Category Archives: Finance and Economics

Riding the Populist Wave

This, my latest article, points out that capitalists now admit that the system is “rigged” in their favor; it argues that Trump and Sanders represent two edges of the populist wave that is now dominating U.S. politics, that a Sanders win over Trump is entirely plausible, that the New Deal of FDR has  been systematically dismantled and needs to be reestablished, and that in the long run people will need to work together in communities to build systems and structures that can circumvent the rigged system.

Here is an excerpt, but I hope you’ll read the entire article.

There, the capitalists are admitting it–the system is rigged.

In his latest newsletter, financial advisor, John Mauldin, Co-Founder of Mauldin Economics, acknowledges that the system is rigged in favor of the wealthy and powerful, and against everyone else, including the shrinking middle-class. Mauldin says:

The “financialization” of the American economy has led to increasing income and wealth disparity. As much as it pains me to say it, the “system” really is rigged. Whatever the good intentions of the Federal Reserve in particular and the US government in general have been, it has distorted the economic feedback loops that balance a true market-based economic system. The fact is we already have “socialism” today. It’s not the socialism we feared in 1974. We have socialized the risks of capitalism, to the benefit of a small portion of the country, while a larger portion struggles.

So, Mauldin admits what has been obvious for a long time, that the U.S. economy is characterized by socialism for the rich ruling class, and dog-eat-dog competition for everyone else. He cites this fact as the main reason why political outsider Donald Trump was elected President in 2016 and why “socialist” Bernie Sanders might conceivably be elected President in 2020. I agree.

So, what do Trump and Sanders have in common?

As I see it, both are viewed by the electorate as “populist,” which ostensibly means anti-elite, Trump representing right-wing populism and Sanders left-wing populism. But, except for paying lip service to a plan to shift U.S. foreign policy away from the imperial belligerence of the deep state, Trump’s actions as President belie any anti-elite sentiment. In fact, it’s been quite the opposite.

What people want is something other than the globalist, interventionist, imperialist policies of the past several decades that have wasted enormous amounts of resources, killed hundreds of thousands of people, destroyed communities and nations, and caused political upheaval around the world. People want relief from the economic policies that have favored capital over labor by increasing capital mobility while shifting jobs from the U.S. to low wage countries especially in Asia, and at the same time reduced constraints on banks and corporations, enabling them to more fully exploit people and the environment.
More…

A version of the article was also published on Medium and republished at OpEd News.

The Economics of Peace, Justice and Sustainability

This video is based on a presentation I gave at the Economics of Peace Conference in Sonoma, California in October, 2009. My prescriptions for reclaiming the credit commons and creating a new “butterfly economy” remain completely relevant, and their implementation is becoming ever more urgent.

A PDF of the slide show can be downloaded here.

The Exchange Revolution

In November of 2009, I gave a presentation at the conference on Michigan’s Future Energy, Economy & Environment, at Crystal Mountain Resort in Thompsonville, Michigan. More than 10 years later, this presentation is still timely.

Ken Freeman has recently augmented and adapted recordings of that presentation to produce this new video, titled, Exchange Revolution, which has now been posted on our Beyond Money Podcast site. It is a comprehensive description of the what and how of transcending the political fiat money regime, and building a new equitable system of value exchange.

It can also be found on YouTube at https://youtu.be/MvTMcvVzNuQ. The transcript can be found here.

 

Spanish Edition of The End of Money and the Future of Civilization

I’ve waited ten years for it to happen but I’m delighted to announce that, thanks to the efforts of translator Enric Montesa and publisher Julio Fernández, my book, The End of Money and the Future of Civilization, is now available in Spanish. The Spanish language edition, titled El Fin del Dinero y el Futuro de la Civilización, can be ordered from the publisher, Ediciones Kaicron, at their website, https://www.kaicron.es/tienda/el-fin-del-dinero-y-el-futuro-de-la-civilizacion/.

The book will be introduced and discussed in Madrid this Friday (November 8) during a roundtable session, Money and Sustainability, at the four day event, Biocultura: La Revolución Ecológica (Bioculture: The Ecological Revolution).   

Is Capitalism about to crash?

