Thoughts on the Federal Reserve.

 The One Thing I Wish People Would Really Understand

From an article from 2016 on the financial position of the United States in Wikipedia.  We find:

“The financial position of the United States includes assets of at least $269.6 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP)[a] as of Q1 2014.” 

I read it and said, “How does this make sense?  The opposite side of the coin that says debt, says asset.”  

To understand the Federal Reserve System one needs to understand that in creating money, i.e. the Flexible Currency discussed in the Act, they do not give it away but they lend it out.  If you ask why that is bad, it is bad because more is always owed than is created and lent out.  Let us make a spreadsheet to see how this works.  The following chart shows the growth of the money supply at 2% per year with an interest rate of 6%.

The first column is the Year, next is Money in Circulation, the third is Money Created, then Total Principle owed, and finally total  Principle + Interest

1 $100.00 $0.00 $0.00 $0.00

2 $102.00 $2.00 $2.00 $2.12

3 $104.04 $2.04 $4.04 $4.41

4 $106.12 $2.08 $6.12 $6.88

5 $108.24 $2.12 $8.24 $9.54

6 $110.41 $2.16 $10.41 $12.41

7 $112.62 $2.21 $12.62 $15.49

8 $114.87 $2.25 $14.87 $18.81

105 $784.18 $15.38 $684.18 $22,287.52

106 $799.87 $15.68 $699.87 $23,641.39

107 $815.86 $16.00 $715.86 $25,076.84

108 $832.18 $16.32 $732.18 $26,598.74

109 $848.83 $16.64 $748.83 $28,212.31

110 $865.80 $16.98 $765.80 $29,923.04

As you can see after the 110 years there is 39 times as much owed (principle and interest) as what was created.  Since the Federal Reserve counts how much money it has created and publishes it, it is $4 trillion , we would expect to owe $156 trillion today in principle and interest.

This simple calculation shows the power of compounded interest.  While I made all these numbers up it shows that the Wiki article may have some validity.  

Almost thirty years ago I had this discussion with an employee of the Federal Reserve.  When I pointed out that more money is always owed than is borrowed he told me, “As long as the Federal Reserve maintains the right amount and the right kind of money, the rest is just numbers.”

But that is not true.  When the Federal Reserve creates Federal Reserve notes they lend them to the member banks that mark up the interest rate and lend them to borrowers.  For every dollar of debt we owe, the Member Banks get a percentage of the interest.  It is why the financial industry in the United States earns over $3.5 Trillion dollars on $4 Trillion of Federal Reserve Notes.

Sen Rand Paul recently wrote an opinion piece about auditing the Federal Reserve.  I have read their website and the Federal Reserve is a Behemoth.  They are involved in thousands if not tens of thousands of different activities.  While I would bet just about anything there are no falsehoods in what they report, I would bet twice that much that there are no truths either.

But here is the deal, we don’t have to know how it works, like a person doesn’t have to know anything about automobiles to calculate the miles per gallon, the solution is straightforward.  The Nobel Prize winning economist Paul Krugman suggested it.  Well he suggested minting a Trillion-Dollar coin, but that is not how it would work.  How it would work is that the United States Government would pay its bills with checks redeemable for Genuine United States Dollars.

Thoughts on National Debt

 There is no cloud so dark or an economist so despicable that some light cannot be found.  I am referring to the Nobel Prize winning economist, Paul Krugman.  He suggested in 2013 that the United States should somehow create a Trillion-Dollar Coin.  Instead of a Trillion-Dollar Coin, a better strategy would be for the mint to just start printing Genuine United States Dollars.  

The Genuine United States Dollars (GUSD’s) would look identical to Federal Reserve Notes except at the top they would no longer have the flag declaring the bill worthless paper of the Federal Reserve.  The Federal Reserve Note being only backed up by the lies of corrupt and greedy banksters.  

The full faith and credit of the United States, along with it’s military, would back up the Genuine United States Dollars guaranteeing that they would be as good or better than gold.

Actually how it would work is that the United States Government would pay its obligations with checks that would be redeemable for Genuine United States Dollars.  They would be “cleared” by the Federal Reserve System and presented to the mint for Genuine United States Dollars at which time the mint would print up the necessary currency. 

