 on 3-9-09 is not some inexplicable mystery: There was nothing to stop the bears piling on as they made fortunes driving down the market.

    The bears made fortunes, but they also did collateral damage -- like thieves destroying a cash register as they rob a restaurant -- ruining pension funds and 401k accounts.]

    Top -- Home

    www.cleveland.com/opinion/index.ssf/2014/07/is_our_slow_recover_because_of.html

    by Robert D. Oberst, Guest Columnist

    The Plain Dealer on July 30, 2014

    [Are Boomer retirements sinking the economy?]

    It has been nearly seven years since the start of the Great Recession, yet our economic engine continues to sputter, generating less than 1 percent growth in gross domestic product over that period -- the worst since the Great Depression ...

    In each of the previous five years, we registered a quarter of near-zero growth, raising repeated fears of sliding back into a recession. Unemployment improved to 6.1 percent in June [2014], but after nearly every other recession, we saw unemployment below 6 percent three years earlier.

    Is our meager performance merely due to the financial crisis or is there an underlying current that caused the aftermath of this recession to be so long and deep?

    Could it be because the baby boomers are retiring in unprecedented numbers, withdrawing their record level of economic stimulus from our consumer-spending-addicted economy? With over 75 million members, the boomers are, after all, the largest generation in U.S. history.

    An in-depth model shows that generational economic stimulus (GES) peaks when a generation is in their 40s and 50s. The boomers' GES peaked from 1983 through 2007, stimulating a 25-year expansion -- the longest in U.S. history.

    With an average retirement age of 62, Generational Economic Stimulus declines precipitously during our 60s, which, for the boomers, occurred around 2007, indicating the start of a severe contraction ...

    The largest generation was retiring in increasing numbers, setting the stage for the Great Recession. They were downsizing, buying fewer goods, cars and, most notably, fewer homes.

    As they aged, their fund balances and pension funds naturally shifted from stocks to bonds, creating a huge demand for low-risk investments.

    The financial industry -- seeking products to fill the demand -- manufactured mortgage-backed securities. Escalating home prices insured the value of these over-rated assets; but, as the boomers downsized, the housing bubble burst, leading to the Great Recession.

    Unlike recessions that last only a few years, these longer-term generational contractions tend to last over a decade, which is why we will continue to experience such sluggish financial conditions.

    When the boomers were in their peak financially, we had the longest expansion, and when they exited this peak, we had a severe contraction.

    Are there other instances when a peak generation's retirement led to a long-term contraction? It turns out that this scenario has played out four times over the last 140 years, once for each peak generation, thereby supporting this theory.

    In the 20th century, in addition to the boomers, there was the Greatest Generation born at the start of the century. Their Generational Economic Stimulus peaked in the 1950s to 1960s and declined in the 1970s, when we had four recessions and unemployment up to 11.2 percent.

    There were two parallel peak generations in the 1800s: the Greatest Generation that fought the Civil War and the Civil War boomers immediately following that war.

    The Civil War Greatests generated 9.4 percent growth in the 1870s to 1880s as the United States became the dominant economic power. When they retired in the early 1900s, growth slowed to a quarter of the previous level.

    The post-Civil War boomers, like the post-WWII boomers, increased the population by nearly 50 percent. Their Generational Economic Stimulus peaked during the roaring 1920s, then declined during the debilitating Great Depression.

    Unlike recessions that last only a few years, these longer-term generational contractions tend to last over a decade, which is why we will continue to experience such sluggish financial conditions.

    The pattern we see emerging is one of expansions lasting 15 to 25 years with growth averaging 6.7 percent followed by contractions lasting 9 to 15 years and 1.5 percent growth. Events such as World War II and proactive leadership make a difference. [How does this fit with Kondratieff Wave theory?]

    The Great Recession might have been less severe without the perfect storm induced by the actions of the financial industry, consumers and government.

    The analysis of Generational Economic Stimulus predicts that the current contraction will likely last into the 2020s when the millennials' Generational Economic Stimulus will finally counteract the boomer effect ...

    Robert D. Oberst is a human resources and financial consultant in Cleveland who authored "The Financial Time Machine, Predicting Our Economic Future," where he developed the model and theory explored in this article.

    ----------

    www.cleveland.com/business/index.ssf/2014/08/american_standard_of_living_po.html

    American standard of living poised to plummet, report says ...

    August 15, 2014

    By Olivera Perkins, The Plain Dealer

    CLEVELAND, Ohio - The American Dream, rooted in the belief that each generation will do better than the last, is threatened with devolving into a pipe dream, according to the findings of a recent report.

    The standard of living in the United States is in danger of declining by 9 percent by 2030, back to what it was in 2000, says the report [the "standard of living report"] by Accenture, a global consulting company ...

    "Things have gotten better," said Peter Hutchinson, the Accenture managing director of public service strategy, who authored the report.

    "The standard of living is higher now -- if you measure it in terms of gross domestic product per person -- than it was in 2000 even if median wages, for example, may not be," he said. "The standard of living includes the whole of the economy, not just the wage economy."

    The report says anticipated declines in the living standard are being fueled by three factors undermining the labor market:

  • lower worker participation rates,

  • inadequate productivity growth and

  • a shrinking working age population.

    Hutchinson said Baby Boomers reaching retirement age will have a huge impact on the relative size of the working age population, or those 15 to 64. The working age population was 66 percent in 2013, and Accenture estimates it will decline to 61 percent by 2030.

    "The economy was growing because the working age population was rising as a percentage of the total population," he said. "Now, it is starting to decline."...

    Labor force participation rates have been falling across all demographic groups in recent years. Hardest hit are the youngest workers, or those ages 16 to 24, a trend Hutchinson considers alarming. He cited an Accenture survey this year [2014] of recent college graduates, in which 46 percent of respondents considered themselves underemployed, and another 13 percent said they were unemployed ...

    The standard of living report was based in part on national surveys of jobseekers, employers, state employment service officials and residents polled in what is referred to as a citizen survey. (Surveys were also conducted in 10 countries.) Accenture did additional interviews beyond the national survey in 12 states, including Ohio.

    Most of the Ohio responses varied little from those of the national survey.

    The Ohio survey showed that:

  • 14 percent of jobseekers said it was easy to find the right job.

  • 1 percent of employers were highly confident the government is doing enough to support job creation.

  • 5 percent of employers said the government is working closely with businesses to anticipate the future skills requirements in their fields.

  • 24 percent of residents surveyed believed government was acting fast enough to address employment and skills challenges ...

    [Neither of the above articles mentions the effect of the Robotic Revolution on labor force participation. What will happen when McDonald's goes robotic?

    Is it time to consider a large public works program, repairing our national infra-structure, paid for with "greenbacks" issued by the U.S. Treasury?]

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