The Fed Invents $3 Trillion and That's OK (I Guess?)

This episode of the Planet Money podcast was really fun (as many of them are), but the first segment was particularly concerning. They talk about how the Fed (literally) conjured $3 trillion from the aether and banks didn't bother loaning it out. All this money is just sitting there, doing nothing. Hopefully, the banks won't loan it out all at once, which would seem, to me, like a reeeally bad idea (steroidal inflation!). In fact, the banks just sitting on it seems like a bad idea, too. I mean, the point was to stimulate the economy. However, according to the experts, it is recovering just fine.

$3 trillion just seems like a LOT of money to wish in from the Cornfield Bank. It's not as bad as that one time, but still. The fact that the Fed can invent money at all is irksome and with everything the USG, banks, and corporations have done over the last ten years, it's hard to trust them.
Just on principle, think about how the Fed works.

They help keep our economic system stable by creating money from nothing. But who benefits the most from our economic system? The 1%. And who runs the Fed? Members of the 1%. So, really, it's just the rich protecting the rich while making sure we get enough table scraps to survive, but not enough to get into a position of power so we can do something to stop this lop-sided system.

If you think about just how much money is in our economy, you realize that a ton of problems that America is dealing with could go away. Do you know how many homeless people that $3 trillion could house? How many it could feed? How many medical bills it could pay?

Ugh... I feel gross just thinking about it.

Yet, all this money exists and is moved around in circles you and I will never experience.
Then again, here is a segment of the Daily Show from January of 2015 that reports on how Salt Lake City, Utah, solved its homeless problem by giving the homeless homes. That's right, they gave them homes.

The Daily Show
Daily Show Full Episodes,  More Daily Show Videos,  Comedy Central Full Episodes

The clip is really funny, but the gist is this: it's cheaper to house everyone who can't house themselves. Between law enforcement costs, medical costs and other costs that occur thanks to people being homeless, it's cheaper to just put them in apartments. Meanwhile, the rest of the country still has this lopsided system.

So much emphasis is put on making money and spending money that we don't even think about the fact that there are other ways our system can work. Should we get away from Capitalism altogether? I don't think so. But the idea that some of us should suffer for not being able to play the game as well as some? Yeah, that's not right. We can certainly use a combination of both capitalism and socialism to the benefit of all citizens, except the 1%, of course. But I think they've gotten most of the benefits over the last 20 years.  I think they'll survive.

Help my personal economics and go buy a Ballpoint Adventures T-shirt or my novel from Amazon!

The Onion Calls Out our Imaginary Economy (I wonder how often this'll get RT'd)

Screengrab source.

I guess it’s fine that our economy is entirely a symbolic, mutually shared illusion, so long as we can laugh at it. ;P

…but seriously, I doubt we’ll see this Onion story reblogged and retweeted all over the tuberwebs.

Hack the Economy

Ben Bernanke (right), on my Kindle 2, the real most powerful man on Earth (Photo Credit)

Finally a Solution to the Economic Mess I Can Get Behind...

Last month I came across an article on Arthurmag.com which presented a really great idea-- hack the economy. What does this mean? It means rebuilding it on our own--DIY it, retrofit it, reverse engineer the way we provide and receive goods and services. Let me quote the article by Douglas Rushkoff:

The cyberpunk ethos was actually based in the very same DIY (do-it-yourself) ethos I’m espousing now. Cyberpunk was about reclaiming technology, making modifications oneself or with one’s friends, generating value from the bottom up, exchanging goods and services in an alternative economy. I’m not saying we get rid of money—only that we learn to make it ourselves, as communities. I’m not saying we get rid of banks—only that we stop outsourcing our banking to Wall Street firms that mean only to extract value from our communities.

I have always admired hackers—computer hackers and social hackers. I’m just trying to expand the range of technologies and institutions we feel ready and willing to hack. We should hack money. We should hack banking. We should hack business. This doesn’t necessarily mean hacking the dollar, which is just one kind of closed source currency. We should hack money by coding new kinds. Bank hacking has been around for a long time—it’s just that credit unions and other local or community-based bank models were driven down by the anti-competitive practice of banking conglomerates. It’s time for those institutions to be renewed, as well.

