Corporate greed is what gets me. Amoral price gouging just about everywhere has pushed us to the brink. Belt tightened here… riding this out alongside you, Professor. Thanks for your sound, honest and cohesive writing, once more. 🌻
Gets me, too. Price gouging at any time is outrageous; at a time like this, when we're struggling to escape a pandemic, fighting back the forces of authoritarianism both inside and outside America, and should be trying to save the planet, is beyond outrageous.
I can't understand why Biden and his administration wouldn't be doing EVERYTHING in their power to stop a recession? Biden knows what the corporations are doing, he himself said so, what gives? Why can't he influence his own administration? Why are so many of Trump's appointees still in government, Louis de Joy, Christopher Wray, many in the DOJ and other agencies? Why has NO ONE, Trump or any of his accomplices, been held accountable for a myriad of crimes we know they committed? I just can't understand why so many things are getting worse in the country; blatant corruption of the SC and in the SC, pandemic policies thrown around as a political football, blatant unwillingness to fund education and undermine education everywhere screaming about and highlighting racism. Nothing is changing, everything is just getting worse. I think it's because we are no longer living with democratic policies, this is the early days of American fascism.
I agree in part with Claire, but I can't think of anyone else I'd rather have as president at this time as Biden.
But I don't understand why the Justice Department, Commerce and the FTC have not been attacking price gouging. This is a worldwide pandemic and it has been aggravated and exacerbated by energy policy, which has undermined our domestic economy. Today NATO and the EU are addressing energy sanctions on Russia. Putin has been in cahoots with Saudi Arabia/OPEC. The Saudis control OPEC, the "market maker" for the price of oil internationally by fixing output. The Saudis own the largest oil refineries in the US and control a number of US oil producers.
On April 12, 2020, under pressure from Trump, the world’s biggest oil-producing nations outside the United States agreed to the largest production cut ever negotiated.
OPEC, Russia and other allied producers slashed production by 9.7 million barrels per day (bpd), or about 10% of global output. Half that volume came from cuts of 2.5 million bpd each by Saudi Arabia and Russia, whose budgets depend on high oil-and-gas revenues.
This was done because the dramatic reduction in demand caused by the pandemic reduced gasoline prices to the point where it was hurting American oil company profits.
To protect those oil companies, Trump essentially extorted the Saudis to cut production.
American Oil companies have achieved record, multi-billion profits.
Once demand was restored, we were stuck with Trump’s short-sightedness.
After the price of oil dropped by over 12% and the stock market began its recovery, with the Dow rising 631 points, those reductions in prices were not reflected in prices at the pump.
Many states have price gouging statutes, but individuals should be able to act as private attorneys general to spot it, stop it and seek consequential damages.
Whoa, this was very interesting Daniel. Thank you for taking a moment to write this. Yeah, so many of our government agencies that could go after price gouging are impotent. The Louis de Joy problem is just one example of where Republicans are keeping in place someone, De Joy, everyone wants out. Can't happen. I think this is pretty widespread in the Biden administration. Here we are, with Powell's policies since there's nothing else.
Absolutely! Great idea, since the servants of corporations and the Uber-wealty (Republicans) are turning to this tactic with social issues (abortion, books= education and representation on race, gender, sexual orientation, clas, religion... unless it conforms to their wishes- like The Taliban), make them and their masters should be subject to the same practice. Let individuals sue corporations and/Individuals for price gouging, profiteering, damage to the planet (fossil fuel), work place illness and injury (inadequate covid protocols), sue for better pay amd against pay inequity, etc....
@Claire. Oh gosh Claire, you scare me! I can't say you're wrong either. That scares me too. I think the professor gave us the right guidance - work with and on your Representatives, get them to get away from the sucker punch from the right, trying to drag all discourse into cultural issues while the economic plight of Americans is what really needs attention.
Please forgive this lengthy answer, but I wondered about each of your queries so much so that I pondered a bit on each one. I thought I’d give you my viewpoint, one by one:
1. Biden is not responsible for stopping a recession from occurring. I am not one to say, however, consequences of a world-wide pandemic (and the supply chain factor) Corporate Greed, also a War waged on Ukraine by a tyrant haven’t helped matters. Sadly, this is only a few of the reasons.
2. Though Biden knows what “corporations are doing” he must prioritize. He’s very busy doing damage-control from TFG.
3. Biden is not TFG.
4. “Keep your friends close and your enemies closer.” Biden is not dumb.
5. The DOJ is silently and methodically making an airtight case against TFG and all of his cronies. Many of us realize how airtight cases must be.
Please don’t be discouraged. Please count your blessings instead. I am warm and safe at home. The victims of so many are not.
While I voted for Uncle Joe because the alternative was unthinkable, let's not forget that he is a corporate Democrat. When your campaign depends on corporate dollars, you are indebted to the beasts. Don't expect Joe Biden to go after the big monopolies with anything but lip service.
TOTALLY AGREE. ME TOO! I complained bitterly about Biden's run for president and threatened (as I did about Hilary Clinton) not to vote for him. Friends were horrified and I ultimately backed down and caved voting for them both holding my nose. Completely chickened out. But I vow this, NEVER AGAIN. The next time the Democrats put up another corporate donor favorite I can't stand, I'm not voting. I'll vote the down ballot but I'll never again vote for another democrat. I can't vote GOP, I just won't vote for the presidential candidate and hold my nose doing it. I left the party years ago, independent now. Never vote GOP.
I will probably continue to vote for a corporate Dem over a Republican because I feel the Republicans have become anti-democratic. Don't throw away your vote, Claire. Who knows, maybe someone dynamic like Sec. Reich will emerge.
Dave, I know you are right about throwing away my vote, that's why I couldn't follow through and not vote for Clinton and Biden. Yes, I will vote, unhappily for a corporate Dem if I must, but I don't want to.
Like corporations care about any of those things. We were a young couple with a 2 yr.old in 1982, and the interest rate on our mortgage was 18%!!!!!!! When I would ask my husband how his day was, he replied that he still had a job. Other people had it way worse! I read a long time ago that voting for a republican for president was tantamount to voting for a recession.
You stated in a recent column that Putin's war is reuniting the American people just as the old Cold War did, that representatives of very diverse political/social/economic views are drawing closer in an effort to present a united front (well, sort of a superficial, time-restricted united front) against a threat from the outside. This may be true and all well-and-good considered our very divided and splintered union but I ask you this: what does it say about a nation that there are apparently no shared values, ideals, certainties and that that nation has to rely on clear and present threats exterior to itself to function at all? Is there nothing we share any longer, no principles we sustain in good times as well as bad, nothing we're willing to uphold when everything is going in our favor---and when it's not? If you have seen any of President Zelenskyy's tv series "The Servant of the People," you might have checked out the fictitious (now real) president of Ukraine's inaugural speech to his nation: The president chucked his prepared comments based on LIncoln's inaugural and said that he was aiming to be able to look clearly and without reserve into the eyes of his children (the nation's children) knowing that he had done his best. Of course this was all fiction (or was it?) but I would posit that, despite taking an oath of office to the rule of law and the Constitution of the United States, that is to defend and support all the laws--financial/social/moral--supporting our supposed union, very few of our public servants in office today can stress looking unreservedly into the eyes of OUR CHILDREN. We have given up so much for the few oligarchs who retain power over every aspect of our lives; in fact, we have given over our role as leader of the free world (and peace or the hope for peace) to a servant of the people who earns $11,000 to serve as President of Ukraine and relies on his successful years as an entertainer (a legitimate way of earning a living but one now-disgraced in the United States) by looking into the eyes of all his children--and choosing to remain in their struggle to be free.
You have to "go deep, go long" with a single policy that expresses and immediately implements a new paradigm in the economy with a 50% discount/rebate policy at retail sale. It literally changes everything...because it just DOES by its high percentage increase (100%) in everyone's purchasing power and its strategic point of implementation at the summing and ending point for price and cost at retail sale. You have to brush past your cynicism, any limiting orthodoxies and mental filters you've acquired and yes have faith/confidence that these facts are FACTS! It's the key to solving the multiple crises we are facing. I'm not a crank and I'm not just some zealot. I've studied all of the cutting edge reformers including Dr. Reich and I just happened to have also studied the relevant economic, monetary and paradighmatic history. Pattern change. Patterns are vast, and pattern changes BY DEFINITION effect VAST changes. Look at it! And believe!
