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Retired Fl Real Estate Broker.
  • Total Collaspe ! Minsky,Keynes,MISES, All Got It Right.  0 comments
    Jun 14, 2012 8:13 PM | about stocks: FAS, FAZ, TIP

    A lack of control of the quality and quantity of a nation's currency will lead it to collaspe.

    Excerpt from L. Randall Wray, "...I thought it might therefore be useful to provide a link to a paper I wrote that summarizes many of his papers on the ELR proposal, and to paste here the outline I use in class for a lecture on Minsky's writings. Take a look at the outline, then go to my paper, then use the reference section of my paper to locate Minsky's actual writings on the topic. This is only for those who are serious about trying to understand the argument that we need jobs to solve the "disease" of poverty, and that welfare will not be sufficient because of the perverse dynamics created. My paper is titled "Minsky's Approach to Employment Policy and Poverty, Employer of Last Resort, and the War on Poverty," Levy Working Paper September 2007." L. Randall Wray

    1. Next up: A blog on inflation and efficiency.

      MINSKY'S APPROACH TO EMPLOYMENT POLICY AND POVERTY
      L. Randall Wray

    2. justaluckyfool | June 12, 2012 at 7:38 pm | Reply
    3. "Perhaps Minsky's most important recognition is that the structure of the economy
      affects economic performance, including the volume of, and nature of, employment,
      growth, and inflation."
      The question becomes, how to effect the volume of, and nature of employment
      and at the same time the volume of, and nature of growth,and at the same time the volume of and nature of inflation.
      Employment, growth and inflation vary in different sectors. Whatever remedy is used must be placed in an equal amount as to the degree needed to unequally allow them to gain to a level to where each is at full employment,better growth and with limited controlled inflation. The dose of remedy must be greater in lagging sectors than in leading sectors, and must contain a means for control of quality and quantity.
    4. The remedy must also contain a cure for perhaps "two outstanding flaws of capitalism"
    5. ("Finally, Minsky's vision of the capitalist economy closely followed that of
    6. Keynes.
    7. He endorsed Keynes's Chapter 24 claim that the two outstanding faults of
      capitalism are its failure to provide for full employment and its tendency to result in an
      excessively unequal distribution of income."
      This brings us to a point -Where Minsky Went Wrong.CURE the Flaws:provide for full employment (availability for all willing and able) without inflation
    8. and cure the excessive rate of inequality !
      INFLATION AND INEQUALITY
      " Promotion of growth through
      investment is subject to four problems: it increases financial fragility; it is inflationary; it
      increases capital's share of national income; and it increases the inequality of wages
      (Minsky 1964, 1973). Investment must be financed through a combination of internal and
      external funds. According to Minsky, over the course of an expansion, the weight shifts
      toward external finance, as income flows and safe assets are leveraged by debt (Minsky
      1975b, 1992). Because investment generates profits at the aggregate level (as in the
      Kalecki equation, not added to Minsky's analysis until later), this encourages even more
      investment, external finance, and leveraging-exposing the economy to the possibility of
      a financial crisis (Minsky 1968, 1986). "
      Yet, he states a solution.."euthanize the rentier; put in place a modest bias of taxes and transfers in favor of the poor."
      In conclusion, to ameliorate the fundamental faults of capitalism, Minsky would
      euthanize the rentier through lower interest rate policy and-more importantly-by
      reducing the importance of the private financial system (Minsky 1973). This could be
      accomplished by shifting emphasis away from stimulation of private investment, which
      relies on external finance, and thus creates financial assets that become part of the rentier
      economy. Second, he would modestly bias the tax-and-transfer portion of the budget in
      favor of the poor, although he would not make this the major re distributive mechanism to
      eliminate poverty "
      Right church, wrong pew.
      Is it that all three , Minsky, Keynes, Mises missed the the ways and means used by mankind to control the quality and quantity of all wealth? Did they not recognize "the most powerful force in the universe"?
