On March 5, 2013, Money News reports:
The Federal Reserve’s aggressive monetary stimulus will make it harder for the U.S. central bank to engineer a smooth retreat from its unconventional policies, a top Fed official said on Tuesday.
“I fear that small mistakes (could have) large consequences,” said Jeffrey Lacker, President of the Federal Reserve Bank of Richmond and an inflation hawk who has been skeptical of central bank bond buying.
In response to the financial crisis and deep recession of 2007-09, the Fed more than tripled the size of its balance sheet to around $3 trillion as it purchased Treasury and mortgage-backed securities in an effort to keep long-term interest rates low.
The central bank has made clear that juncture is not on the horizon for now. Indeed, the Fed continues to ease monetary policy with $85 billion monthly purchases of securities.
It has vowed to continue buying assets until there is substantial improvement in the outlook for jobs.
U.S. unemployment remains elevated at 7.9 percent while the economy, which stalled in the fourth quarter, is expected to expand around 2 percent this year, still too slow to make up ground lost during the worst recession in generations.
The Federal Reserve is engaged in un-productive activity. My colleague at the Center for Economic and Social Justice (www.cesj.org) has written an excellent summary of why the United States economy is in decline.
Lacking new investment opportunities, the rich put their money into existing equity: the stock market. Consequently, the rate of growth in the secondary, non-productive sector increases rapidly — as does the volatility of the market in response to massive infusions of cash unrelated to current production. Growth in the speculative, non-productive sector masks the lack of growth in the productive sector that ultimately supports the non-productive sector, as it did in 1873, 1893, 1929, and the present day.
Stock market speculation does not create jobs. Because new jobs are not created and the number of existing jobs shrinks, wage income declines. Dependent on the existing money supply and generally not having the capacity to create new money by offering bills backed by the present value of existing or future marketable goods and services that they produced or expect to produce, ordinary (non-rich) people have less money to spend.
Similarly, a flawed monetary and financial system combined with rapidly advancing technology causes a decline in the number of “quality” jobs due to technological unemployment. This is often masked by the creation of “lower quality” jobs as the value of labor falls relative to that of advancing technology.
Simply to generate some income, people become willing to take anything rather than not work at all. Raising wages of “lower quality” jobs artificially can reduce or eliminate this effect by making technology more attractive on the basis of cost. “Lower quality” jobs begin disappearing at a faster rate than “higher quality” jobs, as lower end wage workers usually have less job security than higher end wage workers.
The decline in consumption income as jobs disappear, or as “high quality” jobs are replaced with “lower quality” jobs creates the illusion of a “money famine,” or an insufficient money supply. The real problem, of course, is that people who can no longer be productive or as productive with their labor are not able to replace their lost productiveness (and thus their consumption income) by owning the machines that are displacing them.
The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Chairman Benjamin Bernanke and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.
Debt should be justified and incurred when the monies are pledge to stimulate FUTURE productive capital growth whereby the FUTRUE earnings will be first applied to the loan payback and then, once paid, fully paid out to the individual owners as personal income. In this way we can substantially grow the economy while simultaneously broadening private, individual ownership and creating “customers with money” to purchase the products and services the economy is capable of producing.
To achieve this FUTURE just economy, we need to reform the Federal Reserve Bank to create new owners of FUTURE productive capital investment in businesses simultaneously with the growth of the economy.
The solution to broadening private, individual ownership of America’s future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets. The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy. Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.
Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.
Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687
What America needs is an enormous investment stimulus to the economy, with the stipulation that corporations seeking to grow and benefit from the low-interest loans issue and sell new stock to be purchased by EVERY American using an insured pure credit loan and paid off with the FUTURE earnings of the investment.
The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to become a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.
A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.
The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today––management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The Federal Reserve Board is already empowered under Section 13 of the Federal Reserve Act to reform monetary policy to discourage non-productive uses of credit, to encourage accelerated rates of private sector growth, and to promote widespread individual access to productive credit as a fundamental right of citizenship. The Federal Reserve Board needs to re-activate its discount mechanism to encourage private sector growth linked to expanded capital ownership opportunities for all Americans.
If we continue with the past’s unworkable trickle-down economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.
There is a solution to America’s economic decline, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.