What you are suggesting is a solution at the point of retail sale, as though all that matters is the power of (challenge to) consumers to keep on consuming when high inflation looms in the near future. Is this what I am talking about? I didn't know that. What I was talking about did not have as much to do with the strength of the nation retail-wise (consumer spending) as with the strength of the nation to endure and represent its own values, values it claims to try to export to the free world. I do not have much in the way of spending power and I will have even less when high-inflation kicks in but that is not as disturbing to me as the moral and ethnical decay that allows us and our "leaders" to pursue luxury and self-indulgence in the face of hardship for those whose income will continue to flag (children, seniors, disabled, workers in devalued jobs). I believe we should be looking at UBI seriously and guaranteeing a decent living in this wealthiest of countries. By logic that means that those who have endeavored (and succeeded In) avoiding taxes ante-up but I fail to see that happening. This is not so much cynicism as recognizing that in a contest between values and morals on the one hand and wealth and power on the other, the latter contestant will consistently carry the day.
If you want morals to triumph why not integrate an aspect of the highest moral and ethical concept mankind has ever conceived directly and continuously into the woof and warp of the economic process, namely monetary grace as in GIFTING with a 50% discount/rebate policy at retail sale. The way to self actualize an ethic is to repeat its reality until it sticks. How much good could come from creating the opportunity to feel gratitude (as opposed to feeling ripped off) everytime you bought a pair of shoes or a sweet potato during the often multiple times per day that you bought something??? As a man thinketh, so is he. No? Actively creating a positive reality beats the hell out of bemoaning the present or past 6000 years of living under the monetary paradigm of Debt Only.
But you know something? People are not constantly buying things. Retail and "gifting" (you really mean giving, gift being the product/ result of giving and gifting being a noun recently made into a verb) are not the only game in town, people engage in all sorts of activities that have nothing whatsoever to do with retail and discounting prices by percentages. We tend to think of the USA as a consuming society in which the main activity of all life--the real sign of life--is spending and buying stuff. But this may not be true and, for many of us, it is not true at all. (It becomes much less vital when one has nothing with which to spend.) It would be odd if we were to create scenarios in which everything depended on products and their prices. There are those of us who happily (or not) restrict our spending and purchasing in pursuit of other goals and activities. You cannot really solve all economic or human problems by reducing the retail prices on stuff, especially when you are dealing with people who prioritize their lives in such a way that values and ethics and social connections and self-fulfillment rank higher than the price of the newest/latest cell-phone.
Your analysis of the macro situation and of the profiteering/lack of a systemic means of curbing it problem are spot on. The only thing missing is a clear and conscious awareness of the solution to our economic problems and that is the specific new MONETARY paradigm concept and its aligned policies, primarily a 50% Discount/Rebate policy at retail sale.
Think about it Prof Reich. Steve Keen, the Bundes bank, and the Bank of England among others have acknowledged that upward of 97% of our money is created by accounting entries when banks make loans. In other words they directly create a deposit to your account and reciprocally they make an account in their books that you owe them such and such amount of debt...AND THATS THE ONLY WAY THAT THEY CREATE IT, THAT IS AS DEBT ONLY. Now, what's wrong with that? Number 1 ITS A MONOPOLY PARADIGM CONCEPT. Number 2 its held by the private banking business model to covertly dominate every other business model and 99% of individuals. Number 3 ignore public debt, that is not the problem and is simply a political side show that private banking will use forever to distract us from the real problem. Number 4 PRIVATE debt has destabilized every empire since Sumer that hasn't practiced periodic debt jubilees according to Michael Hudson and its doing so now as well. Number 5 We must utilize a direct and reciprocal (accounting) means of preventing the de-stabilizing build up of debt that benefits both the consumer and business (and hence their cooperation in ending the monopoly paradigm of private banking) AKA Direct and Reciprocal Monetary Gifting with two primary policies: A: a 50% Discount/Rebate policy at retail sale where consumers' purchasing power is increased 100% and yet with the money authority reciprocally creating and rebating 50% of the price of everything commercial agents do not suffer. This would also integrate beneficial price and asset DEFLATION into profit making economic systems which is "miraculous so far as any capitalist economic theory is concerned and is also a temporal universe and conceptual complete inversion...which is one of the cardinal signatures of historical paradigm changes. B: a 50% Debt Jubilee at the point of loan signing which institutionalizes debt jubilee and integrates it directly and continuously into the economy instead of making it a one-off every 60-70 years and only with regimes that aren't totally given over to their financial masters...like every empire since Rome including our own of course.
The present monetary paradigm is the underlying problem and a new monetary paradigm and its policy program is the solution to our economic woes and to the confronting the climate change crisis as well as it will enable the mega-fiscal spending to retro-fit production without inflation.
Do you see this Prof Reich? Please address this most basic analysis of the problems we face.
Wouldn't your new economic ways require that a huge government bureaucracy be created that would have to oversee and process every retail purchase made? And wouldn't such cause the government to create even more money, which many argue is the cause of our inflation going from near zero to nearly 8 percent? Would we be jumping from the frying pan into the fire?
Furthermore, much of the professional commentary that I've read on our current inflation is that price gouging is real but driving inflation in only a very small way. Yellen repeatedly insists that the pandemic is the primary demon; allay that demon, and many economic problems will be immensely reduced, if not eliminated.
As you say, banks do have a monopoly on lending and thus creating debt, which can, you say, ultimately topple regimes of any type. Would you recommend that the government, which we can better control, be the lender in all these cases? That would radically change the nature of banking, if not destroy it, but that sounds like an improvement. Of course, getting the banking industry to commit bottom-line suicide is a very heavy lift. It would be a brave new world; and because most of us hate and fear change, few voters would be excited or even confident about a paradigm shift of epic proportions. We can't even agree on masks or who goes to which restrooms.
Nonetheless, I like that you're thinking outside the box, because after millennia, we need to finally fix macroeconomics. Will we ever solve our basic money problems? Must the poor be with us always? Must we endure boom-and-bust business cycles forever? Surely, there's a solution out there somewhere. (I believe that the new insights of Modern Monetary Theory, if used properly, can get us out of this vicious circle. We've misunderstood how big money operates.)
And remember, reducing the cost/price of everything with a 50% discount/rebate policy at retail sale macro-economically integrates and insures beneficial price and asset DEFLATION into the economy. The 50% Discount/Rebate policy is the very temporal universe expression of the new paradigm by its high percentage effect and its strategic point of implementation at the terminal summing and ending point of the economic process at retail sale.
Thanks, Steve, for your in-depth replies. (I'm still trying to unpack them and their ramifications to our economy.)
If the government rebates the retailer 50 percent for every sale, wouldn't that mean that the government was creating trillions of new monies? Wouldn't that put the government in huge, unsustainable debt?
A moderate amount of debt is fine, in fact, good for the economy, helping it to grow, but an astronomical amount would break the bank, no? MMT says that we can create too much money, but your system seems not to have that drawback (because the money was correctly and logically used for the sale of desirable goods or services; the money wasn't created merely with the hope that it might someday be used constructively or in a financially sound way).
(As you can see, I'm still trying to understand all the actions and reactions that might be involved in your idea.)
I'd like to hear what Dr. K thinks about your brave new financial transaction system. He'd probably be gobsmacked by its novelty. To me, this idea is fresh off the boat, unseen and unheard-of till now.
Again, we appreciate you economic inventors. We always can use breakthrough ideas in the dismal science, not just in high-tech and craft beers.
James, Thanks for that. "If the government rebates the retailer 50 percent for every sale, wouldn't that mean that the government was creating trillions of new monies? Wouldn't that put the government in huge, unsustainable debt?"
Actually, not. The immediate conversion of the government's "debt" by creating bonds is simply a form of debt prestidigitation. It's proper to account for that money, but why turn it into an income stream (mostly bought by the banks via their charter to create money in the first place)? The answer is because the Fed was created to back up the financial system...rather than serve the general populace as it should. Money, that is "debt", we owe to ourselves and that funds the government actually need not be, and as we see in the fear mongering vehicle of "the national debt" is not and never will be paid back...because it need not be.
