| Fatally Flawed "End the Fed" Proposal from Rep. Kucinich would Allow Congress to Print Money into Existence for Essentially Anything Posted: 21 Dec 2010 10:25 PM PST Representative Dennis Kucinich has introduced a bill to end the Fed. Unfortunately his proposal grants Congress ability to create money at will for virtually any purpose. Kucinich specifically mentions full employment, stabilizing social security, and to "lend new money into circulation as authorized by Congress and to provide means for public investment in capital infrastructure". In other words Kucinich want Congress to have the power to print money into existence for any reason it wants. Here are a few snips from Kucinich's End the Fed Bill that show what I mean. IN THE HOUSE OF REPRESENTATIVES Mr. KUCINICH introduced the following bill
To create a full employment economy as a matter of national economic defense; to provide for public investment in capital infrastructure; to provide for reducing the cost of public investment; to retire public debt; to stabilize the Social Security retirement system; to restore the authority of Congress to create and regulate money, modernize and provide stability for the monetary system of the United States, retire public debt and reduce the cost of public investment, and for other public purposes.
To enable the Federal Government to invest or lend new money into circulation as authorized by Congress and to provide means for public investment in capital infrastructure.
SEC. 201. ENTRY OF U.S. MONEY INTO CIRCULATION.
The Secretary shall cause United States Money to enter into circulation by and through any of the following means:
Any origination or disbursement of funds to accomplish Federal expenditures authorized and appropriated by an Act of the Congress.
Any disbursement to retire outstanding instruments of indebtedness of the Federal Government or the Secretary of the Treasury as such instruments become due.
Any exercise of "lender of last resort" emergency authorities under the emergency procedures specified in section 305.
Any other means, and for any other purpose explicitly authorized by an Act of the Congress that becomes law after the effective date of this Act. Support for the BillI saw this bill a few days ago thinking it was so insane no one could possibly stand up in favor of it. I was sadly mistaken. I am hoping Karl Denninger's excuse is he failed to read the entire bill. Otherwise I am at a loss to explain Dennis Kucinich: Delete The FedI'm stunned.
Really.
Dennis Kucinich, which many people have (properly) labeled as one step removed from a communist in the past, and who has a reputation as having a hard-core left slant in his politics, has just written up and introduced a bill that will fundamentally restore the free market - for real - to banking and credit.
We're about to find out if people like Ron and Rand Paul really stand for what they claim, or if they're empty suits. If they do, then I expect to see them on the Tee Vee within hours demanding passage of this bill, and joining with Mr. Kucinich in making sure that it is immediately reintroduced in the new Congress - and passed.
If that does not happen then these two claimants of a demand for "sound money" have been immediately and permanently exposed as FRAUDS, as will any so-called "Tea Party" members of Congress.
This is a bill that must become law. I'm Stunned Too
Denninger is not the only one who is stunned. I am stunned that anyone could support this preposterous idea, assuming they read it and are sober. Neither sound money nor the free market comes from printing money into existence. Arguably the only thing worse than the Fed printing money out of thin air is Congress printing money out of thing for the purpose of full employment and/or any other absurd ideas Congress has. The last thing we need, the very last thing we need is Congress lending money into existence to pay the bills or to do anything it wants for any reason. Those looking for hyperinflation can find the roots of it in that bill. Kucinich did mention abolish fractional reserve banking, in a clumsily worded paragraph difficult to interpret precisely. A second paragraph was more precise "fractional reserve lending is ended". I am 100% in favor of eliminating fractional reserve lending. Ironically, Denninger once challenged me on that score, defending the practice. Please see Fractional Reserve Lending Constitutes Fraud for the debate. Hopefully Denninger has changed his mind. All things considered, and in spite of horrendous flaws, it may be a plus that someone has actually submitted a bill in Congress to end Fractional Reserve Lending. Now all we to do is throw away the entire rest of the bill and let Ron Paul draft a proper bill ending FRL as the central idea. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List 
|
| UK Budget Deficit Hits Record High; Cut in Public-Sector Pensions 'Non-Negotiable'; Cameron Still Too Generous Posted: 21 Dec 2010 06:15 PM PST In the UK, unions are howling over Prime Minister David Cameron's plan to cut public-sector pensions. However, something has to be done as the UK budget deficit balloons to record highBritain's public borrowing unexpectedly hit a record £23.3bn in November, the Office for National Statistics (ONS) said on Tuesday.
The figure, which excludes financial interventions by the Government, was a marked increase on the £17.4bn a year earlier and beat the previous highest monthly borrowing record of £21.1bn in December 2009, according to the official figures.
The bigger-than-expected figure will be seen by Chancellor George Osborne as supporting the need for recent austerity measures, which include an £81bn package of spending cuts and a hike in VAT next year.
Jonathan Loynes, chief economist at Capital Economics, told PA: "Given that the economy has expanded rather more quickly than anticipated over recent quarters, we might have expected somewhat lower current borrowing, even allowing for the usual lags."
The unprecedented £5.9bn leap in borrowing was mainly due to Government spending – up 10.8pc on last year. EU contributions and spending on health and defence were particularly high last month, the ONS said, while VAT receipts dipped by 0.1pc.