    9. Perhaps this force was being used solely for the betterment of 1% rather than for all mankind.
    10. WHAT IF ? As in the parable of "The Brothers, Interest and Compound Interest" after they clearly were victorious they had announced, "Now we will serve a new master the "Invisible Hand".
    11. READ; economics-of-compound-rates-of-interest-a-four-thousand-year-overview-part-ii/
    12. We must end the practice of allowing private financial institutions to charge us compound interest on our own money. A system that destroys the remedy because it turns a benevolent solution into one that earns them a profit. It takes away
      the re distribution of the currency for the general welfare and turns it to their own uses. They also would as it is in the very nature of private financial institutions, leverage the assets in order to increase profits and eventually cause disastrous inflation.
    13. Read: http://michael-hudson.com/2012/01/banking-wasnt-meant-to-be-like-this/
    14. WE CAN GIVE OURSELVES THE TOOLS TO FIX WHERE WE WENT WRONG.
      "DON'T END THE FED, AMEND THE FED" READ MORE: IMPROVE IT USE IT AS YOUR OWN.
      http://justaluckyfool.wordpress.com/
    15. Challenge it !
      Improve it !
      How do you in 90 days or less create 4 million jobs ?(EMPLOYMENT)
      Raise $2 trillion income per year for the next 36 years? (GROWTH)
      Control the quality and quality of the currency thru re distribution? (INFLATION)
      ,"The answer lies in not how the most powerful force in the universe is used ,rather how you redistribute what it creates !
      "The most powerful force in the universe is compound interest" - Albert Einstein
      For the solution:"We cannot solve our problems with the same thinking we used when we created them".Albert Einstein
      Perhaps the answer lies in how you redistribute the wealth of a nation; not in how you acquire it.
      EXCERPTS FROM "JUSTALUCKYFOOL"
      A monetary sovereignty must be the only supplier of its currency.
      All transactions must be on a 100% margin (reserve) basis.
      All new issuance is to be done by interest bearing loans.
      NOW THE SOLUTION:(For details you have to read "Great News !! Zero Income Taxes Solves Worldwide Economic Crises"
      The people owned central bank would purchase all real estate loans that the financial institutions do not have 100% reserve.
      Even if at fair market value plus 10%. Some $36 trillion. Modify all the loans at 2% for 36 years.This would solve the housing market and at the same time create a tremendous need for "housing items and new housing" thereby creating 4 million jobs.As for the needs of that industry "the people owned central bank" would lend that industry $1 trillion at 1% for 6 years with first payment due on the one year anniversary date-get the people working,fast.
      And who said,"You must raise revenue somewhere ,if you wish to lower taxes."?
      How's this for over $2 trillion a year income (revenue)?.
    16. PLEASE CHALLENGE,IMPROVE, USE AS YOUR GUIDE.
    17. "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." - Ludwig von Mises
      Translation:NO MEANS TO AVOID COLLAPSE BROUGHT ABOUT BY CREDIT EXPANSION, therein lies the solution,

      turn the credit into cash! But this transaction must be done in a way that will not be hyper inflationary.The new currency created must have a control attached that will allow for the return of that currency while having a very limited circulation.

      The central bank of the monetary sovereignty is the only agency that may issue new currency. The way and means of issuance is by loans bearing repayment with compound interest. This is the solution for the present. The solution for the prevention of future occurrence is all financial expansions must be on a liquid basis, 100%. This is the only protection there is against a bust for all losses can be paid and the transactions remain true and whole. The financial institutions must have that liquidity available and it must be their own.That can be accomplished by a sector loan from the central bank which of course would have quality and quantity control means attached.

    18. justaluckyfool | June 13, 2012 at 11:21 am | Reply

      Minsky, "The financial instability hypothesis takes banking seriously as a profit seeking activity…Bankers (financial institutions) are merchants of debt…" also that profit seeking institutions always try to leverage their assets to the maximum.
      And with Keynes concept of a "veil of money" between what the real assets are and the ultimate owner,they discovered the secret.