When one macro-economically integrates beneficial price deflation with a 50% discount/rebate policy at retail sale that is the end of inflation...FOREVER. And hence the end of any inflation argument regarding fiscal/government austerity. Now it's true that businesses could simpy raise their prices (like they currently do anyway and is the primary cause of inflation, that is, because we don't have a solid means of preventing such anti-social and greedy actions, but what if an anti-social CEO raised his/her prices 20% and just one of their competitors didn't raise their prices? Just how much market share would the non-inflating CEO take from the anti-social one? And, seeings how everything is 50% less than it was before the discount/rebate policy, you'd still have a 30% decrease in the price of the asshole anti-social CEO's products anyway...so no matter what the 50% discount/rebate policy is all upside. Of course in my book I advocate for new tax incentives and disincentives and a new government department I call The Department of Competition, Innovation, Boycotting and the Public's Bully Pulpit that has weekly press briefings in which they point the figure at corporations that arbitrarily raise their prices instead of competing on them (despite the fact that the government has greatly increased the possibility of demand for their products by paying for half of that price) and that recommends the public boycott those corporation's products. And I also call for at least a 50% cut in taxes for those businesses that do not inflate and a tax of 100% on any profit made on the sale of products/services of those who do inflate.
MMT is a good reform and has the mechanics of money creation correct, but it still remains in the present "Debt Only" paradigm. It aligns with the new monetary paradigm of Gifting. After all what are government deficits? They're monetary gifts to government contractors. For that matter What is a UBI? Monetary gifts. What is a debt jubilee? A monetary gift that reduces indebtedness. These reformers simply haven't cognited on the superior efficacious nature of a 50% discount/rebate policy at retail sale that because of the point at which it is implemented macro-economically expresses the new monetary paradigm.
In fact in my book I advocate for a $1000/mo universal dividend for everyone 18 and older which paired with the 50% discount/rebate at retail would give every adult $2000/mo. of purchasing power....for life! And if you had that the payroll taxes we and every business pay for welfare, unemployment insurance and even for social security would immediately be redundant and hence able to be eliminated. Paradigm changes are always characterized by inversions of both conceptual reality and temporal universe reality.
Thanks for the reply. "Wouldn't your new economic ways require that a huge government bureaucracy be created that would have to oversee and process every retail purchase made?" Actually not. The infrastructure (accounting) is already ubiquitously there. All that would be necessary would be for every retail business to open a new T account labeled Sales Discounts/Rebates enter the amounts of their discounts and then the monetary authority, whether the amended charter of the FED or another authority specifically created distribute the rebate monies, opens their own similarly labeled T account...and the money created as a gift simply balances both acounts and zeros them out. Money and accounting are two of humanity's greatest inventions...they just have to serve the individual not enslave them...like they've done since human civilization began.
It would be best if we had a true publicly administered banking system, but that might not be immediately necessary with a few restricting policies to guard against Finance's worst speculatory tendencies. Once the genie of the new paradigm policy that immediately and continuously doubles everyone's purchasing power and that also benefits every other business model except Finance is out of the bottle with the 50% discount/rebate policy and the 50% debt jubilee at loan signing policy it will expose Finance's monopoly dominance and isolate them from the interests of every individual and the rest of the business community. Historically, paradigm changes are so universally beneficial that everything adapts to the new paradigm, NOT the other way around.
I'm all for Modern Monetary Theory, and it accurately describes the operations of money creation and the government's involvement in that process... under the present paradigm. It aligns perfectly with the new monetary paradigm of Direct and Reciprocal Monetary Gifting in that it understands the endogenous and fiat nature of the system...but it needs to perceive the new PATTERN. The PARADIGHM/PATTERN is a wholistic level of analysis of the operant reality ABOVE the theoretical/systemic level. Paradigm changes are what is necessary because they not only make immediate changes of reality they also enable things that appear unresolvable like integrating the interests of presently opposed economic and political forces and also enabling us to rationally direct industrial policy toward ecological sanity.
Amoral is the right word. Corporations are amoral because they lack a moral dimension. (They are not immoral.) It wasn't always this way. In 1970 economist Milton Friedman argued in an essay published by the New York times that that it corporations should not concern themselves with social responsibility and such because shareholders could, if they wanted, impose moral considerations on the corporations they owned. That marked the beginning of the end of corporate social responsibility.
Yup...we'll have a recession...and the markets will reflect this....and you know what that means. Moooooore BAILOUTS! If there's one thing America can't tolerate, it's a struggling Dow, just sitting there, languishing, depressed and so far from its previous heights. And though many taxpayers may prefer to use our own money for schools, healthcare, and housing, thankfully, our leaders know best, that to leave a Dow and NASDAQ that low and down on their luck would be pure cruelty.
Corporate welfare is now so deeply engrained in our business culture that a sharp downturn in the stock market almost inevitably brings forth government subsidies to "troubled" businesses. But when we have such clear evidence that measures like the enlarged Child Tax Credit dramatically reduce child poverty, we seem incapable of acting.
Of course, you are right. Democrats, however, are deeply entrenched in their corporate donors largesse. I'm still mad at Biden for not (and he was urged by the progressives to get Powell out BECAUSE of his policies) replacing Powell with a DEMOCRAT, someone who would reflect HIS POLICIES. Shoot! When we elect a Democrat to run the country we want DEMOCRATS to run the country! Get Trump's people OUT! At least start there, start fresh with new policies and new ideas. For crying out loud Powell is going back 50 (!) years to enact policies that NO LONGER APPLY! Why? Because he's 69 years old, too old to be in this job, and can't see it any other way, age and politics. Biden's too old and shouldn't be in this job because he can't see government any other way than how he's done it more than 50 years ago. By that I mean he wants BIPARTISANSHIP, sees it where it doesn't exist but tries to force it anyway. He wasted more than a year on Manchin and Sinema because he was working with an old political playbook...and he has done that by keeping Powell. But look at the far reaching effects this misjudgment by a too old politician is having on our country. I will finish with this; I thank my lucky stars that with the political upheaval now caused by Russia that Trump is OUT of office. Holy Cow, would we be screwed if he were there now.
@Claire. In defense of Biden (only to a degree) Congress has its way of working and experience with this is valuable. Witness the Speaker of the House. But I agree that Biden started his tenure with too much confidence in the old ways of relating. Republicans in Congress are not playing according to the old regular order. Nope, that's clear. And thank goodness for Stacey Abrams and the two Democratic Senators from Georgia! But give Biden some credit - he is evolving pretty fast (for an old guy?). But he needs to get past this "war" and get back to concentrating on domestic issues and the economy!
Benjamin, I completely agree! Stacey Abrams (!), she continues to amaze me with her courage and grit, thank goodness for her, talk about "persevere." I acknowledge that Biden does seem to be evolving at a decent pace. But I have to say this Benjamin, if Biden lets this country fall into a bad recession there won't be an "economy." Americans will feel let down. If Americans suffer more, jobs, stagnant salaries, etc, they will be angry and the Democrats are out. The danger is the midterm elections. If the Republicans take both chambers Biden is lame duck, all bets are off.
That said, IF the January 6th commission ever televises their findings that could be a game changer....but I honestly don't know if that group is another Mueller let down.
But what I don’t understand is how Democrats are so bad at defending their own values and policies. If they keep doing things that work, why not raise hell when the GOP tries to stop them? I feel like lies took over, in part, because the Dems are either bad at defending the truth or choose not to do so.
Professor, some of your readers like to quote Adam Smith, or to paraphrase/interpret his work. So here is the part of his philosophy, which you understand, which so many of our co-readers overlook:
The Wealth Of Nations, Book IV Chapter VIII, p. 145, paras. c29-30.
To widen the market and to narrow the competition, is always the interest of the dealers…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
Frank Lee-you are perpetrating a myth that the federal budget is like our family budget, and must be “balanced, and that deficits are always bad. last time I checked none of us can print money, and all of us do deficit spending on mortgages, car and school loans etc. use your newsletter to educate not perpetrate economic nonsense and myths!
