Wednesday, May 30, 2018

Will America have a debt Jubilee?

So far it is mostly Left-leaning economists who have been calling for it but conservative financial prophet Porter Stansberry thinks it is going to happen soon. I will let him outline the matter and then I will follow up with an even more radical but fairer proposal

Stansberry is something of a panic merchant and tends to put dates on things where he would be better to avoid that.  It has been clear to me for some years that America is effectively bankrupt but I have no idea when that will come to a head. As Keynes is alleged to have said: "The market can remain irrational longer than you can remain solvent". And with Mr Trump in the equation, anything or nothing is possible. So Stansberry and I agree on all but the timing of the crisis.

We owe a trillion dollars on our credit cards—which often have interest rates as high as 28%! We've borrowed a trillion dollars to buy new cars—which plummet in value the minute you drive off the lot. And we've racked up about $1.5 trillion for college education with dubious worth.

The debt load for the working poor has nearly quadrupled in the past 20 years as a percentage of their income. And this debt can never, ever be repaid.

It's this system that dooms every average worker to poverty. And almost guarantees that the rich and the powerful will stay that way.

Simply working harder—or working smarter—isn't benefiting employees anymore. On the other hand, Americans who own assets and businesses have seen their wealth soar over the last 40 years.

And so we are left with the biggest income and wealth disparity in America in nearly 100 years.

For those who have taken on these incredible new debt loads, it's a very stressful way to live. So many Americans today are in a hole. They are extremely stressed out, and there is no way out.

And herein lies the problem. This group is growing, and this stress and anger is building... ultimately fueling many of today's biggest issues...

It's why you see people rioting in Charlottesville, Virginia...

It's why you see massive increases in violence and desperation in cities like Baltimore and Chicago...

It's why you see more and more radicalized politics—like resurgent neo-Nazi groups and the rise of Black Lives Matter...

It's why you see the tearing down of historic statues, and why according to a recent Harvard study, more than 50% of young people no longer believe in capitalism!

It's why we now have the highest-ever percentage of people on food stamps—double the historical rate.

It's why in some states, nearly 10% of working age adults receive disability payments!

Remember: These uprisings and protests may be nominally about race, or Donald Trump, police brutality, or immigration.

But what they're really all about is money, debt, and economics.

And that's why we will soon see a dramatic political and economic event, the likes of which we haven't seen in nearly 50 years...

Very soon, millions of Americans will be calling for the government to "do something."

Specifically, they'll be calling for a clean slate... to wipe out their debts and "reset" the financial system.

The crowds will cheer and march like never before. The violence will escalate. Our politicians will promise this reset of the financial system as a way to a "new and better prosperity."

And while it might sound like good news to those who have gotten in over their head—what will really happen is a national nightmare.

You see, this idea of erasing debts to reset the financial system is not new. In fact, in the Bible, it's referred to as a "Jubilee."  If you're unfamiliar with the term, it comes from The Old Testament, the Book of Leviticus, Chapter 25.

A Jubilee in the Jewish tradition was said to occur roughly every 50 years.  It was a time for total forgiveness of debt, the freeing of slaves, and the returning of lands. Pope Boniface VIII proclaimed the first Christian Jubilee in 1300.

Since then, it's been used dozens of times, when anger among a population hits extreme levels, typically because of an explosive divide between the wealthy and the working class.

And very soon, millions will be calling for a new Debt Jubilee here in America. Believe it or not, many are already doing so...

Folks like Carmen Reinhart of Harvard University and Stephen Roach of Yale have advocated for a Debt Jubilee in one form or another. So have financial pundits Barry Ritholtz and Chris Whalen.

In Congress, more than a half-dozen Jubilee-style laws have been proposed, by folks such as Rep. Kathy Castor and Senator Bill Nelson from Florida.

And many of the most powerful left-wing economic "experts" are calling for a Debt Jubilee by name...

London School of Economics Professor David Graeber says: "we are long overdue for some kind of Biblical-style Jubilee... it would relieve so much genuine human suffering."

The national affairs correspondent for The Nation says we should: "Think Jubilee, American Style... because it combines a sense of social justice with old-fashioned common sense."