As a bohemian artist type, I've kinda been doing this off and on for years. Favors for friends repaid with favors in return, is usually what this looks like in the immediate here and now. Granted, I still need a job and I still need money, but it's important to understand that there are and have always been alternatives to the almighty USD.

Speaking of the US Dollar, you should know it's a product we are all forced to use and it represents the single most powerful monopoly that exists today. The Federal Reserve literally creates money and loans it to banks at interest. The chairman of the Fed recently said in a 60 Minutes interview (my emphasis added):

The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. 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 than it is to borrowing.

So, why is it only the Fed that can print money? Because they are part of the government? No--because they're not part of the government. How do I know? Simple--ask yourself which member of the Fed board do we elect?

None of them.

We get to vote for the guy who names the chairman every four years in November (the POTUS) and the senators and congressmen which supposedly have oversight over the Fed, but have only once heard of Congress actually performing said oversight on the Federal Reserve. The reality is that most presidents don't get to name a chairman of the Fed because the chairmen of the Fed have terms of 14 years (yes, on paper the term is officially 4 years, but they're almost always reappointed).

So, how do we hack the economy?

That's a good question. I think the idea is to trade goods and services when ever you can. Stop going through the Dollar system for absolutely everything. Getting rid of a bookcase or couch? Don't sell it--trade it with someone. Or give it away. There are loads of sites online that help with this process. Whether it's Craigslist.org or, a site I use here in the Big Apple, NYCDailyDeals.com, there are alternatives to buying or selling everything. Another popular site is freecycle.org.

There are even people trying to get their own currency off the ground since owning gold and silver coins is still legal. LibertyDollar.org is a site that will tell you all about this new form of currency. It's legal, but no one really takes it as cash, just yet. Now, I don't approve of the Liberty Dollar because of a message engraved on each coin:

"Trust in God"

Yeah, so let's replace one BS currency with another? I think the Liberty Dollar folks are missing the point. It's not "liberty" until you're really free (to not believe if you choose).

But I digress.

The point here is ultimately this: Humanity has existed in it's current evolutionary state for something like 200,000 years. It's done most of that existing without Chase Manhattan or Citigroup or the Federal Reserve System.

We humans came up with the concept of money--why can't we come up with alternatives?

So, let's start thinking about ways around relying on money for everything. I know it's an uphill battle, but we've got to start somewhere.

Senate Passes the Bailout Bill After All

You knew they were going to do it.

If you read this blog you know I knew they were going to do it.

Forget that the Federal Reserve already sunk $630 billion into our economy. I was shocked when I saw a Twitter post from thePuck Tuesday that the Fed had decided to move on its own. Earlier in the day, I saw another socnetizen in my circle microblog something like "what difference does $70 billion make? Apparently a lot."

He was referring to the $70 billion less the Fed was borrowing from other central banks.

While I was shocked, it wasn't shocked because the Fed went ahead and did it. I was shocked because the Federal Reserve is usually pretty low key. They speak in riddles and hide in the shadows. Don't believe me? Check out FederalReserveEducation.org and see how long it takes for your ADD to kick in. These guys do not want us to know what they're up to, or else we already would.

So, the idea that these guys would make a move like this and draw all sorts of attention to them, is very surprising. Why should they not want to draw attention to themselves?

Simple, they're the real power in our country. But I'm digressing. This post is about the USG passing a bailout bill anyway.

This is what baffles me. How can the media not cover this in any serious way? Did a single person on TV or in print ask the question of anyone in congress: "WHY do we need the bailout now??"

Yet, yesterday, a bailout bill passed the Senate.

The good news is that now the House needs to vote on it. Hopefully, they will say no.

The idea of bailing the water out of the sinking ship that is the American economy pisses me off.