Richard Wolff provides an insightful analysis and historical perspective on the present state of capitalism and democracy. Clearly, Franklin Roosevelt saved capitalism in the 1930s by yielding a bit to the masses’ demand for a share of the economic benefits. Will there be a repeat of that in the coming decade under the next President?

That is doubtful. Conditions today are much different than they were in the 1930s. Big government is no longer in vogue since governments have ceded most of their power to transnational corporations. People now are much more aware of the need for structural change in politics, economics and finance. The vogue today is decentralization of power and restoration of the commons.

I don’t know if Marx has any answers because I’ve never studied Marxist economics.

I am convinced of one thing however that no one else seems to recognize, that is the fundamental flaw in the global interest-based, debt-money, central banking regime. It is the “debt-growth imperative” that derives from the way banks create money by making loans that require the payment of interest. One need only look at the empirical evidence of global debt growth over time to see that it conforms to the exponential growth function of compound interest. Even the richest countries have exploding levels of sovereign debt because there are limits to how much debt the private sector can bear, so governments become the “borrower of last resort” to keep the money supply from collapsing. That’s the reason for bank bailouts and “quantitative easing.”

The fundamental need is for a deep restructuring of money, banking, and finance to decentralize control of credit and eliminate the “debt-growth imperative.” Such an idea may seem radical in the extreme and will not be welcomed by the powers that be, but alternative approaches are already in the works and will be ready to save the day when the capitalist train crashes off the rails.

Greece and the Global Debt Crisis

Greece and the Global Debt Crisis
Thomas H. Greco, Jr.

ABSTRACT

The Greek debt crisis is emblematic of a more general, decades-long pattern of economic exploitation and reactionary politics that threatens not only the European Union but the stability of the global financial infrastructure and Western democratic civilization. The situation calls for a different form of globalization, not one that is dominated by transnational banks and corporations, but one that is built upon local self-determination and self-reliance, and based on local and domestic control of money, credit, and finance. Greece (and other debtor countries) can recover a measure of sovereignty and rebuild its economy by combining “debt triage” with public and private actions for creating domestic liquidity.

            In the summer of 1977, I first ventured abroad from North America on a journey to explore ancient civilizations, cultures, and religions, and to experience contemporary life in Egypt, Israel, and Greece. During my six-week odyssey, I was able to visit the Pyramids, amble over the Holy Land, and visit the temple ruins of Athens and Delphi.

At one point while in Cairo I came upon a scene that greatly troubled me. There was a small burro hitched to an enormous cart that was laden to the hilt with onions. I felt nauseous as I watched the poor animal lying on its side being flogged by a man in a vain effort to rouse it to the task of moving what seemed to be an impossible load. As a stranger in a strange land, I felt helpless to intervene and quickly moved away. I often wonder what might have been the ultimate outcome, but in my imagination I see the man with the whip standing over the lifeless body of that animal lying in the street, and weeping in worry and frustration.

Now, when I contemplate Greece’s current predicament, that image comes to mind. I see Greece as that beaten and dying animal, overburdened with debt that is beyond its capacity to service, and being flogged by its creditors in a vain attempt to get it to pay up. In my mind’s eye I see a future in which the dead carcass of Greece is being carved up and distributed amongst the creditor institutions. In actuality, Greece will survive, but under new (foreign) management, as she is forced to sell off her assets at fire-sale prices.

In the eyes of the Germans and other creditors, represented by the so-called “troika” institutions (the European Commission, the European Central Bank, and the International Monetary Fund), the Greek people are lazy freeloaders who have been living “high on the hog” at their expense, and who now balk at repaying what they borrowed.

But there is another side to the story that paints a different picture, and even if there is a bit of truth in that characterization, what is there to be gained by creditors insisting upon their “pound of flesh”? As civilization has advanced, debtor prisons have been eliminated and bankruptcy laws have been instituted to protect people and companies from creditors who insist upon collecting more than debtors, for whatever reason, are able to pay. Why can’t nations be afforded the same considerations?

First of all, it was not the Greek people who did the borrowing, it was a series of Greek governments that were either corrupted, coerced, or seduced into taking on a series of debts that were increasingly burdensome. Greece was lured into the debt trap from which it seems impossible to escape. Ellen Brown has summarized in her article, The Greek Coup: Liquidity as a Weapon of Coercion, some of the many moves that were made to ensnare the Greek government, and by extension, the Greek people.  … more.