Paul Kedrosky, a senior fellow at the Kaufman Foundation (a liberal think tank), says: "we need a fresh start, and we need it now... we need... a Jubilee."

A Jubilee—which wipes the slate clean for millions of the most indebted Americans and "resets" the financial system—is inevitable.

And mark my words: This trend will accelerate. The idea of a Debt Jubilee will become THE leading political issue in the months to come.

Today, for millions of Americans, there's no more powerful political promise than a Debt Jubilee. Politicians will soon be promising it all...

I will wipe out your debts.
I will allow you to start fresh.
I will reward all of your bad decisions.
I will solve America's massive income inequality.

Who will pay for it?  You guessed it...  You, me, and millions of Americans with pensions, retirement accounts, and other types of savings.

Just as in the past, the folks in Washington will disguise this Jubilee under a different name. They might call it a "National Restoration" or "Patriotic Solvency." They'll pass an "Act" like they did in 1841... or invoke an Executive Order as was done in 1933 (Executive Order #6102)... or simply issue a mandate to the Secretary of the Treasury (which they did in 1971).

But it all means the same thing. The Jubilee will redistribute trillions of dollars from those who have invested and saved... to those who can no longer pay their debts.

Excerpt from an article received via email.  Stansberry has more in his recent book "The American Jubilee, A National Nightmare is Closer Than You Think"

What Stansberry predicts is obviously unjust but does seem inevitable.  Debt "forgiveness" happens all the time in international affairs.  Argentina and Greece live on it.  But how would you feel if a bank's debts to you (your deposits) were suddenly "forgiven"?  Your savings would vanish.

There is a better way:  America can't pay its debts so it is effectively bankrupt. So America should declare bankruptcy.  But how do you do that?  To whom do you make your declaration?  It can't be done in anything like the normal way.  The only way it can be done is to void the currency.  America needs to declare that the Greenback is no longer its currency and all debts denominated in it lose any authority.

America then needs to issue a new currency (Maybe called "Feds") and declare that only debts denominated in Feds will be honoured. All dollar debts would be wiped.  The streets would be filled with cheering students celebrating the end of their student debt and householders suddenly finding that they own their house outright after their mortgage debt has disappeared. And that pesky credit card debt is gone too. And without debt a lot of businesses would become more viable too. A weight will have lifted off the backs of the whole nation, resulting almost certainly in a huge economic boom.  And a free government grant of 1,000 Feds to every citizen would get things rolling.

But what about your savings?  The bank now owes you nothing.  Nobody owes anybody anything.  That's where the government can use its money issuing power.  Certain losing groups can be compensated by GIVING them Feds.  All savings accounts with a balance up to 5 million could be reinstated showing the same amount in Feds that they once showed in dollars.  And social security payments would be re-denominated in Feds and would continue as before

China and Wall St would not be compensated or else the whole thing would be a farce.  And labor unions that have extorted huge retirement benefits for their members would also find that their extortions had been in vain. Benefits their members had been receiving would come to a grinding halt.  Their retired and retiring members would have to go on to the same social security payments (in Feds) as everyone else

So average Americans, whether previously savers or debtors, would all be better off and only the parasites would lose. Abandoning the greenback would root out a whole world of corruption.

That is just a very brief outline of how a national bankruptcy could be managed and I am not hopeful that the idea will be adopted.  But it shows that the coming Jubilee would not necessarily hurt the little guy.  He could be compensated.


Conservatives Need to Argue About Ideas, Not About Trump

“Let’s grow up, conservatives.”

That call to arms was delivered by Barry Goldwater at the 1960 Republican convention to implore members of the then-youthful conservative movement to hold their noses and rally around Richard Nixon’s candidacy.

Neal Freeman, a battle-scarred veteran of the conservative movement — he was a correspondent for National Review and the producer of William F. Buckley’s TV show, “Firing Line,” among other tours of duty — recently echoed Goldwater’s clarion call for a different cause. It is time for conservatives to get to work on updating or even reinventing what it means to be a conservative. The conservatism of the last 50 years, programmatically, politically and psychologically, is in dire need of rejuvenation.

One sign of the exhaustion, Freeman writes, “is that the largest and most urgent issues are left unaddressed by any of the entrenched interests. Incumbent politicians deal with old issues. Movements ride new issues.”