@Robert. Thank you for this guidance. I was thinking "nothing we can do" until you reminded me. We each have Representatives! The FED is independent, nominally, but our legislators can regulate business!
@Daniel, how is fieldteam6.org different from SwingLeft.org? How are the two organizations similar? I’ve been aligned with SwingLeft and Vote Forward for a couple of years now and write a lot of Get Out The Vote letters.
@Daniel, I’ll check out fieldteam6. Something I’m noticing for myself is that it’s very, very easy for me to “scatter” my time and energy all over the place, and then I feel totally ineffectual, like a hamster spinning on a wheel going nowhere. It’s challenging but crucial for me to remember that I can only do my part, however humble or small, to change our beyond-dysfunctional financial/power system, not change the entire system myself. I suspect I’m not the only one who can go into overwhelm over the massive, massive amount of dis-ease that is in not just our country, but in our whole world. By the way, the ancient Israelite prophets, and Jesus, and Wise People for as long as humans have roamed the earth, have been begging humanity to wake up to the fact that with our human greed and hubris we will destroy our civilization(s) and indeed, the very planet we live on. More important than ever, for me at least, to balance the world of Spirit with this material world we find ourselves in.
Researching and boycotting. For example, I just gave up fig newtons because they are owned by Mondelez International (Nabisco). Nabisco won’t pull their products out of Russia. When enough people watch where they spend their money it adds up.
Until the Fed, Council of economic Advisors and Congress begin to embrace Modern Monetary Theory, and develop a cheat proof way to tax corporations,we will be playing this boom and bust silliness and allowing big corporations to price fix and gouge us whenever they can.
Your comments about the Fed just reinforce for me that an unbridled capitalistic system does not provide sustainable prosperity for all members of society. All we ever seem to do is play Whack - A - Mole. We need a new economic system that works for everyone - sure wish I was smart enough to come up with one!
@Rosie. It's capitalism, but not an unbridled one. A well-regulated economic system, based on market principals but prevented from abusing market principles, is the best we have seen in history. That, plus an enlightened, progressive tax system that provides for the common good, is what Adam Smith was talking about in his famous book.
But even with regulations we had in place before Reaganomics became popular, we still saw constant swings of recessions, depressions, inflations, wild swings in interest rates. How do we avoid those with market capitalism?
@Rosie. Since FDR times the seasons of various economics have waxed and waned, but each time something was learned. This is why Professor Reich questions Powell's judgement - we have been down that road. Perhaps Powell is just using his position to "talk a certain game" when he doubts that it will come to be. But if we take him at his word, he has missed a few of the important lessons of the post-WWII era. Another thing Prof. Reich has pointed out is that regulation of business is a tool that must be used and/or used more effectively because the Federal Reserve has real constraints on how much or in what direction they can influence the economy. We need real policy responses and we need effective regulation. It takes Democrats to do either of these things because, even though Democrats are too much under the sway of lobbyists and other moneyed interests, Democrats are way more likely to do the right thing than Republicans.
I don't feel the 8%. I just got home from the grocery store. There are many items that cost twice what they did less than a year ago. I don't know any company who won't watch all the news of inflation and then take advantage of it to increase their profits. From my heart, I really feel the major cause of this inflationary spiral is nothing but greed! It was Bernie Sanders whom I remember saying that people who hunger for more and more money have a serious psychological problem.
Not a macroeconomist, but I've read that price gouging is not the major generator of our nearly 8 percent inflation, because it's not widespread. Yes, it is occurring, no doubt about it, but just as car theft occurs, it is not the reason car prices are high.
Janet Yellen insists that the pandemic is the main problem; it's making everything worse worldwide in every way, but especially in our economies. It's in the driver's seat, not price gouging.
Dr. Reich acknowledges that we are in a perfect storm. Many negative forces are hitting us all at once, and no one that I've read disagrees, but putting the lion's share of the blame on price gouging seems unfair and untrue. (Odd that I'm defending Corporate America, which I detest, but I just want to get at the truth and solve the problem ASAP. We shouldn't go off tilting at windmills here.)
Bottom line for me: I don't know, but I am frustrated painfully realizing that after millennia of studying macroeconomics, we humans still can't get our economies to perform as we need them to. Why can't we, once and for all, fix our big money problems? For every generation in every country, it's the 500-pound gorilla in the room that sooner or later attacks and harms 99 percent of us. Plato said that money is the cause of war. We need answers, solutions, and rapid execution of these solutions. The masses have suffered long enough.
"Money won't solve all your problems, but it will solve about 98 percent of them."
Of course, Manchin or Sinema won’t disappoint their corporate bribers by allowing any progressive Fed nominees. And, they know they can get away with this because the Democrats need their votes on court nominees.
We can chuckle at Churchill’s quote that “Democracy is the worst form of government, except for all the others.” However, capitalism fails without regulations, fair taxation, campaign finance limits, fair courts and voting access. The Reagan era lead to rising corporate wages, wealth inequality, efforts to lower taxes and efforts to take over state-government to facilitate voter suppression via gerrymandering. Savings and Loans were destroyed by Keating and others who used FSLIC insured deposits to sell junk bonds, while bribing politicians like Senators McCain and Glenn.
We need to address the banking and brokerage monopolies which profit from increasing interest rates, while underwriting the massive dirty energy extraction and deforestation that is destroying our planet. Also, the low-risk investments in pension and company retirement funds underwrite this. For example, here's one action:
I have been ordering online during the pandemic and will continue to have to do that because of mobility issues and my upcoming orthopedic surgeries to improve my mobility. With higher cost, I am unable to pay off my credit cards at this time. Increases in interest rates will make it all the more difficult to do so. They aren’t even considering how these rate increases will affect retired seniors on fixed incomes.
These low interest rates haven’t even touched credit card debt. The rates are already usurious. I am counting on the Democratic Party reining in these usurious rates while they start charging the banks and the billionaires for borrowing once again. The ability for the wealthy to borrow for free while still charging us at such high interest rates compound their wealth by making us even poorer.
Increase rates on the banks’ borrowing and decrease them on those who borrow from them. We need the govt to step in and start regulating banks once again.
Call Joe, time for Jerome to retire himself and his antiquated view of the world…oh, right, Joe is one of those “old white guys” who doesn’t get it either…so we are all screwed.
Seeing the "space ride" makes me sad that only the "rich" can have a great life while the rest of us struggle to eat. Why can't the rich help the people that have pushed his company to grow. Then I wonder if they are the ones helping Putin? They supported Trump who supported (still does) Putin. That is why Putin helped him get to be the President and of course, having him as President he fueled part of America to hate the rest of the Americans. He has divided our country which weakens our country and easy to get away killing people to grab more land,$$$$. Corrupt, so many of the rich are corrupt.
Despite the cards being stacked against a resurgent labor movement, and seeing the tide starting to turn in its favor, the monied interests resort once again to fiscal restraint to beat labor back into the ground.
I keep reading how the higher price of gasoline will cause price hikes on everything else. But I haven't heard any pundits say that higher interest rates will also cause price hikes. Retailers add between 2 to 3 percent onto every item to cover their credit and debit transaction fees - but nobody talks about that either.
And I'm sure that higher income Americans have increased their savings, but that's certainly not true for the 60% of Americans still living paycheck to paycheck.
Corporate greed is what gets me. Amoral price gouging just about everywhere has pushed us to the brink. Belt tightened here… riding this out alongside you, Professor. Thanks for your sound, honest and cohesive writing, once more. 🌻
Gets me, too. Price gouging at any time is outrageous; at a time like this, when we're struggling to escape a pandemic, fighting back the forces of authoritarianism both inside and outside America, and should be trying to save the planet, is beyond outrageous.
I can't understand why Biden and his administration wouldn't be doing EVERYTHING in their power to stop a recession? Biden knows what the corporations are doing, he himself said so, what gives? Why can't he influence his own administration? Why are so many of Trump's appointees still in government, Louis de Joy, Christopher Wray, many in the DOJ and other agencies? Why has NO ONE, Trump or any of his accomplices, been held accountable for a myriad of crimes we know they committed? I just can't understand why so many things are getting worse in the country; blatant corruption of the SC and in the SC, pandemic policies thrown around as a political football, blatant unwillingness to fund education and undermine education everywhere screaming about and highlighting racism. Nothing is changing, everything is just getting worse. I think it's because we are no longer living with democratic policies, this is the early days of American fascism.