But you ask, “What about inflation?”  The point is that the only difference between printing a trillion dollars of GUSD’s or printing the equivalent of Federal Reserve Notes is the fact that the Banksters get $30 to $50 billion per year (interest for ever) for the Federal Reserve Notes while the Genuine United States Dollars cost us nothing.  The amount of inflation would be exactly the same. The cost to the taxpayer would be a lot less. 

The Doomsday Material to be considered is the future of a people and their form of government; that they would rather trust evil greedy non-elected bankers with the management of the National Currency (and pay them $3 trillion per year in the bargain) than trust their democratically elected representatives.  What sick puppies we are.

Thoughts on AI

Forty years ago I took a course in graduate school titled, “Management of Management.”  My thesis advisor recommended it even though I was in the engineering school and the course was offered in the B-school. The subject of the course to paraphrase was; 

Because the purpose of education and training is to make stupid people look smart, it is in management’s interest to be able to differentiate between “smart” people from those who only “look” smart. 

The text we used was titled:  The Invisible War, Pursuing Self-Interests at Work by a couple of clowns from UCLA by the names of Samuel Culbert and John McDonough, published in 1980. The last time I looked you could buy a copy on-line for a penny and $3.99 shipping and handling.  I found it completely unreadable.  I still have my first edition, it is full of notes and where I had to diagramed sentences to try to figure out what the authors were trying to say.  

At almost the end of the semester, I was getting ready to go to work one morning, worrying about the grade I was going to get in a course without homework or tests.   As I looking into the mirror, I had the most horrifying and self-esteem destroying revelation (epiphany?) that I had become well trained and educated to such an extent that I could differentiate people who were smart from those who “looked” smart.  

Interacting with smart people lets me see texture, colors, and tone in a world I normally see as black, white, and shades of gray.  Dealing with stupid people who act smart is not nearly as good but if one is cognizant of their shortcomings that they only know or understand what they know or understand it is bearable.  They may have PHD’s, a blog, and be prolific writers but they bring nothing new to the world.  In the last twenty years or so, I have observed more and more stupid people who appear to be smart promoting stupid ideas and being unwilling or unable to change.  

Dealing with stupid people being stupid is the norm of our society, it provides full employment to our criminal justice and social welfare institutions.  It requires a sense of tolerance, patience, and cooperation because most of them think they are smart and become offended when you point out how really stupid they are.

While I am forced to agree with you on AI not being able to do original work, it can definitely do the work of the stupid trying to look smart.  Actually, it will do it better because the AI will have access to a much larger fund of ‘facts’.  Though on the other hand, because AI is just a stupid person who looks smart, who programs it (educates and trains) will determine what it knows and understands, but that is no different than what we have now.

 Of more interest the History Guy might have explained what was done to counter all the corruption.  

If he had we would know that the election in 2020 was the most corrupt and fraudulent since 1892.  From the 1890’s up until the election of 2020 the United States used a method of voting to protect its democracy known as the Australian Ballot.  The theory behind the Australian (secret) ballot is that it forestalls attempts to influence the voter by intimidation, blackmailing, and potential vote buying.  For the ballot to be anonymous the voter must be observed by the poll worker and the Parties’ representatives (if desired) to vote in the privacy of the voting booth.  It cannot be discretionary because the vote harvesters, ward heelers, and union bosses will coerce their subordinates to request “mail in ballots” if they are available so they can make sure they are filled out correctly.  

In the 2020 election the only votes we “know” are legitimate are the ones which were cast in person at the election booth observed to be legitimate by the poll worker and the Parties representatives.  All the others (46% of all votes cast in 2020) are at least “suspect” if not outright demonstrably fraudulent.  The reason you vote in a booth is not to keep your vote from the poll workers who don’t know you, it is to make sure your family, neighbors, co-workers, and bosses don’t know how you vote.  It allows you to vote your conscience and not what is publicly acceptable and do it without fear of retribution or being ‘cancelled’.  