      Money = Debt. Money = Credit. Money = debt + credit.
      Private banks exist solely for the purpose of gaining wealth for its owners.
      A central bank should be established to control the currency, quality and quantity as a not for profit, rather as an agency to redistribute its currency , " in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity…"

      Read : Where we went wrong and how we can fix it.
      Google "justaluckyfool"
      "Great News !! Zero Income Taxes…"
      "Don't End The Fed, Amend The Fed"
      Challenge it, Improve it, then make it your guide.http://justaluckyfool.wordpress.com/

    MORE:

     

    • justaluckyfool says:

      May 16, 2012 at 9:46 am

      Perhaps you would endorse:
      THE SOLUTION:(by justaluckyfool, "Great News!! Zero Income Taxes…"

      ONE.
      AMEND THE FEDERAL RESERVE CHARTER; TURN THE FED RESERVE INTO THE FEDERAL RESERVE BANK OF AMERICA (OTC:FRBA),RESTORE MONETARY POWER BACK TO THE PEOPLE ,OPERATE THE FRBA WITH ABSOLUTE TRANSPARENCY, ("GLINDA,the Good Witch, owns a Great Book of Records that allows her to track everything that goes on in the world from the instant it happens."_The Road to Oz)
      ESTABLISH THE FRBA AS THE ONLY MEANS FOR MONETARY SUPPLY,ALL OTHER INSTITUTIONS MUST MAINTAIN 100% MARGIN ON ALL INVESTMENTS.

      TWO.
      ESTABLISH A ZERO FEDERAL PERSONAL INCOME TAX.
      INTEREST INCOME (REVENUE) WILL REPLACE PERSONAL INCOME TAXES.
      The Federal RESERVE Bank of America,make it the melting pot for Federal Reserve.,FDIC,FHFA,and the GSE's,Fannie,Freddie,Ginnie and Sally, as well as the IRS. These organizations will be needed to service the federal loans.

      All loans by any financial institution must be backed with 100% reserves.No more Fractional Reserve Banking.No more production by private banks of this Monetary Sovereignty's currency.All loans may be used as assets for borrowing from The FRBA so that they comply with the 100% reserve. Any loan that is not in compliance must be sold to the FRBA or the financial institution would be placed into receivership.
      Private banks will have to be self-insured. Risk 100% their own investors money for 100% reward or loss.

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    • Richard Wilson says:
    • May 17, 2012 at 2:36 pm

      [1] Roger writes: "In the 9/14/11 post titled, "How about socialized banking," and elsewhere, I have suggested that all banks be federally owned - i.e. the elimination of private banking."

      Yes, I have been saying this for years. Why not make banking and currency like a public utility? This would get us past the debt trap, and revolutionize mankind. Private control of central banking is an elephant in the room that few economists never dare mention. It causes 95% of all our financial woes, plus most of our political woes, since politicians are on the payroll of private bankers.

      Private control of currency and central banking is tyranny. It is the greatest power on earth, and the greatest scourge. Whoever has this power can buy armies, police forces, media outlets, governments - everything. That is why it is so viciously guarded. It's why it is never mentioned in the lame-stream media. Politicians dare not mention it, since they are on the private bankers' payroll. The only exception was Rep. Dennis Kucinich, who consistently introduced bills to make the Fed a public institution. All bills were ignored.

      In Ireland, no politician dares mention the public banking option, not even Sinn Fein, or the "socialists," or the United Left Alliance, all of which claim to oppose the new household tax and the "European Stability Treaty," which puts all European governments under the direct control of Brussels and the ECB in Frankfurt. All whine about austerity, but none dare mention the solution to everything, which is public banking.

      In Greece, Alexis Tsipras, head of the "Radical Left Coalition," whines about austerity, but he is adamant about keeping the euro, and would NEVER consider public banking. He just wants to get on the payroll of the ECB bankers, like every other European politician.

