Economy Lynn Parramore Nomi Prins

You’re Living in a World Wrought by the Federal Reserve. Notice Anything Wrong?

In her new book, veteran Wall Street watcher and economist Nomi Prins warns that central bank strategies deployed since the financial crisis are destroying the real economy, worsening inequality, and creating societal chaos.
Kidfly182, CC BY-SA 4.0 https://creativecommons.org/licenses/by-sa/4.0, via Wikimedia Commons

By Lynn Paramore / Institute for New Economic Thinking

Ever wonder why it is that for most of the 21st century, no matter who is in the White House, no matter the state of the economy, and regardless of what ordinary people are suffering, money travels inexorably to the top?

If you find this baffling, you’re not alone. For many, it seems that the further we travel into this acutely challenging century, the political, economic, and social rules we thought we understood increasingly fail to apply.

Economist, journalist, and former Wall Street exec Nomi Prins is here to explain the inexplicable. Her latest book, Permanent Distortion: How the Financial Markets Abandoned the Real Economy Forever, is a highly readable and clear account of how the financial realm, with its central bank-fueled loose money and mega-wealthy financiers, has split off from the real economy, the place inhabited by regular working people who buy stuff and produce things.

The upshot: the people’s needs are increasingly ignored in favor of market demands.

Prins points to the 2008 financial crisis and the Federal Reserve’s response as the pivotal moment in which we jumped on a tiger that we can no longer seem to dismount. What was supposed to be an emergency response to a crisis ended up turning into an unstoppable addiction to cheap money which, Prins argues, initiated a vicious cycle of pumped-up financial markets, destabilizing inequality, a public left worse off, and a political system increasingly unable to make real progress on long-term priorities like climate change. She spoke to the Institute for New Economic Thinking about who is responsible, what the public needs to understand, and why this tiger will not take us anywhere we want to go.


Lynn Parramore: You’ve written several books about the U.S. economy and Wall Street. Why this new book, focusing on central banks and their influence? Why is this so important to understand now?

Nomi Prins: Since the financial crisis, one of the themes in my books is money and power. There’s a real thru-line from my 2009 book, It Takes a Pillage, which focuses on the financial crisis, to All the President’s Bankers (2014), where I go back into the history of American bankers and their political influence, on up through Collusion (2018), the global analysis of what happened from the financial crisis through the period before the pandemic.

That thru-line concerns this external body – the central banks – which can effectively manufacture money, and how this money, just by sheer mass momentum and the players involved, goes disproportionately to financial markets relative to the real economy. This activity, in fact, is detrimental to the relationship between markets and the real economy, and also to the real economy itself.

I wrote Permanent Distortion because to me, the distortion that money and power have created between markets and the real economy did in fact become permanent. It’s not just something we’re experiencing now, and then can we go back to a more glorious time when it wasn’t like this. It was around July 2020, when we were all locked down and not knowing what was going on with our lives, our personal economies, our health, and our families, when I realized that the Federal Reserve had doubled the size – or even more so — of its book of assets. It had created about $5 trillion worth of money in a very short period of time.

During that time, the markets went from being very afraid and down to being very, very high. A lot of people said, well, we’re all at home using Zoom, so therefore the market just rebounded by so much. But that was just a small part of it. The bigger part was that money became available at such an immense level and therefore the distortion between where money goes in the financial markets and where it doesn’t go in the real economy became permanent. At that moment I saw that this can happen in any amount, at any time. There’s no restriction, no transparency, no responsibility.

LP: You make a strong case that high finance has become unhinged from the economy, and you go so far as to say it has become disconnected from capitalism itself. What exactly does that mean?

NP: When I’m talking about capitalism in that sense, I’m connecting it to the idea of financial markets supposedly being created to aggregate money in order to then funnel it into companies, and therefore into projects, and on into the real economy.

So the idea, technically, from a capital market perspective, is that borrowing money in order to do something, or selling bonds in order to finance something, or selling shares in order to finance something, used to have a particular relationship to each other. If there was a transparent use for a company that had value to shareholders, they would be willing to effectively invest their money in order for that company to do what it does to grow whatever it’s growing. Part of that use could be profits, part could be wages, part could be cars. The point being that the relationship was more or less (though not always) transparent at a theoretical level.

But now there is more money being thrown into the markets from an outside source. It’s not money from the actual profits of a company or its long-term strategy, or the productivity of workers, or the creation of long-term things. You end up getting an unmooring between what markets are theoretically there to do in a capitalist society and from a capital-raising standpoint. There’s this other source that comes in and kind of turbo-boosts and distorts all of those relationships.

LP: You place the roots of this trouble in 2008, a year which, you point out, increased the power of central banks. Yet, Ben Bernanke, the very economist in charge of the Fed at that time, just won the Nobel Prize. As some have pointed out, we are living in the world he created, and many hail him as the guy who prevented the second Great Depression. How did he contribute to the alarming picture you paint of an economic system gone off the rails?