I agree in part with Claire, but I can't think of anyone else I'd rather have as president at this time as Biden.
But I don't understand why the Justice Department, Commerce and the FTC have not been attacking price gouging. This is a worldwide pandemic and it has been aggravated and exacerbated by energy policy, which has undermined our domestic economy. Today NATO and the EU are addressing energy sanctions on Russia. Putin has been in cahoots with Saudi Arabia/OPEC. The Saudis control OPEC, the "market maker" for the price of oil internationally by fixing output. The Saudis own the largest oil refineries in the US and control a number of US oil producers.
On April 12, 2020, under pressure from Trump, the world’s biggest oil-producing nations outside the United States agreed to the largest production cut ever negotiated.
OPEC, Russia and other allied producers slashed production by 9.7 million barrels per day (bpd), or about 10% of global output. Half that volume came from cuts of 2.5 million bpd each by Saudi Arabia and Russia, whose budgets depend on high oil-and-gas revenues.
This was done because the dramatic reduction in demand caused by the pandemic reduced gasoline prices to the point where it was hurting American oil company profits.
To protect those oil companies, Trump essentially extorted the Saudis to cut production.
American Oil companies have achieved record, multi-billion profits.
Once demand was restored, we were stuck with Trump’s short-sightedness.
After the price of oil dropped by over 12% and the stock market began its recovery, with the Dow rising 631 points, those reductions in prices were not reflected in prices at the pump.
Many states have price gouging statutes, but individuals should be able to act as private attorneys general to spot it, stop it and seek consequential damages.
Whoa, this was very interesting Daniel. Thank you for taking a moment to write this. Yeah, so many of our government agencies that could go after price gouging are impotent. The Louis de Joy problem is just one example of where Republicans are keeping in place someone, De Joy, everyone wants out. Can't happen. I think this is pretty widespread in the Biden administration. Here we are, with Powell's policies since there's nothing else.
Fascists at all levels. Good time to move out, before the dictatorship is in authority.
Absolutely! Great idea, since the servants of corporations and the Uber-wealty (Republicans) are turning to this tactic with social issues (abortion, books= education and representation on race, gender, sexual orientation, clas, religion... unless it conforms to their wishes- like The Taliban), make them and their masters should be subject to the same practice. Let individuals sue corporations and/Individuals for price gouging, profiteering, damage to the planet (fossil fuel), work place illness and injury (inadequate covid protocols), sue for better pay amd against pay inequity, etc....
@Claire. Oh gosh Claire, you scare me! I can't say you're wrong either. That scares me too. I think the professor gave us the right guidance - work with and on your Representatives, get them to get away from the sucker punch from the right, trying to drag all discourse into cultural issues while the economic plight of Americans is what really needs attention.
Hello Claire,
Please forgive this lengthy answer, but I wondered about each of your queries so much so that I pondered a bit on each one. I thought I’d give you my viewpoint, one by one:
1. Biden is not responsible for stopping a recession from occurring. I am not one to say, however, consequences of a world-wide pandemic (and the supply chain factor) Corporate Greed, also a War waged on Ukraine by a tyrant haven’t helped matters. Sadly, this is only a few of the reasons.
2. Though Biden knows what “corporations are doing” he must prioritize. He’s very busy doing damage-control from TFG.
3. Biden is not TFG.
4. “Keep your friends close and your enemies closer.” Biden is not dumb.
5. The DOJ is silently and methodically making an airtight case against TFG and all of his cronies. Many of us realize how airtight cases must be.
Please don’t be discouraged. Please count your blessings instead. I am warm and safe at home. The victims of so many are not.
Perspective.
It would be nice to heart this, but appears to be no way to let site know there's an issue here. Hoping to the dogs with the rest of the nation?
Can't heart this. Would if I could.
While I voted for Uncle Joe because the alternative was unthinkable, let's not forget that he is a corporate Democrat. When your campaign depends on corporate dollars, you are indebted to the beasts. Don't expect Joe Biden to go after the big monopolies with anything but lip service.
TOTALLY AGREE. ME TOO! I complained bitterly about Biden's run for president and threatened (as I did about Hilary Clinton) not to vote for him. Friends were horrified and I ultimately backed down and caved voting for them both holding my nose. Completely chickened out. But I vow this, NEVER AGAIN. The next time the Democrats put up another corporate donor favorite I can't stand, I'm not voting. I'll vote the down ballot but I'll never again vote for another democrat. I can't vote GOP, I just won't vote for the presidential candidate and hold my nose doing it. I left the party years ago, independent now. Never vote GOP.
I will probably continue to vote for a corporate Dem over a Republican because I feel the Republicans have become anti-democratic. Don't throw away your vote, Claire. Who knows, maybe someone dynamic like Sec. Reich will emerge.
Dave, I know you are right about throwing away my vote, that's why I couldn't follow through and not vote for Clinton and Biden. Yes, I will vote, unhappily for a corporate Dem if I must, but I don't want to.
Like corporations care about any of those things. We were a young couple with a 2 yr.old in 1982, and the interest rate on our mortgage was 18%!!!!!!! When I would ask my husband how his day was, he replied that he still had a job. Other people had it way worse! I read a long time ago that voting for a republican for president was tantamount to voting for a recession.
You stated in a recent column that Putin's war is reuniting the American people just as the old Cold War did, that representatives of very diverse political/social/economic views are drawing closer in an effort to present a united front (well, sort of a superficial, time-restricted united front) against a threat from the outside. This may be true and all well-and-good considered our very divided and splintered union but I ask you this: what does it say about a nation that there are apparently no shared values, ideals, certainties and that that nation has to rely on clear and present threats exterior to itself to function at all? Is there nothing we share any longer, no principles we sustain in good times as well as bad, nothing we're willing to uphold when everything is going in our favor---and when it's not? If you have seen any of President Zelenskyy's tv series "The Servant of the People," you might have checked out the fictitious (now real) president of Ukraine's inaugural speech to his nation: The president chucked his prepared comments based on LIncoln's inaugural and said that he was aiming to be able to look clearly and without reserve into the eyes of his children (the nation's children) knowing that he had done his best. Of course this was all fiction (or was it?) but I would posit that, despite taking an oath of office to the rule of law and the Constitution of the United States, that is to defend and support all the laws--financial/social/moral--supporting our supposed union, very few of our public servants in office today can stress looking unreservedly into the eyes of OUR CHILDREN. We have given up so much for the few oligarchs who retain power over every aspect of our lives; in fact, we have given over our role as leader of the free world (and peace or the hope for peace) to a servant of the people who earns $11,000 to serve as President of Ukraine and relies on his successful years as an entertainer (a legitimate way of earning a living but one now-disgraced in the United States) by looking into the eyes of all his children--and choosing to remain in their struggle to be free.
You have to "go deep, go long" with a single policy that expresses and immediately implements a new paradigm in the economy with a 50% discount/rebate policy at retail sale. It literally changes everything...because it just DOES by its high percentage increase (100%) in everyone's purchasing power and its strategic point of implementation at the summing and ending point for price and cost at retail sale. You have to brush past your cynicism, any limiting orthodoxies and mental filters you've acquired and yes have faith/confidence that these facts are FACTS! It's the key to solving the multiple crises we are facing. I'm not a crank and I'm not just some zealot. I've studied all of the cutting edge reformers including Dr. Reich and I just happened to have also studied the relevant economic, monetary and paradighmatic history. Pattern change. Patterns are vast, and pattern changes BY DEFINITION effect VAST changes. Look at it! And believe!