      The "Occupy Wall Street" crowd just wants to punish the rich by taxing them. This is not only useless (since it will never happen), it is unnecessary. Instead of trying to bring the rich down, why not bring everyone up via public banking?

      Private control of banking is the disease. Unless we admit this, all discussion is blind chatter about the symptoms.

      PUBLIC banking is tied directly to monetary sovereignty. People who don't want to talk about pubic banking and monetary sovereignty are either idiots, or else they are shills directly or indirectly on the payroll of private bankers.

      Consider Paul Krugman, to take an example. He too whines about austerity, but Krugman thinks the problem is not debt (controlled by private bankers). No, he thinks the government simply needs to borrow more from those same private bankers, with the debt dumped on the masses. Thus Krugman seems to be a "populist," when in fact he is a shill for the bankers. That's why he gets so much exposure in the media.

      [2] Roger writes: "There is not one good reason why banks should be privately owned, and a multitude of reasons why they should be owned by the federal government."

      Banker shills say that if the bankers' godlike powers were given back to the public, then governments would print too much money, causing inflation. This is another lie. In reality, inflation only happens when there is an imbalance between money supply and money demand. The money supply can be regulated, such that balance is maintained. If there is not enough money in circulation, then we can print more. If there is too much money, and inflation looms, then we reduce the money supply via temporary taxes. By contrast, today's federal taxes all go to pay the interest on the debt on the national currency we borrow from private bankers. This is insane.

      Among the masses, many idiots say that public banking would be worse than private banking. This is like saying, "The ship is sinking, and we are all doomed to die, but let's not do anything about it, since the alternative might be worse." Bankers love these clowns. One of the fools (above) says the failure of regulators is proof that government is worthless. Excuse me, but those regulators, like politicians, are on the payroll of unaccountable private bankers!

      As for the cretins that rail against "socialism" in any form, Roger has already disposed of them above. As I said, bankers love these retards.

      [3] We can keep private banks, but make public the central (federal or national) bank. The only state in the USA that is not is fiscal trouble is North Dakota, since that is the only state that has a public central bank. The Bank of North Dakota partners with private banks and oversees them, such that the private banks do a healthy business, but may not engage in fraud and theft, as we see in the Too-Big-To-Fail banks.

      [4] Some people think the solution is not public banking, but a "gold standard." These idiots fail to understand two things. First, gold prices can be (and are) easily manipulated for the benefit of elitists. Second, ALL currency INCLUDING GOLD is fiat currency. Gold, like paper money, only has value because people agree that it does. It is not like land or food, which have absolute value.

      Regardless of the currency we use (gold, paper, sea shells, tally sticks, or whatever), fiat systems go awry when they are privately controlled.

      [5] Public banking brings up the issue of bailouts. Nobody "bails out" the big banks. The big banks bail themselves out, via shell games. How could governments bail out the big banks, when governments get all their money from those same banks? Therefore, whining about "government bailouts" is another means to avoid looking at the reality of private control.

      [6] Suppose you lived on an island with 10 other people, with each of you living in his own hut. And suppose you and the others used a currency - let's say sea shells. Now suppose that only one hut had total control of the sea shells. The one person in that one hut has sole power to determine what shells are "currency," and to determine how many shells are in circulation. That one hut would rule the other nine. That is the situation we have today.

      THINK ABOUT IT, PEOPLE. We are poor because we have no bits of paper called "money." Who controls those bits of paper? Target them, and you target almost all of your problems.

      [7] As long as our currency and central bank remain under private control, "nationalization" will simply mean that private bankers' debts and losses are dumped on the public. When we "nationalize" a financial institution, we leave it under private control, while socializing the debt. This is false nationalization. True nationalization means public control, which all begins with public control of the currency and central bank.

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    • Craig Harmon says:

      June 7, 2012 at 11:28 pm

      Heck yes!

      We can't have people mutually and consensually storing their money voluntarily with other people! That sounds too much like "freedom"!

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      • Zarepheth says:

        June 8, 2012 at 3:12 pm

        People storing their money with other people is not the problem.