A bailout is stealing money from our future pockets and putting it in the hands of the rich. Hell, it's stealing from our pockets now, too. All that money ($630 + $700 billion= $1.33 TRILLION) will drive the value of the dollar straight down. Of course, if you're disgustingly rich, you'll hardly feel it.

That's what this ultimately comes down to. The fucking rich and their rich pals in government.

This is no democracy. Its a corporatocracy. It's the feudal system all over again.

We all work for corporations/feuds that kiss the ass of the king/George. The king/George keeps the military working for the good of the corporations/feuds keep the peasants (us) in line.

Man, it sounds so extreme, but with the shrinking middle class and the ever-present corporation, I feel like the metaphor fits.

UPDATE: My original post-title was "USG Passes Bailout After All" I realized that was inaccurate so I changed it.

Socialism and the Federal Reserve

In 1913, Woodrow Wilson (see portrait above) signed into law the Federal Reserve Act. The new law allowed for the creation of a central banking system. What does this have to do with socialism and why would I be writing about this in the middle of the current economic strife here in the US?

Not surprisingly, there has been a lot of writing (and blogging) about our economy. I've written about it a lot over the years, but most recently I blogged (here: http://thepete.com/…he-bailout ) about why I'm against the bailout, mainly because it breaks our own rules. After that, I blogged about why it's bad to break our own rules (here: http://thepete.com/…onable-man ), basically explaining that breaking our own rules makes us look like untrustworthy liars and it makes our laws look like jokes.

But in that last post I just linked to, I commented about socialism. People are accusing the USG of practicing the "S" word in bailing out Wall Street. I said that those accusers are both right and wrong. Effectively, they're right, but literally, not exactly.

Here's where the Federal Reserve comes into it.

The $700 billion the USG wants to give Wall Street will need to be borrowed before it can be gotten from We The People in the form of taxes. All banks and the USG borrow money directly from the central bank--the Fed. Now, the Fed is under no effective control of the USG. We don't vote for a single person who works for the Federal Reserve and the Fed's chairman is appointed the president for 14 years. (!)

In any practical sense the Fed is not a government agency. As a result, we can consider them a private organization. I've heard some say they are a legal corporation, but I haven't seen proof of this.

So, since the Fed is private and the USG is borrowing money from them, effectively, the Fed is bailing out Wall Street, not the USG. So, really, it's corporatism, not socialism.

But it sure feels like it's socialism, doesn't it?

Now, that's the nutshell. Not surprisingly, I have a lot more on the Federal Reserve loaning us money to bail out Wall Street and how the Fed is private. If you're interested, keep reading.

Effectively, though, I've made my point.

Isn't that funny? I keep having to use the word "effectively" because all this money stuff is so stupid and vague there's nothing tangible about it--just like our currency. If only we had a gold reserve... :(

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The Federal Reserve Waits for No Government

So, remember how there was all that funny hubbub regarding the US Congress trying to spend all this time working on a bailout bill for Wall Street? Remember how Bush, this morning, gave another bit of speechification (here: http://is.gd/3lH2 ) on how we really, really, really need to pass a bill to help Wall Street? Perhaps you remember that other time he talked about the economy where he said that if we didn't do something the entire economy was in danger?

As Jon Stewart might say:

Funny story!

Turns out the Federal Reserve decided to go on and bail out Wall Street all on it's own!

Yesterday, the Fed took it upon itself to borrow more money from other central banks around the world. Europe, the UK and Japan all took part in the fun, allowing the Fed to inject $630 billion into our economy, via loans to banks.

Now, the above screencap comes from Bloomberg.com (here: http://www.bloomberg.com/apps/news ) but neither CNN.com nor Money.CNN.com had any headlines about this. I did a quick search through Google News and it looks like the hardcore money sites are covering this, but I didn't see any of the mainstream news sites with headlines about it.

So, this means, once again, America doesn't know what the heck is going on with it's own money.