To read my prescriptions and the full article, click here. The article is excerpted from the book, Rebuilding after Collapse: Political Structures for Creative Response to the Ecological Crisis, edited by John Culp. –t.h.g.

I was right about “quantitative tightening”

I was right about “quantitative tightening”
by Thomas H. Greco, Jr.

Just about two years ago, someone sent me a link to an article titled, Why America’s Federal Reserve might make money disappear, that appeared in The Economist on April 17, 2017. The gist of the article was the predicted move by the Fed to unwind quantitative easing, that is, to sell off some of the securities that it bought in the wake of the 2008 financial crisis. The expansion of Fed holdings from the $850 billion it held just prior to the crisis, to the $4.5 trillion it held at the time the Economist article was written, was a desperate move that was taken to keep a flawed financial system from crashing down.

After I read that article, this is what I wrote to my correspondent on April 25, 2017:

Dear…,
Thanks for alerting me to that article in the Economist. Interesting.
The sub-head reads, “The Fed has signalled that it will soon reduce the size of its balance-sheet,” yet the article says nothing about how it signalled that move. It seems to be the author’s own speculation based on the Fed’s recent small interest rate increase. To wit, “Today, however, the Fed, now led by Janet Yellen (pictured), is raising short-term rates, as it tries to keep a lid on inflation. So—the logic goes—it should also shrink its balance-sheet, to push up long-term rates.”

You need to ask, why did the Fed load up on government bonds to begin with?

I am reminded of a story about a man who wanted to invest in the stock market. He opened an account with a broker who immediately steered him into some penny stock.

The dialog went something like this:
Broker: Welcome aboard. I can get you in on the ground floor of this new company. Their stock is really hot right now and it’s only four dollars a share.
Customer: Fine, buy me 1000 shares.

The next day the broker calls and says,
Broker: Hey, that stock is now up to eight dollars a share.
Customer: Wow, that’s great, buy me 2000 more shares.

A couple days later, the broker calls again and says,
Broker: Amazing, that stock is now up to 12 dollars a share.
Customer: Fantastic, sell all my shares.
Broker: To whom??

In other words, the Fed is locked in to their position, it’s a one way street and there’s no going back.

The answer is that there was not nearly enough available capital in private hands to fund the government budget deficits, at least not at interest rates that would not make the deficits even more gigantic than they have been.

As I’ve written in my books, there is a collusive arrangement between bankers and politicians that goes back more than 300 years. Governments get to spend more than their revenues, while banks get to lend money into circulation by making interest bearing loans. Yes, open market operations by the central banks do distort financial markets as QE critics claim, but that is the fundamental role of central banks, to manipulate financial markets. It’s the biggest scam in history. The central bank is the lender of last resort, and the government is the borrower of last resort to keep the money supply pumped up as bankers suck interest earnings into their capital account.

The Fed will be lucky to get away with small interest rate increases, but unloading their holdings of government bonds will not happen.

The entire article seems disingenuous, suggesting the possibility of actions that cannot be taken without severely unbalancing government budgets and contracting the money supply which will send the economy back into recession.

Real inflation rates are much greater than government figures indicate.  See the Chapwood index, http://www.chapwoodindex.com/, and Shadow Stats, http://www.shadowstats.com/alternate_data/inflation-charts.

Also, follow Chris Martenson, https://www.peakprosperity.com/.
This interview is particularly pertinent, Oil, Gold, & The Collapse of Central Banking ~ Interview with Chris Martenson.

Regards,
Thomas

Now, on March 20, 2019, this Bloomberg article, Powell Signals Prolonged Fed Pause as Inflation Lags, Risks Loom, acknowledged that the Fed has thrown in the towel on tightening, saying, “Federal Reserve Chairman Jerome Powell said interest rates could be on hold for “some time” as global risks weigh on the economic outlook and inflation remains muted. … Officials also decided to slow the drawdown of the U.S. central bank’s bond holdings starting in May, then end them in September. Together, the moves complete the Fed’s 2019 pivot away from policy tightening and toward a markedly cautious stance.”

Surprise, surprise!

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