        The problem is that the banks' privilege to create money comes from the community but is denied to everyone except the banks. It is also the only source of money in our economy. Thus, the banks hold everyone else in servitude by only creating and giving out money if people agree to pay back more than they borrowed. Since the bank only created enough money for the principle, there is not enough money in the economy to pay both the principle and the interest on all the debts. This whole system forces the community as a whole to go into debt, and thus slavery, to the banks. Even if a few individuals avoid debt, the total debt plus interest in the economy has to exceed the amount of money in the economy. There is no way this system can possibly work without having serious problems - like inflation and deflation, booms and busts - a the while, those at the top skim the interest off the top to enrich themselves while everyone else has to pay for it. Even the few debt-free individuals have to pay higher prices to their indebted suppliers of goods and services.

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    • Rodger Malcolm Mitchell says:

      June 8, 2012 at 4:02 pm

      Zarepheth,

      The other source of dollars is federal deficit spending, which does not require interest payments.

      I've not thought about this before, but I'll speculate that so long as total federal deficits are higher than total interest, there always will be sufficient dollars to pay interest. Have to give this further thought, though, because I may have overlooked something obvious.

      The following graph is a bit confusing, as it uses two different scales, but the red line is the federal deficit, scaled on the left. The blue line is Total Assets Interest-Earning, All Loans And Leases, Gross, Consumer Loans, Credit Cards, All Commercial Banks, multiplied by 2%, scaled on the right. As you can see by comparing the scales, the red line today is 100 times as high as the blue line, today.

      Monetary Sovereignty

      This year there are about $600 billion in assets earning interest, which assuming an arbitrary interest rate of say, 2% (probably high), would equal $12 billion in interest. The federal deficit is about $1.3 trillion - about 100 times higher - plenty of dollars to pay interest.

      If I have more time to think about it, I may publish a post on this.

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      • Zarepheth says:

        June 8, 2012 at 7:03 pm

        It's too bad that the federal government does not realize that it could create the dollars for it's spending instead of "borrowing" them from the federal reserve - or whomever chooses to buy treasury bonds. If those government bonds were counted as part of the debt, I'm pretty sure the total debt would exceed the money supply. By the way, does the blue line also include corporate bonds and similar debt instruments?

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    • Rodger Malcolm Mitchell says:

      June 8, 2012 at 9:33 pm

      The money supply = Total Debt Outstanding Domestic Non-financial Sectors. Every form of money is a form of debt.

      The blue line = Total Assets Interest-Earning, All Loans And Leases, Gross, Consumer Loans, Credit Cards, All Commercial Banks

      Rodger Malcolm Mitchell

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      • justaluckyfool says:

        June 9, 2012 at 12:11 pm

        Your response, Money supply=Total Debt Outstanding Domestic NON-FINANCIAL SECTORS !
        Does that include the verified $300 trillion in derivatives held by the FINANCIAL SECTOR. Also does that include the trillions owed by borrowers that have trillions of future interest payments on financial assets (loans) held by private financial institutions?
        In your quest for what you may are overlooked ,please read,"How the Banks Broke the Social Compact, Promoting their Own Special Interests "
        by Michael Hudson …"Governments can create new credit electronically on their own computer keyboards as easily as commercial banks can. And unlike banks, their spending is expected to serve a broad social purpose, to be determined democratically. When commercial banks gain policy control over governments and central banks, they tend to support their own remunerative policy of creating asset-inflationary credit - leaving the clean-up costs to be solved by a post-bubble austerity. This makes the debt overhead even harder to pay - indeed, impossible.

