On June 4, 2013, Richard (RJ) Eskow writes on The Huffington Post:
Tomorrow’s crisis is already making billions today for bankers and investors. But then, there’s almost no way for financiers to stop profiting from the next crisis under current conditions. The Federal Reserve and other central banks have flooded them with cheap money, making it inexpensive to borrow.
That was the right thing to do, but these low-cost loans should have come with strings, especially requirements that the money be used to provide consumers and small businesses with loans that could benefit the real-world economy in which most people live. Instead, as Prof. Kay points out,
“(T)he system is geared around trading profits, which are, in large part, money that is borrowed from the future. A crisis results from the moment at which this money has to be paid back.”
“Margin debt” – money which is borrowed to invest in markets – has soared to pre-crisis levels, according to the New York Stock Exchange. Stocks are running as far ahead of inflation expectations as they did in the run-up to the last two crises. And yet there is very little sign of dramatic improvement in traditional economic indicators such as employment or consumer confidence.
That has given us the “Truman Show” economy, with an artificial veneer of prosperity for the many – and great wealth for the few.
Prof. Kay says that he considers the Eurozone the likeliest spot for the next disaster. But wherever the spark is struck, disaster seems imminent. In the meantime, bankers are making enormous amounts of money with borrowed money … and on borrowed time.
To solve the debt problem permanently, it is essential to terminate monetization of government debt and increase the tax base by fostering productivity. We can duplicate the quantum leaps in productivity and real income we saw in 19th century America by making ownership of future private sector industrial and commercial capital open to everyone, without redistributing existing wealth.
A “Capital” or “Industrial” Homestead Act can be financed not by self-defeating and counterproductive redistribution of existing wealth, but by allowing anyone with a qualified and financially feasible capital project, whether agricultural, commercial, or industrial, to discount bills at local commercial banks for rediscount at the regional Federal Reserves. Replacing traditional forms of collateral with capital credit insurance and reinsurance, and bank reserves backed with government debt with reserves backed with private sector hard assets, would take away any justification for having an outstanding national debt of any size.
Unless you and I and every other human being with a desire to be someone and contribute to the betterment of society do something about it, disaster will be the reality of the FUTURE. It all comes down to what source of income will each of us gain access to and whether we will Own or Be Owned in the economic sense.
The statement “Own or Be Owned” suggests the two alternative worlds of the FUTURE. Today’s reality is that the average citizen does not own wealth-creating productive capital assets (as do the wealthy rich people in our society). To change one’s plight from that of capital-less or under-capitalized and solely dependent on a job or government welfare assistance in one form or another, citizens must share in the ownership of the money system. Most of you out there do not even know how money is created. Money is created when the Federal Reserve Bank (a central bank privately owned) loans it to banks that you have your checking account or meager savings account (if any) with, and the banks re-loan it multiple times because laws allow them to have a fraction of the amount on hand or in reserve in relation to the amount of loans they are allowed to make (fractional banking). This creates boom and bust cycles in the national economy, and empowers an elite few who really OWN America. With proposed Capital Homesteading, the Federal Reserve would loan money directly to citizens, who must put it in a personal special Super-IRA retirement account which would invest in dividend-paying stocks of corporations that use the money for productive, economy-growing purposes. This would empower all, instead of an elite few and eliminate fractional-reserve boom and bust. It would also provide for unlimited private sector growth, and eliminate the need for socialist welfare programs funded with tax extraction and national debt. This would back the currency with real products or goods and services and reduce the size and scope of government. As government becomes smaller because individual citizens are able to support themselves and their families living off dividend income and resulting REAL jobs, national debt would be retired and demand for taxes would shrink. The tax system would be changed to be far simpler, flatter, and fairer. And all of us would be on the path to prosperity, opportunity, and economic justice to pursue our personal desires and experiences as we become strongly independent and responsible.
The answers are to be found in the proposed Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm, and the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797