Not only that, but the Bloomberg article I cite above doesn't mention a damn thing about how $630 billion will impact inflation.

In fact, I haven't stumbled across anything mainstream newsish that even talks about inflation in the context of today's economy or the bailout or now, the Fed's bailout.

So, what the heck happens now?

Damned if I know.

Can't imagine why the tax-payers need to pay for anything now. But watch the media ignore the Fed deal and the Congress push through a bill just the same.

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Kucinich Reminds Us of Our Debt-Based Economy

I'm no economist but I do find physics interesting. Laws of physics are immutable, generally speaking. One of those laws is that neither energy nor matter can be destroyed or created--just transferred.

A truly stable economy should work the same way, in my estimation. The economic law of "supply and demand" is pretty similar to that physical law I mentioned above, when you think about it.

The economic law of "supply and demand" says that prices are determined based on those to things, supply and demand. High supply means low prices (to make sure you sell as many as you can) and low supply means high prices (to make sure you make as much money as you can). Demand works similarly but is inverted, with high demand making prices high and low demand making them low. In short, if you create more supply, the price goes down.

When it comes to money, the physical laws should apply here, too. After all, paper money used to represent gold. When new deposits of gold were found, the value of all gold would drop. However, back in 1913, the Federal Reserve Act was passed and our current system of banking was created. Any kind of precious metals were cast aside and money stopped being based on the value of gold and started being based on the "good credit of the United States of America."

In other words, the US dollar came to represent the productivity of the American economy.

Now, you can't just create money any more than you can just create matter or energy. The latter can't be done because the universe won't let us. However, because the concepts of money and economy are entirely man-made, the universe has no such regulations over our monetary system.

As a result, new money can be, and often is, injected into our economy. This money is either effectively created from nothing (lended/borrowed) or is literally newly created money (when banks or the USG borrow from the Fed). Either way, the result is inflation and, finally, a weak dollar.

And when the US dollar starts getting compared to the Canadian dollar (as it has been for about a year now), you know things are bad.

This morning on Democracy Now, Dennis Kucinich reminded us that our entire financial system is based on debt. The below is an excerpt that comes from a transcript (here: http://www.democracynow.org/…s_congress ) of an interview Dem Representative Dennis Kucinich gave to Amy Goodman this morning:

AMY GOODMAN: The issue of corporate compensation? According to the Institute for Policy Studies, chief executives of large US companies made an average of $10.5 million last year, 344 times the pay of the average worker.

REP. DENNIS KUCINICH: Well, this is really a fundamental issue in our society. Again, it’s all about how the wealth accelerates to the top and how work is not respected or rewarded for its own intrinsic value. We’ve really moved, you know. We’ve made a transition in our economy from industrial capitalism to finance capitalism. And with this debt-based economy that we have, where we keep—this public and private debt keeps exploding, as it has under—as it did under Alan Greenspan, quadrupling in a period of twenty years, we see ourselves in a position where the debt just keeps building and building and building, and we’re calling that economic progress. It is not.

We need to challenge again the underlying assumptions about a debt-based economy, about whether or not we should revisit the 1913 Federal Reserve Act, which has an unfortunately privatized monetary system and created a system which includes banks having the ability to create money almost out of thin air with a fractional reserve. We have to look at the implications of that, maybe put the Federal Reserve under the Treasury and have the Treasury really be responsive to the interests of the American people and keeping the economy going.

Yep, the Federal Reserve is a private entity. We don't vote for anyone who runs it, though we do vote for the guy who appoints the guy who runs it (aka, the president appoints the Fed Chairman). But considering how much control the Fed has over our lives and our money, it seems like we should have a bit more control over them. I really wish Kucinich had a real chance of ever winning the White House. I think it's his honesty that prohibits this.

Wow, just read that the bill didn't pass in the House. Kucinich got his way and Wall Street is totally panicking. Looks like that chant I heard down on Wall Street last Thursday was right: "You break it! You bought it!"

Dig that CRAZY irony!!

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