Archive for money

Monopoly Money

Posted in uncategorized with tags , , , , on July 2, 2021 by andelino

If you don’t save for the future, you will starve. This is a truth that people learned from early in human history. It is obvious to all who farm, hunt and preserve food, and who watch the weather and climate. It is an ancient principle put into practice long before the creation of money, credit and just-in-time inventory management. Saving for the future is what people everywhere used to believe in.

Today, the United States is $28 trillion in debt. We have no savings. There is no emergency fund. We have already spent the taxes on future earnings of our grandchildren—and their children. But if you believe America’s leaders, everything will be fine because none of that matters anymore.

Leaders in Washington, Wall Street and even Main Street believe in a new economic theory. Politicians love it, because it makes saving for the future obsolete. It theorizes that deficits and debts are actually good because their main effect is to stimulate the economy. It theorizes that we won’t ever really have to pay back borrowed money because our central bank can create unlimited numbers of dollars out of nothing—at the push of a button. The theory has a name: Modern Monetary Theory. Believers view it as a modern monetary miracle, a way to push economic problems into the future forever.

These theorists think they have transcended the basic laws of economics. Can you borrow money and spend it without ever having to pay it back? Can you print massive amounts of money out of thin air without destroying its value and making everything more expensive?We are going to find out.

Print and Spend

Since the onset of the Covid 19 lockdown and resulting economic fallout, the Federal Reserve has increased the nation’s money supply to record levels. Over the past 12 months, the M2 money supply—which includes cash, checking accounts and other easily spent money—has ballooned by more than 27 percent!

In other words, one out of every five dollars of all the easily spendable money in existence since the founding of this nation was created over the past 12 months. And the Federal Reserve has used much of that money to buy trillions of dollars of government bonds, treasuries and even people’s mortgages.

This is how it works: The U.S. Treasury prints a bond, which is basically just a promise to pay back borrowed money with interest. It sells it to the Federal Reserve in exchange for dollars that the U.S. government then spends. Where does the Federal Reserve get dollars to buy bonds? This is where the modern monetary miracle comes in. The Fed doesn’t earn dollars by providing goods or services or anything else, or even by collecting taxes. It creates dollars out of thin air. It has the ability to add as many zeros to its bank account as Washington wants. With the push of a keyboard button, it can expand its dollar supply to approach infinity.

But according to the Federal Reserve, there is nothing of concern here. In March, it quietly announced that it will no longer publish weekly data showing the number of dollars coming into existence.

“They are trying to hide something,” said Steve Hanke, professor of applied economics of Johns Hopkins University. “They don’t want people paying attention to money supply growth.” As Hanke pointed out, “Federal Reserve Chairman Jerome Powell has very explicitly claimed that money doesn’t matter in recent testimony. He’s basically said that money and the measurement of money doesn’t really matter because it’s unrelated to inflation.”

Hopefully Mr. Powell is right, because the U.S. government is spending a lot of it. Consider the scope of the “stimulus” bills over just the past 12 months:

  • $2.2 trillion for the Coronavirus Aid, Relief and Economic Security Act of 2020.
  • $2.3 trillion for the Consolidated Appropriations Act of 2021.
  • $1.9 trillion for the American Rescue Plan Act of 2021
  • $6.4 trillion! Where did all that money come from?

Some of it was borrowed and will have to be paid back with interest. But an incredible $3.6 trillion worth was created with the stroke of a pen and a push of a button. Pantera Capital gives some context. With the first trillion dollars the United States printed throughout its history, “We defeated British imperialists, bought Alaska and the Louisiana Purchase, defeated fascism, ended the Great Depression, built the Interstate Highway System, and went to the moon.”

What did we accomplish this past year with $6.4 trillion?

Initially, the government distributed money to businesses and individuals, many of whom had lost income because the government shut down much of the economy. This was one of the first times in American history that the government gave direct cash handouts to individuals. The government also increased unemployment benefits and issued grants to businesses. But much of the money went to other uses.

Now more than a year has passed since the first covid lockdowns. Official unemployment has dropped back down to just over 6 percent, gasoline demand is approaching pre-covid levels. Housing prices are setting records all over the nation. And the stock market is reaching record highs. Yet the stimulus spending plans are not even close to over.

Looming Inflation

The Biden administration is currently working on a $2.3 trillion infrastructure bill in addition to another $2 trillion American Families Plan infrastructure bill. “Together, the ideas inside these plans aim to redefine what infrastructure is, by bolstering ‘human infrastructure’ along with everything else,” writes Slate. “It’s a new kind of American populism.” More accurately, it’s American socialism. This spending comes in addition to the regular $1 trillion budget deficits the government was running before it began shutting down the economy.