What you are suggesting is a solution at the point of retail sale, as though all that matters is the power of (challenge to) consumers to keep on consuming when high inflation looms in the near future. Is this what I am talking about? I didn't know that. What I was talking about did not have as much to do with the strength of the nation retail-wise (consumer spending) as with the strength of the nation to endure and represent its own values, values it claims to try to export to the free world. I do not have much in the way of spending power and I will have even less when high-inflation kicks in but that is not as disturbing to me as the moral and ethnical decay that allows us and our "leaders" to pursue luxury and self-indulgence in the face of hardship for those whose income will continue to flag (children, seniors, disabled, workers in devalued jobs). I believe we should be looking at UBI seriously and guaranteeing a decent living in this wealthiest of countries. By logic that means that those who have endeavored (and succeeded In) avoiding taxes ante-up but I fail to see that happening. This is not so much cynicism as recognizing that in a contest between values and morals on the one hand and wealth and power on the other, the latter contestant will consistently carry the day.
If you want morals to triumph why not integrate an aspect of the highest moral and ethical concept mankind has ever conceived directly and continuously into the woof and warp of the economic process, namely monetary grace as in GIFTING with a 50% discount/rebate policy at retail sale. The way to self actualize an ethic is to repeat its reality until it sticks. How much good could come from creating the opportunity to feel gratitude (as opposed to feeling ripped off) everytime you bought a pair of shoes or a sweet potato during the often multiple times per day that you bought something??? As a man thinketh, so is he. No? Actively creating a positive reality beats the hell out of bemoaning the present or past 6000 years of living under the monetary paradigm of Debt Only.
But you know something? People are not constantly buying things. Retail and "gifting" (you really mean giving, gift being the product/ result of giving and gifting being a noun recently made into a verb) are not the only game in town, people engage in all sorts of activities that have nothing whatsoever to do with retail and discounting prices by percentages. We tend to think of the USA as a consuming society in which the main activity of all life--the real sign of life--is spending and buying stuff. But this may not be true and, for many of us, it is not true at all. (It becomes much less vital when one has nothing with which to spend.) It would be odd if we were to create scenarios in which everything depended on products and their prices. There are those of us who happily (or not) restrict our spending and purchasing in pursuit of other goals and activities. You cannot really solve all economic or human problems by reducing the retail prices on stuff, especially when you are dealing with people who prioritize their lives in such a way that values and ethics and social connections and self-fulfillment rank higher than the price of the newest/latest cell-phone.
Touché, Sir. Thank you for replying 🌻
Yes!
Your analysis of the macro situation and of the profiteering/lack of a systemic means of curbing it problem are spot on. The only thing missing is a clear and conscious awareness of the solution to our economic problems and that is the specific new MONETARY paradigm concept and its aligned policies, primarily a 50% Discount/Rebate policy at retail sale.
Think about it Prof Reich. Steve Keen, the Bundes bank, and the Bank of England among others have acknowledged that upward of 97% of our money is created by accounting entries when banks make loans. In other words they directly create a deposit to your account and reciprocally they make an account in their books that you owe them such and such amount of debt...AND THATS THE ONLY WAY THAT THEY CREATE IT, THAT IS AS DEBT ONLY. Now, what's wrong with that? Number 1 ITS A MONOPOLY PARADIGM CONCEPT. Number 2 its held by the private banking business model to covertly dominate every other business model and 99% of individuals. Number 3 ignore public debt, that is not the problem and is simply a political side show that private banking will use forever to distract us from the real problem. Number 4 PRIVATE debt has destabilized every empire since Sumer that hasn't practiced periodic debt jubilees according to Michael Hudson and its doing so now as well. Number 5 We must utilize a direct and reciprocal (accounting) means of preventing the de-stabilizing build up of debt that benefits both the consumer and business (and hence their cooperation in ending the monopoly paradigm of private banking) AKA Direct and Reciprocal Monetary Gifting with two primary policies: A: a 50% Discount/Rebate policy at retail sale where consumers' purchasing power is increased 100% and yet with the money authority reciprocally creating and rebating 50% of the price of everything commercial agents do not suffer. This would also integrate beneficial price and asset DEFLATION into profit making economic systems which is "miraculous so far as any capitalist economic theory is concerned and is also a temporal universe and conceptual complete inversion...which is one of the cardinal signatures of historical paradigm changes. B: a 50% Debt Jubilee at the point of loan signing which institutionalizes debt jubilee and integrates it directly and continuously into the economy instead of making it a one-off every 60-70 years and only with regimes that aren't totally given over to their financial masters...like every empire since Rome including our own of course.
The present monetary paradigm is the underlying problem and a new monetary paradigm and its policy program is the solution to our economic woes and to the confronting the climate change crisis as well as it will enable the mega-fiscal spending to retro-fit production without inflation.
Do you see this Prof Reich? Please address this most basic analysis of the problems we face.
Wouldn't your new economic ways require that a huge government bureaucracy be created that would have to oversee and process every retail purchase made? And wouldn't such cause the government to create even more money, which many argue is the cause of our inflation going from near zero to nearly 8 percent? Would we be jumping from the frying pan into the fire?
Furthermore, much of the professional commentary that I've read on our current inflation is that price gouging is real but driving inflation in only a very small way. Yellen repeatedly insists that the pandemic is the primary demon; allay that demon, and many economic problems will be immensely reduced, if not eliminated.
As you say, banks do have a monopoly on lending and thus creating debt, which can, you say, ultimately topple regimes of any type. Would you recommend that the government, which we can better control, be the lender in all these cases? That would radically change the nature of banking, if not destroy it, but that sounds like an improvement. Of course, getting the banking industry to commit bottom-line suicide is a very heavy lift. It would be a brave new world; and because most of us hate and fear change, few voters would be excited or even confident about a paradigm shift of epic proportions. We can't even agree on masks or who goes to which restrooms.
Nonetheless, I like that you're thinking outside the box, because after millennia, we need to finally fix macroeconomics. Will we ever solve our basic money problems? Must the poor be with us always? Must we endure boom-and-bust business cycles forever? Surely, there's a solution out there somewhere. (I believe that the new insights of Modern Monetary Theory, if used properly, can get us out of this vicious circle. We've misunderstood how big money operates.)
And remember, reducing the cost/price of everything with a 50% discount/rebate policy at retail sale macro-economically integrates and insures beneficial price and asset DEFLATION into the economy. The 50% Discount/Rebate policy is the very temporal universe expression of the new paradigm by its high percentage effect and its strategic point of implementation at the terminal summing and ending point of the economic process at retail sale.
Thanks, Steve, for your in-depth replies. (I'm still trying to unpack them and their ramifications to our economy.)
If the government rebates the retailer 50 percent for every sale, wouldn't that mean that the government was creating trillions of new monies? Wouldn't that put the government in huge, unsustainable debt?
A moderate amount of debt is fine, in fact, good for the economy, helping it to grow, but an astronomical amount would break the bank, no? MMT says that we can create too much money, but your system seems not to have that drawback (because the money was correctly and logically used for the sale of desirable goods or services; the money wasn't created merely with the hope that it might someday be used constructively or in a financially sound way).
(As you can see, I'm still trying to understand all the actions and reactions that might be involved in your idea.)
I'd like to hear what Dr. K thinks about your brave new financial transaction system. He'd probably be gobsmacked by its novelty. To me, this idea is fresh off the boat, unseen and unheard-of till now.
Again, we appreciate you economic inventors. We always can use breakthrough ideas in the dismal science, not just in high-tech and craft beers.
James, Thanks for that. "If the government rebates the retailer 50 percent for every sale, wouldn't that mean that the government was creating trillions of new monies? Wouldn't that put the government in huge, unsustainable debt?"
Actually, not. The immediate conversion of the government's "debt" by creating bonds is simply a form of debt prestidigitation. It's proper to account for that money, but why turn it into an income stream (mostly bought by the banks via their charter to create money in the first place)? The answer is because the Fed was created to back up the financial system...rather than serve the general populace as it should. Money, that is "debt", we owe to ourselves and that funds the government actually need not be, and as we see in the fear mongering vehicle of "the national debt" is not and never will be paid back...because it need not be.