        It is too early to forecast whether banks or governments will emerge victorious from today's crisis. As economies polarize between debtors and creditors, planning is shifting out of public hands into those of bankers. The easiest way for them to keep this power is to block a true central bank or strong public sector from interfering with their monopoly of credit creation. The counter is for central banks and governments to act as they were intended to, by providing a public option for credit creation.Read more..by Prof. Michael Hudson ; http://www.globalresearch.ca/index.php?context=va&aid=28938

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      http://rodgermmitchell.wordpress.com/2012/05/12/at-long-last-are-we-ready-to-end-private-banking/

      Reply http://rodgermmitchell.wordpress.com/2012/05/23/7342/

    • justaluckyfool says:

      May 24, 2012 at 1:45 pm

      To RMM,
      It should be obvious that I lack writing skills (not to mention also other skills),but I believe that my opinion of
      where we have gone wrong and how we can fix it may be of value.
      Or correct it so that it could be.
      This is a long post but I do not know any other way to present it to you. At least I know you will read it, even if not posted.
      Please challenge it , improve it, and post it.
      It has as a basis some of your
      "Mitchell's laws: The more budgets are cut and taxes increased, the weaker an economy becomes.
      No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia."

      "To lower taxes,you must raise revenue somewhere."
      This is a concept that could help overcome another misconceived concept,"We must end deficit spending".
      (Note; A Monetary Sovereignty can simply print any funds,BUT may need to overcome "moral hazard and or inflation")
      How could a government fund, "a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…"" at the same time ... LOWER TAXES (PERSONAL INCOME TAXES TO ZERO),... RAISE REVENUE ($4 TRILLION PER ANNUM), ... AND END DEFICIT SPENDING (TRANSFERRING ASSETS) .
      The solution is so simple (to quote Einstein,"Make it simple") that it becomes "too good to be true".
      But we are at a point in history that may allow the 99% to make it happen.
      If in fact correct; "Allow the truth to set us free."

    • THE SOLUTION:
    • Take back the power that was legislated away from the people.
    • Do for the housing industry,construction industry what was done for the automobile industry.
      Almost all economists would agree that the Federal Government as an agent of a Monetary Sovereignty
      has the ability to purchase ALL residential and commercial loans that are in existence on American real estate.
      The Federal Reserve has to power and right to end fractional reserve banking by way of changing the reserve requirement
      to 100% on all loans and financial instruments that are held as assets. There are more consequences to this change but they can be addressed later, for now we will address how residential and commercial loans would work for "we the people".
      In order to prevent a meltdown (systemic failure) by the instant de leveraging of all these loans they must be made "whole".
      They must be purchased at 100% of value that is on the books of the present holders.
      This may be, could be, at only 80% of real "market value"
      That is OK, that is one really great "stimulus" that would prevent the catastrophe
      that seems to be unavoidable from any other solution to end this "credit accelerated" crisis.
      It is not deficit spending,as we will have a 100% matching asset (loans) on the books.
      What is the "magic bullet" that allows this transfer of assets to become profitable (raise revenue)
      and lower taxes ?
      The answer is by using "the most powerful force in the universe, compound interest "
      (may or may not have been stated by Einstein) for the benefit of the 99% instead of the 1%.
      PROOF:
      If $55 trillion is needed to purchase all these loans and they were modified as new Government Assumable
      Loans, not guaranteed by the Feds ( the old stupid way )rather actually funded by the Federal Government, we would create a
      new asset worth, $55 trillion at 2% for 36 years which would produce a revenue of a little over $3 trillion per annum
      for a total payback of $110 over the 36 year term.
      There would be no reason for personal income taxes.
      There would be no reason for deficit spending.

      Raise an additional $3 trillion revenue per year, eliminate FDIC by backing financial institutions 100% reserve, not by GUARANTYING the money rather allow them to borrow the additional $55 trillion to pool their "foiled bets " (investments) at 2% for 36 years.
      Let them insure their losses with their money instead of taxpayers money !
      READ MORE…Google…"Great news !! Zero Income Taxes…" OR …"justaluckyfool"
      May the "invisible hand" help guide the 99%. Read:"Don't End The Fed, Amend The Fed"...http://justaluckyfool.wordpress.com/

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Economy, Debt Stocks: FAS, FAZ, TIP
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