Net debt is now £863.1bn, which represents 58pc of gross domestic product (GDP) – another monthly record. Cut in Public-Sector Pensions 'Non-Negotiable'No doubt soaring deficits were on Cameron's mind when he proclaimed Cut in Public-Sector Pensions 'Non-Negotiable'. The Government has ruled out a change of heart on raising public sector pensions in line with the CPI measure of inflation, saying the matter was "non-negotiable".
The Government announced in June's emergency Budget that it intended to scrap the link between public sector pensions and the retail price index (RPI) in favour of the consumer prices index (CPI). As the CPI tends to be lower than the RPI, the effect is likely to be a reduction in pensions.
Mark Serwotka, the head of the Public & Commercial Services Union (PCS), said that when he asked David Cameron at the Downing Street meeting about the switch to the CPI, the Prime Minister "said flatly it was non-negotiable".
The switch to the CPI has also been attacked by the Royal Statistical Society. Jill Leyland, its vice-president, said that, while the index was "acceptable for macroeconomic purposes", the RSS did "not believe its coverage is generally appropriate for inflation compensation purposes" in areas such as pensions. CPI vs. RPIInquiring minds are investigating the beef. Please consider the following chart and commentary from the UK Consumer Price Index Statistical Bulletin. RPI Compared to CPI
All items Retail Prices Index (RPI)
In the year to November, the all items RPI rose by 4.7 per cent, up from 4.5 per cent in October. The RPI 12-month rate between October and November has therefore increased by 0.2 percentage points compared with an increase of 0.1 percentage point in the CPI 12-month rate between these two months.
The slightly larger increase in the RPI 12-month rate is mainly due to air transport. Air transport has a far lower weight in the RPI than the CPI so the downward effect from this component has much less of an impact on the RPI.
CPIY vs CPI-CT
Consumer Prices Index excluding indirect taxes (CPIY)
The CPIY is the same as the all items CPI except that it excludes price changes which are directly due to changes in indirect taxation (such as the increase in air passenger duty, which came into effect from 1 November 2010).
In the year to November, the CPIY rose by 1.6 per cent, unchanged from October. The unchanged CPIY 12-month rate between October and November compares with a rise in the CPI rate of 0.1 percentage point during the same period. The CPIY has not risen in line with the CPI in part because air passenger duty is excluded from CPIY: the CPIY is therefore unaffected by the November 2010 increase.
Consumer Prices Index at constant tax rates (CPI-CT)
The CPI-CT is the same as the CPI except that tax rates are kept constant at the rates they were in the base period (currently January 2010). Cameron Too GenerousGoing forward I have no opinion as to what the UK CPI is going to do relative to the RPI. However, a quick look at the charts shows Cameron is too generous, especially in light of budget deficits mentioned above. How about the lowest of CPI-CT, CPIY, CPI, or RPI with a maximum cap? Since that is likely still too generous, what about something even more creative such as using the lowest point in the year of any of the above measures. For 2008, that would have been -1.5%, a real reduction, not a fake one as is being debated now. If it comes down to cutting public-union pensions or raising the VAT, the decision is not close. Cut pension benefits. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List 
|
| Spotlight on European Government Bonds; Current State of the Sovereign Debt Crisis in Pictures Posted: 21 Dec 2010 12:13 PM PST |
| Why the United States of America is Broke Posted: 21 Dec 2010 12:55 AM PST Explaining why America is broke is rather simple. All we have to do is look at two separate and distinct problem areas: public unions and defense spending, then generalize the problem. Let's start with a look at defense spending. Here's an article on Foreign Affairs magazine by William Pfaaf making a solid case How Militarism Endangers America . The article is subscription, but a decent sized synopsis and lead-in follows: Summary:
The United States has built a worldwide system of more than 1,000 military bases, stations, and outposts -- a system designed to enhance U.S. national security. It has actually done the opposite, provoking conflict and creating insecurity.
WILLIAM PFAFF wrote a syndicated column that appeared in the International Herald Tribune from 1978 to 2006 and contributed political "Reflections" to The New Yorker from 1971 to 1992. His latest book, The Irony of Manifest Destiny: The Tragedy of America's Foreign Policy, was published in June.
[Article Start]
It is time to ask a fundamental question that few government officials or politicians in the United States seem willing to ask: Has it been a terrible error for the United States to have built an all-but-irreversible worldwide system of more than 1,000 military bases, stations, and outposts? This system was created to enhance U.S. national security, but what if it has actually done the opposite, provoking conflict and creating the very insecurity it was intended to prevent?
The most compelling arguments for opposing this system of global bases are political and practical. U.S. military bases have generated apprehension and hostility and fear of the United States, and they have facilitated futile, unnecessary, unprofitable, and self-defeating wars in Afghanistan and Iraq and now seem to be inviting enlarged U.S. interventions in Pakistan, Yemen, and the Horn of Africa. The 9/11 attacks, according to Osama bin Laden himself, were provoked by the "blasphemy" of the existence of U.S. military bases in the sacred territories of Saudi Arabia. The global base system, it seems, tends to produce and intensify the very insecurity that is cited to justify it.