When one macro-economically integrates beneficial price deflation with a 50% discount/rebate policy at retail sale that is the end of inflation...FOREVER. And hence the end of any inflation argument regarding fiscal/government austerity. Now it's true that businesses could simpy raise their prices (like they currently do anyway and is the primary cause of inflation, that is, because we don't have a solid means of preventing such anti-social and greedy actions, but what if an anti-social CEO raised his/her prices 20% and just one of their competitors didn't raise their prices? Just how much market share would the non-inflating CEO take from the anti-social one? And, seeings how everything is 50% less than it was before the discount/rebate policy, you'd still have a 30% decrease in the price of the asshole anti-social CEO's products anyway...so no matter what the 50% discount/rebate policy is all upside. Of course in my book I advocate for new tax incentives and disincentives and a new government department I call The Department of Competition, Innovation, Boycotting and the Public's Bully Pulpit that has weekly press briefings in which they point the figure at corporations that arbitrarily raise their prices instead of competing on them (despite the fact that the government has greatly increased the possibility of demand for their products by paying for half of that price) and that recommends the public boycott those corporation's products. And I also call for at least a 50% cut in taxes for those businesses that do not inflate and a tax of 100% on any profit made on the sale of products/services of those who do inflate.
MMT is a good reform and has the mechanics of money creation correct, but it still remains in the present "Debt Only" paradigm. It aligns with the new monetary paradigm of Gifting. After all what are government deficits? They're monetary gifts to government contractors. For that matter What is a UBI? Monetary gifts. What is a debt jubilee? A monetary gift that reduces indebtedness. These reformers simply haven't cognited on the superior efficacious nature of a 50% discount/rebate policy at retail sale that because of the point at which it is implemented macro-economically expresses the new monetary paradigm.
In fact in my book I advocate for a $1000/mo universal dividend for everyone 18 and older which paired with the 50% discount/rebate at retail would give every adult $2000/mo. of purchasing power....for life! And if you had that the payroll taxes we and every business pay for welfare, unemployment insurance and even for social security would immediately be redundant and hence able to be eliminated. Paradigm changes are always characterized by inversions of both conceptual reality and temporal universe reality.
Thanks for the reply. "Wouldn't your new economic ways require that a huge government bureaucracy be created that would have to oversee and process every retail purchase made?" Actually not. The infrastructure (accounting) is already ubiquitously there. All that would be necessary would be for every retail business to open a new T account labeled Sales Discounts/Rebates enter the amounts of their discounts and then the monetary authority, whether the amended charter of the FED or another authority specifically created distribute the rebate monies, opens their own similarly labeled T account...and the money created as a gift simply balances both acounts and zeros them out. Money and accounting are two of humanity's greatest inventions...they just have to serve the individual not enslave them...like they've done since human civilization began.
It would be best if we had a true publicly administered banking system, but that might not be immediately necessary with a few restricting policies to guard against Finance's worst speculatory tendencies. Once the genie of the new paradigm policy that immediately and continuously doubles everyone's purchasing power and that also benefits every other business model except Finance is out of the bottle with the 50% discount/rebate policy and the 50% debt jubilee at loan signing policy it will expose Finance's monopoly dominance and isolate them from the interests of every individual and the rest of the business community. Historically, paradigm changes are so universally beneficial that everything adapts to the new paradigm, NOT the other way around.
I'm all for Modern Monetary Theory, and it accurately describes the operations of money creation and the government's involvement in that process... under the present paradigm. It aligns perfectly with the new monetary paradigm of Direct and Reciprocal Monetary Gifting in that it understands the endogenous and fiat nature of the system...but it needs to perceive the new PATTERN. The PARADIGHM/PATTERN is a wholistic level of analysis of the operant reality ABOVE the theoretical/systemic level. Paradigm changes are what is necessary because they not only make immediate changes of reality they also enable things that appear unresolvable like integrating the interests of presently opposed economic and political forces and also enabling us to rationally direct industrial policy toward ecological sanity.
Amoral is the right word. Corporations are amoral because they lack a moral dimension. (They are not immoral.) It wasn't always this way. In 1970 economist Milton Friedman argued in an essay published by the New York times that that it corporations should not concern themselves with social responsibility and such because shareholders could, if they wanted, impose moral considerations on the corporations they owned. That marked the beginning of the end of corporate social responsibility.
It's a no-brainer what the Fed's doin'. It'll >all< tar Biden & the Democrats at election time. Period.
Yup...we'll have a recession...and the markets will reflect this....and you know what that means. Moooooore BAILOUTS! If there's one thing America can't tolerate, it's a struggling Dow, just sitting there, languishing, depressed and so far from its previous heights. And though many taxpayers may prefer to use our own money for schools, healthcare, and housing, thankfully, our leaders know best, that to leave a Dow and NASDAQ that low and down on their luck would be pure cruelty.
Corporate welfare is now so deeply engrained in our business culture that a sharp downturn in the stock market almost inevitably brings forth government subsidies to "troubled" businesses. But when we have such clear evidence that measures like the enlarged Child Tax Credit dramatically reduce child poverty, we seem incapable of acting.
Of course, you are right. Democrats, however, are deeply entrenched in their corporate donors largesse. I'm still mad at Biden for not (and he was urged by the progressives to get Powell out BECAUSE of his policies) replacing Powell with a DEMOCRAT, someone who would reflect HIS POLICIES. Shoot! When we elect a Democrat to run the country we want DEMOCRATS to run the country! Get Trump's people OUT! At least start there, start fresh with new policies and new ideas. For crying out loud Powell is going back 50 (!) years to enact policies that NO LONGER APPLY! Why? Because he's 69 years old, too old to be in this job, and can't see it any other way, age and politics. Biden's too old and shouldn't be in this job because he can't see government any other way than how he's done it more than 50 years ago. By that I mean he wants BIPARTISANSHIP, sees it where it doesn't exist but tries to force it anyway. He wasted more than a year on Manchin and Sinema because he was working with an old political playbook...and he has done that by keeping Powell. But look at the far reaching effects this misjudgment by a too old politician is having on our country. I will finish with this; I thank my lucky stars that with the political upheaval now caused by Russia that Trump is OUT of office. Holy Cow, would we be screwed if he were there now.
@Claire. In defense of Biden (only to a degree) Congress has its way of working and experience with this is valuable. Witness the Speaker of the House. But I agree that Biden started his tenure with too much confidence in the old ways of relating. Republicans in Congress are not playing according to the old regular order. Nope, that's clear. And thank goodness for Stacey Abrams and the two Democratic Senators from Georgia! But give Biden some credit - he is evolving pretty fast (for an old guy?). But he needs to get past this "war" and get back to concentrating on domestic issues and the economy!
Benjamin, I completely agree! Stacey Abrams (!), she continues to amaze me with her courage and grit, thank goodness for her, talk about "persevere." I acknowledge that Biden does seem to be evolving at a decent pace. But I have to say this Benjamin, if Biden lets this country fall into a bad recession there won't be an "economy." Americans will feel let down. If Americans suffer more, jobs, stagnant salaries, etc, they will be angry and the Democrats are out. The danger is the midterm elections. If the Republicans take both chambers Biden is lame duck, all bets are off.
That said, IF the January 6th commission ever televises their findings that could be a game changer....but I honestly don't know if that group is another Mueller let down.
@Claire. Eyeeee knowwww! Can't take another one of those dud rounds!
But what I don’t understand is how Democrats are so bad at defending their own values and policies. If they keep doing things that work, why not raise hell when the GOP tries to stop them? I feel like lies took over, in part, because the Dems are either bad at defending the truth or choose not to do so.
It does not help that many are beholden to their donors.
Professor, some of your readers like to quote Adam Smith, or to paraphrase/interpret his work. So here is the part of his philosophy, which you understand, which so many of our co-readers overlook:
The Wealth Of Nations, Book IV Chapter VIII, p. 145, paras. c29-30.
To widen the market and to narrow the competition, is always the interest of the dealers…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
Frank Lee-you are perpetrating a myth that the federal budget is like our family budget, and must be “balanced, and that deficits are always bad. last time I checked none of us can print money, and all of us do deficit spending on mortgages, car and school loans etc. use your newsletter to educate not perpetrate economic nonsense and myths!
@Howie. thank you
What can the average citizen do to stop the Fed from increasing interest rates?
Urge that Congress use tools such as a windfall profits tax and price controls.