The most obvious such issue is the exploding debt, which both parties have decided is something they should only care about when trying to unseat their rivals, if at all.

But the challenge of the debt is a bipartisan or, more aptly, a nonpartisan one, simply because the math doesn’t care about your politics. The pressing question for conservatives is, simply, “What is a conservative?”

“Are we free traders or fair traders?” Freeman asks. “Do we want open borders or high barriers? Can we save public education or should we euthanize it?”

Part of the dilemma is that in the modern era, Republican presidents define for many Americans (particularly in the media) what conservatism is, just as Democratic presidents tend to define what liberalism is. That may not be true in the eggheadier or more ideologically pure corners of the Left and Right, but for lots of normal Americans, that’s just how it works. Conservatism, in journalistic shorthand, is largely whatever constitutes the “Trump agenda” at any given moment, just as liberalism was whatever Barack Obama wanted to do when he was president.

But this is a remarkably recent development, and the fact that we assume it should work this way is a symptom of the polarization of the moment, which recasts partisan loyalty as philosophical principle.

Lyndon Johnson did not define liberalism for legions of left-leaning activists and voters, nor did Richard Nixon define conservatism among the ranks of right-leaning ones (which is why Goldwater felt it necessary to plead with conservatives to support Nixon).

Indeed, despite the fact that modern American conservatism allies itself with an old, even ancient, political tradition, it’s largely forgotten that it is arguably the youngest of political movements in America — certainly younger than progressivism, socialism or libertarianism (in all of its strains from anarchism to classical liberalism).

I understand very well that conservatives often bristle at the idea they need to change with the times. As the famous line from (the far from famous) Lucius Cary, 2nd Viscount Falkland, goes, “Where it is not necessary to change, it is necessary not to change.”

But we forget that the conservative movement’s strength came from the fact that it was armed with new arguments from diverse intellectual sources. More importantly, its vigor stemmed from the fact that these various strains of conservatives were eager to argue amongst themselves. There are arguments aplenty on the Right these days, but the vast majority of them are arguments over a specific personality — Donald Trump — not a body of ideas. And to the extent that there are arguments about ideas, they tend to be subsumed into the larger imperative to attack or defend Trump.

As I’ve argued before, the best thing Trump did was to shatter the calcified and sclerotic policy agenda of Reaganism. To paraphrase “Ghostbusters,” he was not the form of destroyer I would have picked, but the destruction was necessary nonetheless.

Don’t misunderstand me: Reagan was the indispensable man for his time. But the challenge for conservatives — at least my brand of conservatives — is to find ways to apply Reaganite principles to our times.

It is possible, all too possible, that the Reaganites will fail to win the necessary arguments ahead. But that is not an argument against having those fights, for the Reaganites will surely lose them by default if they don’t engage. We need more arguments — but the right arguments.



Rent Control Pits Current Tenants against Potential Renters

Los Angeles Mayor Eric Garcetti would like to expand rent control in California. Doubtless he has many supporters among current renters. Nevertheless, rent control is actually detrimental to the interests of most renters, as Independent Institute Research Fellow Gary M. Galles explains in an op-ed published in the Orange County Register, and Los Angeles Daily News, and other SoCal news outlets.

Most “renters,” it should be noted, are not current renters but potential renters. “As a result, it is truer to say rent control harms renters than to say it helps them,” Galles writes. Rent control cuts incentives for new construction, it undermines maintenance of the existing rental housing stock, and promotes evasive efforts such as the conversion of rental housing to non-housing uses. Rent control is famous for creating housing shortages. It also robs value from property owners.

“A decade ago, such loses were estimated at $120 million annually under Santa Monica’s strict rent control laws,” Galles writes. “Those tripped property values are given to current tenants, whose bonanzas are shown by the fact that those under such controls almost never leave.”



For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCHPOLITICAL CORRECTNESS WATCH, AUSTRALIAN POLITICS, and Paralipomena (Occasionally updated),  a Coral reef compendium and an IQ compendium. (Both updated as news items come in).  GUN WATCH is now mainly put together by Dean Weingarten. I also put up occasional updates on my Personal blog and each day I gather together my most substantial current writings on THE PSYCHOLOGIST.

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