On October 20, 2014, ECRI post on David Stockman’s Contra Corner:
According to the Fed’s triennial Survey of Consumer Finances, the top 10% of U.S. families are doing just fine, and those in the bottom fifth are essentially being kept afloat by transfer payments; but the inflation-adjusted median family income has shrunk by one-eighth since 2004. Quite simply, middle-class incomes are being gutted.
[C]iting that same survey, Ms. Yellen expressed concern about “lower-income families without assets” that “can end up, very suddenly, off the road.”
She therefore advised families to “take the small steps that over time can lead to the accumulation of considerable assets.” She did not, however, explain how they were to accumulate these assets, in light of falling incomes and zero interest rates.
This uncomfortable disconnect between theory and reality also came out during her Senate confirmation hearings last fall. Given the predicament of “the little person out there who is just trying to pay the bills and maybe put a buck away for retirement,” Ms. Yellen was asked to “explain to the senior citizen who is just hoping that CD will earn some money” the impact of “a policy that says, for as far as the eye can see … keep interest rates low.”
She replied: “I understand … that savers are hurt by this policy, [but] savers wear a lot of different hats… They may be retirees who are hoping to get part-time work in order to supplement their income.”
In essence, despite a zero interest rate policy that mainly helps the wealthy, struggling families with falling incomes ought to take steps to accumulate “considerable assets,” as retirees take part-time jobs to make ends meet. Let them eat cake, indeed.
To most Americans, whether low-income, working class, or middle-class––all living the condition of LACK of ownership of wealth-creating, income-producing capital assets––their ONLY source of income is a JOB, which for most people translates to “Just Over Broke.” How Janet Yellen expects ordinary people, who are without pre-existing wealth and inheritance and are capital-less or under-capitalized to accumulate enough savings to significantly invest and benefit from compound interest, shows how much she is out of touch with reality. If she expects Americans to gamble as “investors” in the casino stock market using 401(k) plans offered through their employment or purchase stock directly, history should have taught her that this is risky business.
Past savings, wether cash in a local bank or equities which can be pledge as security to secure loans to invest, is not a workable solution. This is especially true because tectonic shifts in the technologies of production will continue to destroy jobs and devalue the worth of labor––which is the ONLY means that ordinary Americans have to earn an income.
What is needed and necessary is a new policy direction specifically aimed at creating new capital owners simultaneously with the growth of the economy. The financial mechanisms used MUST NOT REQUIRE past savings and instead be available as a unique and exclusive opportunity for American citizens to access insured, interest-free capital loans for the specific purpose of acquiring newly issued full-dividend earnings payout stock in corporations growing our economy. In other words, we need to use a credit mechanism by which the loans are paid for with the future earnings generated by the creation of new capital assets, which result in products and services needed and wanted by Americans, which then further propels the economy’s growth. Such a policy program is what the Capital Homestead Act would achieve.
Janet Yellen, other Federal Reserve Board members, influential economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner. 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 Yellen 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.
The Federal Reserve needs to stop monetizing unproductive debt, and begin creating an asset-backed currency that could enable every child, woman and man to establish a Capital Homestead Account or “CHA” at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Steadily over time this will create a robust economy with millions of “customers with money” to purchase the products and services that are needed and wanted.
Our leaders need to put on the table for national discussion this SUPER-IRA idea and the necessary reform of our tax policies that would incentivize corporations to pay out fully their earnings in the form of dividend income and issue and sell new stock to grow. 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 with future marketable products 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 (ala the Federal Housing Administration concept), but would not require citizens to reduce their funds for consumption to purchase shares.
Essentially, the pressing need is for everyone in a position of influence to encourage President Obama to raise the consciousness of the American people by making his NUMBER ONE focus the introduction of a National Right To Capital Ownership Bill that restores the American dream of property ownership as a primary source of personal wealth.
This is the solution to America’s economic decline in wealth and income inequality, 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 and the platform of the Unite America Party is published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.
The Capital Homestead Act (http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/) would grow the U.S. economy faster in a non-inflationary way, create new private sector jobs, finance new productive capital and provide capital incomes for all Americans from the bottom-up by enabling them to own trillions annually in new capital formation and transfers in current assets . . . without taking private property rights away from billionaires and multi-millionaires over their existing assets.