@Robert. Thank you for this guidance. I was thinking "nothing we can do" until you reminded me. We each have Representatives! The FED is independent, nominally, but our legislators can regulate business!
Register Democrats. https://www.fieldteam6.org/
@Daniel, how is fieldteam6.org different from SwingLeft.org? How are the two organizations similar? I’ve been aligned with SwingLeft and Vote Forward for a couple of years now and write a lot of Get Out The Vote letters.
Don't know. I'm concentrating on the Fascist State of Florida. Also in contact with the DNCC.
@Daniel, I’ll check out fieldteam6. Something I’m noticing for myself is that it’s very, very easy for me to “scatter” my time and energy all over the place, and then I feel totally ineffectual, like a hamster spinning on a wheel going nowhere. It’s challenging but crucial for me to remember that I can only do my part, however humble or small, to change our beyond-dysfunctional financial/power system, not change the entire system myself. I suspect I’m not the only one who can go into overwhelm over the massive, massive amount of dis-ease that is in not just our country, but in our whole world. By the way, the ancient Israelite prophets, and Jesus, and Wise People for as long as humans have roamed the earth, have been begging humanity to wake up to the fact that with our human greed and hubris we will destroy our civilization(s) and indeed, the very planet we live on. More important than ever, for me at least, to balance the world of Spirit with this material world we find ourselves in.
Researching and boycotting. For example, I just gave up fig newtons because they are owned by Mondelez International (Nabisco). Nabisco won’t pull their products out of Russia. When enough people watch where they spend their money it adds up.
@Anne. Damn, I love fig newtons too. But I'm not having any either!
😂
Until the Fed, Council of economic Advisors and Congress begin to embrace Modern Monetary Theory, and develop a cheat proof way to tax corporations,we will be playing this boom and bust silliness and allowing big corporations to price fix and gouge us whenever they can.
Your comments about the Fed just reinforce for me that an unbridled capitalistic system does not provide sustainable prosperity for all members of society. All we ever seem to do is play Whack - A - Mole. We need a new economic system that works for everyone - sure wish I was smart enough to come up with one!
@Rosie. It's capitalism, but not an unbridled one. A well-regulated economic system, based on market principals but prevented from abusing market principles, is the best we have seen in history. That, plus an enlightened, progressive tax system that provides for the common good, is what Adam Smith was talking about in his famous book.
But even with regulations we had in place before Reaganomics became popular, we still saw constant swings of recessions, depressions, inflations, wild swings in interest rates. How do we avoid those with market capitalism?
@Rosie. Since FDR times the seasons of various economics have waxed and waned, but each time something was learned. This is why Professor Reich questions Powell's judgement - we have been down that road. Perhaps Powell is just using his position to "talk a certain game" when he doubts that it will come to be. But if we take him at his word, he has missed a few of the important lessons of the post-WWII era. Another thing Prof. Reich has pointed out is that regulation of business is a tool that must be used and/or used more effectively because the Federal Reserve has real constraints on how much or in what direction they can influence the economy. We need real policy responses and we need effective regulation. It takes Democrats to do either of these things because, even though Democrats are too much under the sway of lobbyists and other moneyed interests, Democrats are way more likely to do the right thing than Republicans.
I don't feel the 8%. I just got home from the grocery store. There are many items that cost twice what they did less than a year ago. I don't know any company who won't watch all the news of inflation and then take advantage of it to increase their profits. From my heart, I really feel the major cause of this inflationary spiral is nothing but greed! It was Bernie Sanders whom I remember saying that people who hunger for more and more money have a serious psychological problem.
Not a macroeconomist, but I've read that price gouging is not the major generator of our nearly 8 percent inflation, because it's not widespread. Yes, it is occurring, no doubt about it, but just as car theft occurs, it is not the reason car prices are high.
Janet Yellen insists that the pandemic is the main problem; it's making everything worse worldwide in every way, but especially in our economies. It's in the driver's seat, not price gouging.
Dr. Reich acknowledges that we are in a perfect storm. Many negative forces are hitting us all at once, and no one that I've read disagrees, but putting the lion's share of the blame on price gouging seems unfair and untrue. (Odd that I'm defending Corporate America, which I detest, but I just want to get at the truth and solve the problem ASAP. We shouldn't go off tilting at windmills here.)
Bottom line for me: I don't know, but I am frustrated painfully realizing that after millennia of studying macroeconomics, we humans still can't get our economies to perform as we need them to. Why can't we, once and for all, fix our big money problems? For every generation in every country, it's the 500-pound gorilla in the room that sooner or later attacks and harms 99 percent of us. Plato said that money is the cause of war. We need answers, solutions, and rapid execution of these solutions. The masses have suffered long enough.
"Money won't solve all your problems, but it will solve about 98 percent of them."
~ Malcolm Forbes
Of course, Manchin or Sinema won’t disappoint their corporate bribers by allowing any progressive Fed nominees. And, they know they can get away with this because the Democrats need their votes on court nominees.
We can chuckle at Churchill’s quote that “Democracy is the worst form of government, except for all the others.” However, capitalism fails without regulations, fair taxation, campaign finance limits, fair courts and voting access. The Reagan era lead to rising corporate wages, wealth inequality, efforts to lower taxes and efforts to take over state-government to facilitate voter suppression via gerrymandering. Savings and Loans were destroyed by Keating and others who used FSLIC insured deposits to sell junk bonds, while bribing politicians like Senators McCain and Glenn.
We need to address the banking and brokerage monopolies which profit from increasing interest rates, while underwriting the massive dirty energy extraction and deforestation that is destroying our planet. Also, the low-risk investments in pension and company retirement funds underwrite this. For example, here's one action:
https://stopthemoneypipeline.com/march-calender-jam/?link_id=1&can_id=eba703e4b0d912f98bbc3311a33fc2f8&source=email-these-three-companies-can-help-stop-fossil-fuel-expansion&email_referrer=email_1485296___subject_1943821&email_subject=blackrocks-moment-of-truth
And we need to wean the world economy’s from fossil fuels for environmental-survial and Putin-aggresion-containment reasons, among others:
https://www.cnn.com/2022/03/25/business/russia-western-fossil-fuel-companies-taxes-climate-cmd-intl/index.html
I have been ordering online during the pandemic and will continue to have to do that because of mobility issues and my upcoming orthopedic surgeries to improve my mobility. With higher cost, I am unable to pay off my credit cards at this time. Increases in interest rates will make it all the more difficult to do so. They aren’t even considering how these rate increases will affect retired seniors on fixed incomes.
These low interest rates haven’t even touched credit card debt. The rates are already usurious. I am counting on the Democratic Party reining in these usurious rates while they start charging the banks and the billionaires for borrowing once again. The ability for the wealthy to borrow for free while still charging us at such high interest rates compound their wealth by making us even poorer.
Increase rates on the banks’ borrowing and decrease them on those who borrow from them. We need the govt to step in and start regulating banks once again.
Joann, That’s bad and I add check out venture capitalist’s strategies of “packing” and “stacking” to avoid tax liability.
Call Joe, time for Jerome to retire himself and his antiquated view of the world…oh, right, Joe is one of those “old white guys” who doesn’t get it either…so we are all screwed.
Still call Joe!!
Seeing the "space ride" makes me sad that only the "rich" can have a great life while the rest of us struggle to eat. Why can't the rich help the people that have pushed his company to grow. Then I wonder if they are the ones helping Putin? They supported Trump who supported (still does) Putin. That is why Putin helped him get to be the President and of course, having him as President he fueled part of America to hate the rest of the Americans. He has divided our country which weakens our country and easy to get away killing people to grab more land,$$$$. Corrupt, so many of the rich are corrupt.
Despite the cards being stacked against a resurgent labor movement, and seeing the tide starting to turn in its favor, the monied interests resort once again to fiscal restraint to beat labor back into the ground.
I keep reading how the higher price of gasoline will cause price hikes on everything else. But I haven't heard any pundits say that higher interest rates will also cause price hikes. Retailers add between 2 to 3 percent onto every item to cover their credit and debit transaction fees - but nobody talks about that either.
And I'm sure that higher income Americans have increased their savings, but that's certainly not true for the 60% of Americans still living paycheck to paycheck.