And contrary to Fed Chairman Powell’s claims, the economic laws of supply and demand are asserting themselves. More money (due to money printing, government spending and government handouts) chasing a constant or shrinking supply of goods (due to the global lockdown) means the same goods and services cost more dollars.

“A little inflation feels good at first, because wages are rising, and people feel richer,” investment adviser Jared Dillian said. “But the laws of economics are not to be conned. What Powell is doing is what I call central bank populism. [T]here is inflation in the beginning. At the end, there is revolution.”

Notice the price of lumber lately? A sheet of plywood at your local hardware store now costs more than $65. A standard 2×4 costs $7. Average lumber prices have surged close to 200 percent over the past year. Why? Because of supply shortages due to government-mandated factory lockdowns and soaring demand due to people with government handouts remodeling their homes.

Gasoline is also becoming more expensive, with prices nationwide averaging $2.86 per gallon before the summer driving season has even hit. Corn is up 67 percent year over year. Corn syrup is in just about everything. Wheat is up 24 percent. Milk is up 9 percent.

This is not just happening in America. Governments worldwide are printing money to spend. Prices for basic necessities like food are rising. The United Nations Food and Agriculture Organization reports that food prices are up 24 percent over the past year to the highest levels since 2013. Remember the Arab Spring? Some say that, like so many revolutions before it, it began as a hunger revolt.

Other commodities are costing more dollars this year too. Copper: 82 percent more. Silver: 62 percent more. Texas oil: 28 percent more. Concrete: 60 percent more.

Powell and the Fed assure us that the inflationary effects will be moderate and temporary. His comments sound eerily similar to former Fed Chair Ben Bernanke’s comments that the subprime mortgage bubble was contained. That infamously led to the Great Recession of 2008.

One big difference between that crisis and this one is where the Federal Reserve has directed its response. In 2008, the money it created through quantitative easing was injected into the banking system. It caused asset inflation in financial sectors like the stock market and the housing market, but it kept the banks from collapsing and caused less inflation in consumer goods than many people feared. This time, the cash is being sent directly to individuals and businesses. When spending increases, the velocity of money could send inflation soaring and the value of the dollar plummeting.

In other words, massive money printing did not fix the fundamental economic problem in 2008, nor has it fixed the problem this year. We temporarily papered over a volcanic economic upheaval, and it cost us mountains of money to do it.

“Two years, we will be at $40 trillion in debt, and in two years after that, if we continue this stimulus we are going to be at $50 trillion” said Jim Puplava at Financial Sense Wealth Management. “At some point, these debt levels are unsustainable.”

The U.S. government was running trillion-dollar deficits under presidents Barack Obama and Donald Trump. And that was in relatively good times.

“If you are spending $6 to $7 trillion per year to stimulate the economy now, when the economy is recovering, what do you do when you get into a recession?” Puplava said. “How big will the stimulus have to be to get out of the next recession or depression?”

How sad that we are even asking this question. America is the wealthiest nation in world history. Yet its economy is doomed. Why doesn’t America manage its resources better?

Before taking office, all politicians should read Genesis 41. So should Federal Reserve chairmen and secretaries of the Treasury. Our worsening boom-bust cycles, our imminent social upheaval, the causes of so much suffering would be avoidable—if we had the humility to learn.

Money and Politics

Posted in uncategorized with tags , on December 4, 2018 by andelino

America’s 2018 midterm elections are in our rear-view mirror. But let’s take a moment to reflect on one aspect that got little press. It reveals something fundamental about our system of government worth thinking about:

What are we “buying” with our Money?

As in so many other aspects of life, you learn a lot when you follow the money. And in these midterms, there was an enormous amount of money to follow: enough dollar bills to fill 5,000 forklift pallets—enough pallets to fill a container ship.

The midterm elections are called “midterm” because they occur halfway through the four-year presidential term. Presidents have four-year terms, senators have six-year terms, and representatives have two-year terms. Every two years, all the representatives’ seats are up for election, as are one third of the senators’ seats. In addition to 470 national offices, there are thousands of others up for election: governors, state representatives and officers, and local representatives and officers. One source counted more than 3,000 candidates for legislatures.

And all of them were spending lots and lots of money.

Every serious candidate had to rent offices, hold rallies, print signs, produce advertisements, purchase television time, buy online ads, and pay advisers, researchers and other campaign workers. All this money is spent whether they get elected or not. Even running a losing campaign is enormously expensive.

How much money are we talking about?

The 2018 midterm elections were the costliest congressional elections in United States history by far. When you add the mountain of money spent by candidates, party committees and the more than 3,200 outside groups, the cost of the 2018 midterm elections smashed the 2014 midterms by about 35 percent. All those “I approve this message” ads add up!