In voting reform, I have nothing against a voting season where Election Day is the last day of the season.  With the precinct voter rolls being all on-line, I have no problem with out-of-precinct voting where the poll worker and the Party representatives can print out your precinct’s ballot as long as you vote inside a booth, on paper, observed to vote secretly.   I would not be against mobile voting stations going out to supermarkets and malls where people can vote, but the actual voting has to be done inside a booth observed to be secret.  If we don’t want to return to the corrupt voting processes of the 1800’s all mail-in and Internet voting must be eliminated. You must vote in person and be observed to vote privately. 

The Role of Government

A couple of years ago I was at the local Republican Party (Minnesota District 34) meeting and they had Dr. David Schultz of Hamline University as a guest speaker.  He lectured the audience on how bad a system the Constitution is for governing the country.  He called it “the machine”.  I tried to point out (if you think I am a bad writer, I am even worse as a speaker) that good or bad has to be judged in terms of purpose.  The Toyota Pries is as bad a dirt hauler as a Terex 6300 is as a commuter vehicle. But each may be perfectly acceptable for the role they were designed to fulfill.  Be that as it may, the point is what do YOU believe the role of government should be.

Many people; and I believe that Dr. Schultz is in this group, believe that the role of government is to make the lives of the country’s citizens safer, easier, and more egalitarian.  I call these people Type 1’s.  In February 2005, Richard Parker, a liberal economist, wrote an article in the Boston Globe titled, The Pragmatist and the Utopian, in which he blamed Milton Friedman and the free market advocates for every economic misfortune since the 70’s. Parker’s criticism is that in no way has the country achieved more equality, requires less effort, or is safer than it was 25 years ago.  In sociology there are two doctrines on how life can be made safer, easier and more egalitarian.  The first is Symbolic/Interaction, which states (you can google these for fuller explanations) that our institutions and culture form our attitudes and behaviors.  Only by changing the institutions of the poor and disadvantaged will they be able to prosper.  On the other side are the Structural/Functionalists who believe that we have free will and can be anything that we want.  That society is basically good and the problems are caused by deficiencies in the people not being able to adapt or dysfunctional consequences of government action.  The problem is with these goals themselves; each of these goals is reflected by a characteristic human value; egalitarianism is of course about irresponsibility (equality of outcome), lazy people think life should be easy, and safety is important to the cowards. Irresponsible, lazy and cowardice are the human values that are being aggrandized in this system.  I believe this desire for safer, easier, and egalitarian always leads to economic, moral (social), and spiritual bankruptcy. I addressed this belief here: Liberals are cowards, lazy, and irrespnsible.

The next group of people are those who believe that the role of government (they aspire to power) is to be able to reward themselves and their friends and punish their enemies.  I call these people Type 2’s.  Sociologists refer to this as Social Conflict. People who believe in social conflict believe there are poor people because there are rich people.  They believe that the immigrants and poor and downtrodden are holding us back, or else the banksters are stealing all our money.  The defining trait of people who believe in social conflict is that they are never at fault. It is Bush’s fault they say, or the weather, or the Republicans searching for scandal, or obstructing, or you can fill in the blanks.  No matter what happens or how bad it gets, they are always right.  These people not only include the corrupt and criminal dictators and tyrants enriching themselves and their friends but also the white supremacists, the black lives matter group, and the religious zealots attempting to bend humanity to their will.

The last group is a small minority who believe that the role of government is to: “Secure the blessings of Liberty to ourselves and our Posterity” I call these people “stupid”. This is “sort of” the Libertarian positions but like Christianity there are all kinds of people who call themselves Libertarian.  The point I would like to make to the Libertarians is that it is not about (as Richard Parker argued) making life easier, safer and more egalitarian.  It is the opposite.  Prosperity and wealth are created by what I call “work, worry, and woe”.  Anything people do to increase the safety, egalitarianism, or make life easier will make it less prosperous.  I mean, how do you explain to the ignorant and superstitious that the only way to make life better is to make it less safe, less easy, and less egalitarian?   People should ask, “Do I want to squat in a hovel where life is easy and everyone is safe and equal like in Zimbabwe, Cuba, or North Korea or would I rather live in a society of wealth and prosperity even though it is unsafe, unequal, and requires constant effort?  