AN ACCIDENTAL EMPIRE
The United States' present global military deployment does not seem to be the product of conscious design, nor was it assembled absent-mindedly. In part, it is the natural result of bureaucracy left unchecked. At the end of World War II, a precipitous dismantling of the U.S. wartime deployment was halted only by the outbreak of the Cold War. The United States' intervention in Vietnam brought some base expansion in Southeast Asia, but after its failure in Vietnam, the U.S. military was determined to have nothing further to do with insurgencies and quickly returned to reorganization and retraining for what it still considered its primary mission: classical warfare in Europe in the event of a Soviet invasion. This eventually led to the brilliant blitzkrieg against Iraq in the first Gulf War, fought under the Powell Doctrine of popular support, overwhelming force, focused objectives, and rapid withdrawal. America's Misdirected MissileI am 100% in agreement with the synopsis and prelude as presented above. Here is a second article on the same subject. This one is courtesy of the Business Spectator. Please consider America's Misdirected Missile by Alexander Liddington-Cox. The latest WikiLeaks scoop for The Age is a cable from the United States embassy in Canberra expressing concern to Washington about Australia's ability to meet its purchases of military equipment. Australia's defence budget currently sits at around $22 billion a year and, apparently, US diplomats were left unimpressed by the efforts of Australia's Defence Materiel Organisation chief Stephen Gumley to explain how Australia would meet its aims to increase military spending, as laid out in the White Paper. While the article didn't reveal whether or not the cable's author appreciated the irony of a US official lecturing anyone about measured military spending, this graph should really be passed on to them – just in case.
While this graph puts the US defence budget at $US711 billion in 2009, that doesn't include a number of "off-budget" items that, on some estimates, push US defence spending above $US1.3 trillion. And yet, America continues to drown in debt with only modest efforts to reign in how much it puts towards guns, tanks and missiles. Now, being the world's superpower invariably comes with a large military budget and sure some cash can go missing. But in 2002, then Defence Secretary Donald Rumsfeld admitted that on some estimates the Pentagon had lost track of $US2.3 trillion in transactions and there was no way of ascertaining how the money was spent. How long will it be before the US really does something about its own military spending problems?
 For a complete graph and additional commentary, please see the article. There is no rational reason for such spending. So how does it happen? The answer is the same way we are stuck with collective bargaining and absurd public union wages and benefits. Let's compare. Public UnionsIn the case of public unions, union members lobby vociferously for untenable wages and benefit packages. Greedy politicians willing to accept bribes to get reelected, go along. On any threat of reduction in benefits, union organizers get out the vote with massive fear-mongering campaigns promising ruin if they do not get what they want. At election time unions donate massively to candidates willing to back union sponsored agenda. Over time, school boards, city halls, and legislative bodies in general get packed with politicians accepting bribes (campaign contributions) from the unions. WarmongersGreedy politicians willing to accept bribes to get reelected, support massive defense budgets. Defense contractors as well as those receiving handouts from defense contractors label anyone not in favor of wars and massive military spending as "soft on defense". With massive fearmongering campaigns, including pictures of nuclear bombs going off, those organizations are able to whip up public sentiment to do whatever they want, which essentially is to spend more on defense. Every soldier in another country is another soldier that needs to be equipped. At election time defense contractors donate massively to candidates willing to waste more money on needless wars that do not need to be fought. Over time, legislative bodies in general get packed with politicians accepting bribes (campaign contributions) from warmongers. Unfortunately, "compromise" is such that taxpayers get stuck with the worst of both. We have baseless wars and untenable defense spending. We also have untenable collective bargaining rules, untenable social handouts, and untenable union wages and benefits. General TermsIt's easy to generalize the above example. I received this email from reader "Kevin" after I wrote the above but before I posted it. Kevin had seen the union example above as I had used it previously. Kevin writes .... Hello Mish
Here is the corporate lobbyist problem in a nutshell:
Organizations of all types lobby vociferously for untenable subsidies and tax breaks. Greedy politicians willing to accept bribes to get reelected, go along. On any threat of reduction in subsidies or increase in taxes, the organizations get out the vote with massive fear-mongering campaigns promising ruin if they do not get what they want. At election time organizations donate massively to candidates willing to back their agenda. Over time, board of directors, city halls, and legislative bodies in general get packed with politicians accepting bribes (campaign contributions) from the organization.
Kevin had written "corporations" but I changed it to "organizations" to be more broad-based. The above describes quite nicely what happened with health care legislation and it sure helps explain earmarks as well. In case you missed it, please see Interactive Map Showing Where $130 Billion in Earmarks Went, by State, District, and Politician. The big problems are military spending, public unions, and entitlements. However, problems big and small are everywhere you look, and the process of buying votes and seeking special favors is generally smack in the midst of it all. Republicans keep campaigning for "small government". It certainly would be nice if they delivered for a change. Unfortunately, Republicans will not give in on military spending (nor will Obama quite sadly), and Democrats won't budge on entitlements. Compromise in D.C. most often means taxpayers get the worst of what each party has to offer. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List 
|
Postări