The total estimated cost? Five billion dollars.

With $5 billion, you could build a $100 million school in all 50 states. Or you could build about 50 new F-35 fighter jets. Or you could construct a fleet of about 50 container ships. Or you could launch 10 space shuttle missions.

And you could do it every two years.

What is this money being spent on instead? These trainloads of money are being spent on trying to influence voters. They’re being spent on signs and rallies and voter research and so forth. They’re being spent on “opposition research.” They’re being spent on vapid television ads that have nothing to do with issues or policies.

They’re being spent not necessarily to inform voters, not necessarily to get the truth out, but just to convince more people to vote for one candidate than for his or her opponent.

It’s actually quite stunning to think of how all this money in politics is used to sway voters, who decide who will rule—when you look at the declining wisdom and judgment within the voting public. As Winston Churchill said, “The best argument against democracy is a five-minute conversation with the average voter.” 

Now, this money doesn’t come from the candidates’ personal bank accounts, except in fairly rare cases. This money comes from donors. And most of it comes from big donors. As much as politicians like to talk about all the small donations they receive, less than 10 percent of Americans have contributed to a political campaign, ever. And very few Americans give more than $200, which is the amount that has to be reported to the Federal Election Commission: That number has never exceeded more than 0.5 percent of Americans.

Most of the money comes from large individual donors, and from political action committees (PAC’s). And most of these committees are sponsored by corporations, trade associations and other business and professional groups.

Some individuals spend tens, or even hundreds, of thousands of dollars supporting their chosen political candidate or party.

Why? Some think the issues are so important (abortion, for example), that it is worth giving away serious money to help the candidate who shares their viewpoint. But many have a narrower, more selfish motive. They want to help the candidate who will benefit them personally. They want to support a candidate who will pass tax laws or regulations that will benefit their businesses and bank accounts, that will make them more powerful. In some cases, they want the candidate to “pay them back” through other means, perhaps even appointment to office.

And money is a primary determinant of whether a candidate will win.

A 2017 study found that early fundraising strongly predicted which candidates won their primary races. Most candidates who out-fund raise and out-spend their opponents also out-perform them on election day. There are exceptions to the rule: Some big spenders actually lose. It’s also true that incumbents usually win, 9 to 1. So money isn’t all-important, but it is extremely important. When you think about it, it is too important.

“There are literally hundreds of different special interest groups seeking to promote their agendas by way of the wallet—from Big Oil to Big Labor, pharmaceutical companies to cable TV operators, and a full spectrum of ideological groups from the Sierra Club to the National Rifle Association,” writes OpenSecrets.org. “The money they deliver to politicians, year after year, is what pays the biggest part of the bill for American elections.”

These spenders consider it a financial investment: If the candidates they donated to win, they expect, in some way or another, to receive benefits. These donors, to some degree, influence policy. And there are certainly cases where the amount of influence corresponds not to the merits of their policy preferences but to the amount of cash they hand over. 

Money has a perverse effect on government. All that money in American politics influences and perverts our politics in countless ways—from who wins elections to what they do once they are in office.

Did you know that the four richest counties in the United States are suburbs of Washington, D.C.? Think about that: Government and money are supposed to be two different things. But in America today, they have become absolutely inseparable.

And this effect is only getting worse. Since 1998, the cost of midterm elections has more than doubled. In just 20 years, we have gone from spending just under $2.5 billion to spending more than $5 billion! Without inflation, this number is even higher: $1.6 billion to $5.1 billion. And in those 20 years, America has spent a grand total of more than $38 billion on midterm elections. This does not include presidential elections!

Was that $38 billion well spent? Has it bought us senators and representatives with policies and character that have benefited this nation?

These are worthwhile questions to ask. But few really ask them honestly.

Yes, there is a growing general dissatisfaction with our political system, if we are to judge by Congress’s basement-level public approval ratings. And there are louder and louder calls for revising or doing away with various aspects of our system. People seem to want to move more toward direct democracy—getting rid of the electoral college, for example, or allowing everyone voting rights, including prisoners and illegal aliens—as if the wisdom of the multitude will increase by adding in such voices. There are revolutionary forces at work in America.

But one tangible outcome of our dissatisfaction is that we are pouring even more money into the political system we have. Even if it means to elect people who are fighting against that system.

It is worth thinking about what lessons we can take from the direction America’s politics have taken. It’s good to step back and evaluate the big picture.

After all, right now there is a strong trend among many nations to move away from American-style democratic representation. More and more countries are moving away from this type of electioneering. Many are virtually dispensing with the trappings of democracy altogether.

Are there any nations that look at America and see a government model worth following? America has become a model of terrible division—of infighting and bickering—of one political party checking the other—of inertia and gridlock.