To summarize for “Guest”, Visions for the role of government:
1. “Make life safer, easier, and more egalitarian”, Called Type 1’s.
2. “Reward the people in power and their allies”, Called Type 2’s.
3. “Secure the Blessings of Liberty for ourselves and our posterity”, while hard, unsafe and unequal produces prosperity, people who advocate this are called “Stupid”.

Since I am a cynic, I believe that the vast majority of people who claim to be Type 1’s are in reality Type 2’s.  The only two examples of Type 1’s I can identify right now are Kim Jong-un of Democratic People's Republic of Korea (DPRK) and the Castro brothers of the República de Cuba.  In both these countries the people are safe, life is easy, and definitely (in the vast majority) egalitarian.  They have good schools and equal medical care. There is very little crime or violence. The people eat healthy organic diets and neither country has significant obesity or type II diabetes.  Both are environmentally responsible with very small carbon footprints. They don’t have to worry about losing their jobs to bad times and big machines. They are perfect states of peace and tranquility.  They are the models that many in the United States hope we can emulate.  That point being made, I thank the god Jehovah every night that I live in a country that is governed by the corrupt, criminal, and crazy. My question for Dr. Murphy: What do you believe will be the role for government when Jesus takes his throne?  (See Matthew 25:21, Rev 3:21, Rev 4:2) How will he govern?

Freedom and Equality

For the past few years I have been concerned about the complaints of the main street media of the lack of "Equality" in the United States.  Milton Friedman in his book, Free To Choose" pointed out that individual freedom and liberty are on the opposite end of a spectrum from  equality.  (See pg 128 to 149 in the 1990 edition.)  Recently I was cleaning and sorting and found a copy of a letter I sent to Friedman about his premise.   

  

Don't you love the familiarity of the times, "Dear Milton" my ass.  

No typing in those days, I actually looked and I taught myself to type shortly after this was written.

It appears I use a "yellow dog" tablet.  The joys of being young!!!

Last summer I read “The Real History of the End of the World” by Sharan Newman.  Since Daniel and Revelations, apocalyptic predictions have proliferated.  What I find fascinating are the two competing apocalyptic visions presently in vogue. These, of course, are Climate Change and government fiscal budget austerity.  In the past two weeks Kelly has hit them both.  I find most startlingly is the culture war between conservatives and liberals in the defense of their own apocalyptic vision. (The United States is the only country peopled early on by heavily apocalyptic religious groups, and perhaps this permeates our culture more than we realize).  We have the climate Hoaxers and their Liberal allies screaming that if we don’t have energy austerity the seas will rise. polar bears and coral will die, and our children will all suffer a fate worse than death.  At the same time the “fresh water economists” and their conservative collaborators are warning us of the Bond vigilantes and unrestrained debt stealing our children’s future in a tsunami of inflation, bankruptcy and poverty.  These apocalyptic predictions are countered by the Climate Deniers and their friends the conservatives and the Liberal “salt water” economists and Paul Krugman.  The Deniers claim that even thought CO2 has been growing unchecked for the last ten years we have in fact been COOLING! I would point out that James Hansen has just published a paper claiming that if not for CO2 in the atmosphere, due to the solar cycle we are in, both the Thames River and the canals of Holland would be frozen this winter. (As if this would have been a good thing.)  At the same time, Paul Krugman points out that even thought the FED is holding at least $31 TRILLION in debt ($16 trillion private and $15 trillion Public, double of our GDP) to hold interest rates down, the bond vigilantes have yet to show up.  I would note they might be busy in Greece, Spain, and Italy and just not gotten to us yet. You admit to know nothing of science, the type of person we call “superstitious savages”, so how do you know which side to support?  Or do you just accept the incredible example of doublethink, where Paul Krugman tells us that the more educated the Republican the more ignorant they are and just take the opposite side.   I can’t resist, Paul Krugman points out the Real Expenditures have not increased due to the $1.2 Trillion stimulus and TARP spending vs. during the Reagan Recovery.  The reason is as Kelly pointed out; this administration’s goals are to support their core constituencies, at the head of the line are crony capitalists who receive subsidies and bailouts. Next are faculty and staff at colleges and non-profits that depend on government funding. Then come the unions This administration works solely for their own personal gain and to retain their power and prestige.