Whether or not we realize it, this system is not the way of the future. It is about to become a relic of the past. The world is rapidly moving in a different direction.

Looked at from an even wider view, all human history teaches lessons about different types of government—their pros and cons, strengths and weaknesses.

America’s founders looked at all that history—and they created a system that tried to carefully balance elements of democratic representation with elements of aristocracy and with one-man rule. They were very aware that democracy had the tendency to become the tyranny of the majority. Founder John Adams said, “Democracy has never been and never can be so durable as aristocracy or monarchy; but while it lasts, it is more bloody than either. … Remember, democracy never lasts long. It soon wastes, exhausts and murders itself. There never was a democracy yet that did not commit suicide.” 

Few people step back and consider these truths.

Money in Politics
Money And Politics
Money & Politics
How Money Corrupts American Politics
How Can the U.S. Shrink the Influence of Money in Politics?

Big Fat Checks

Posted in uncategorized with tags , , , , , , on February 9, 2014 by andelino

Big Fat Checks 01

First lady Michelle Obama is hitting the “panic” button.

The midterm elections “are less than 10 months away,” she told a Hollywood fundraiser.

“So starting right now, today, we need to be as passionate and as hungry as we were in 2008 and 2012,” she said.

“In fact we need to be even more passionate and more hungry, because these races will be even harder and even closer than those presidential elections,” she told the roughly 200 guests, which included various entertainment industry people, such as Barbra Streisand.

“What you need to do, I’m serious, write a big fat check,” she said, at a house in gated community in Hancock Park.

“Write the biggest check you can possibly write,” she told the guests, who paid up to $32,400 to stand close to President Barack Obama’s stand-in, and to eat gourmet pizza.

“Writing the checks is the single most impactful thing you can do right now to affect the outcome of those midterms.”

The fundraiser was hosted by Phil Rosenthal, the creator of the popular sitcom “Everybody Loves Raymond.”

The Democrats are 17 seats away from regaining a majority in the House, but are also six seats away from losing the Senate, she said.

“What I want all of you to think about for just a minute is what could happen if we lose those six Senate seats,” she said, highlighting growing worries by progressives about their Senate majority.

A Republican majority in the Senate allow the repeal of “ObamaCare,” she said.

The GOP could “interfere” with a woman’s ability to obtain “contraception”, she claimed, even though no GOP legislators actually want to “ban” contraception’s.

A GOP majority could also ban “same-sex marriage,” she said, according to the pool report.

Polls show the GOP is likely to gain some Senate seats.

But GOP leaders are threatening to split the party — and dry up small-scale donations — this summer by pushing for a huge business-backed immigration increase and for an Obama-backed amnesty for at least 12 million illegal immigrants.

Big Fat Checks 03

The first lady also sounded an “alarm” about state elections, suggesting that Democrats plan to invest heavily to defeat GOP governors this fall.

“Thirty-seven governor’s seats are up for grabs… [and] we’ve got state legislatures in play, and remember, these are the folks who draw those congressional districts,” she said.

In fact, the next redistricting process will happen in six years.

The first lady, with the “big fat cheeks,” also served up some guilt along with the bromides, panic and pizza.

“Let’s be clear, Barack cannot do this alone sitting by himself in the Oval Office,” she chided her supporters.

“It’s simply not enough to elect Barack Obama president if we don’t also elect leaders in Congress and in our state houses who will work with him to keep making the change we all believe in,” she told her well-dressed and wealthy listeners.

Interesting how the Democrat “Party of the People” spends a whole lot of time in Hollywood “grabbing” money to further their agenda.

It’s telling that folks who don’t live like you and me will “pony up” thousands of dollars to sit with the woman who would tell the rest of us how to “live and eat.”

Of course, they will not feel the effects of the “rules” mandated by this “misbegotten” administration on the peasants.

It’s so good to be “one of the anointed.”

There is great satisfaction in knowing that this arrogant “Food Czar and her lying hubby” have to get on their hands and knees to “beg” for money.

Big Fat Checks 02

Overheard on the street…

Sitting alone in his office? When the heck does he do that when he has been either on the golf course or on the road campaigning all the time?
What she’s really saying is, “GIMMIE GIMMIE GIMME! I need money for planning another exotic vacation.
Somehow, I just can’t envision the woman giving me a fair shake at getting my share of the pizza.
She didn’t get those “big fat cheeks” by distributing food evenly.
The silent message from Michelle is that the IRS will punish you if you don’t hand over the loot.
Sounds like Multi-Level Marketing. You make money off of the people you deceive.
Disgraceful begging with the elites they hate.
Passionate and hungry. Run!
Mooch is a pain in the butt.. A real MOOCHER!

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