NP: I thought the Nobel Prize for Bernanke was a bizarre choice, although it made sense if you believed the narrative that attributed to him the power to save the economy. And he also happened to have written a lot of things historically about depressions. But if you actually dig into both what he did and what he wrote to win that Nobel Prize, you find a concerning story. To understand it, you have to go back to before the crisis was apparent to everyone — both during the Great Depression and during the 2008 financial crisis.

Back before it became apparent that a financial crisis was happening, there was an immense amount of leverage in the banking system over which Bernanke had a responsibility to regulate. There was also an immense amount of assets being created off the back of a very small amount of interest coming in from subprime loans. Those subprime loans themselves had issues, and Bernanke knew it because the banks knew about the interest payments, and their rising delinquencies, and defaults. A small amount of subprime loans were structured to feed into a large amount of other assets by said banks. As this was happening, either he didn’t want to pay attention or he thought looming problems would just go away as many banks did. But Bernanke had information from the banking system in his position at the top of the Fed and certainly through his connection to the New York Fed. He was deeply connected to those banks and their liquidity and rising delinquency and default problems and he just chose to say that everything was effectively fine.

He did that even before the crisis became apparent. Then, in 2007, when things were absolutely crumbling and even the shares of real estate developers were plummeting, when there was so much information all over the place and reports from the FBI were going into the Fed telling them there were issues, what did Bernanke do? He did nothing.

So when the crisis did occur, Bernanke ultimately used the tool of quantitative easing, which is basically creating electronic money in return for taking out that debt from the market and putting it on the Fed’s books for safekeeping. He put it there and most of it stayed there. Later it manifested a larger crisis, or a looming crisis, by injecting all that money into the market on the auspices of saving the real economy.

What actually happened was the markets rose precipitously over all of the ensuing years. There’s one or two years where they wobbled a bit, but, in all the period of time during Bernanke’s chairmanship of the Fed, the real economy stumbled. To me, the narrative that he saved things from being worse is a false one. Yet that narrative was perpetuated and is still believed today by the majority of people who care to think about it, like the Nobel Committee, apparently.

And what about Bernanke’s writing on the Great Depression that he had done back in the day – as supposedly the main reason he got this prize? Well, he’s had an aura of having such great knowledge of the Great Depression. He was the man who wasn’t going to let it happen again. Yet he forgot, or didn’t recognize, that one of the reasons the central bank did what it did from 1929 to 1931, a time when many banks collapsed, is that there was a housing bubble. There was also overleverage and a situation where Wall Street banks had been doing nefarious things with money. So one of the reasons that the crash happened and so many banks went under afterward was because of what happened before. The banks had become over-extended, over-leveraged and Fed wasn’t paying attention at the time.

Bernanke didn’t write about this. He wrote about what happened when the Fed tightened too much too quickly and caused another leg of the Great Depression. That strategy was something he wasn’t going to have happen on his watch, but he forgot or didn’t pay attention to anything that had actually caused the crisis, to what led to Great Depression. He showed the same blind spot in his approach to the financial crisis. To me, that’s like two negatives, two false narratives. The consistency in those two false narratives is that they are both related to over-leverage in the housing market, to Wall Street taking advantage of it, and to the Fed not doing anything.

LP: Let’s talk for a moment about economists and economic advisers that influence our political system. What can you tell us about their relationship to power? Does it cause them to have these blind spots?

NP: The National Economic Council is generally made up of senior business leaders and bankers with current jobs, so a lot of them tend to lobby for certain policies that benefit them. In this last go-round, there’s been an oddly exorbitant amount of lobbying to the Fed directly. There are about 120 different lobby groups that lobby the Fed directly, even beyond lobbying respective politicians and on behalf of respective companies or sectors! So “the economy” is really convenient as a funnel for any policy that has to do with money going in and out of anywhere. If policies are being formulated or explained by self-interested people or people that work for self-interested companies or parties, then they’re going to be skewed toward those people or companies. You don’t have Joe the Plumber hanging out in the middle of the Economic Council saying well, here’s what’s going on with my building and my house, now what are you going to do about those? That’s not how it’s structured. It ensures a very top-heavy approach to economics.

Take, for example, how the Fed views statistics, such as employment numbers, when it’s thinking about inflation or raising rates so quickly, which is really constraining to people on an actual budget facing other inflationary pressures, and, by the way, not actually doing anything about inflation. They’ve got the Executive Survey and the Household Survey. The Executive Survey counts every single job somebody has as a job in the economy, even if it’s the same person, whereas the Household Survey only counts one job per human. So those numbers are disparate. There’s a lot that can be interpreted in different ways and the framework has been formulated, generally, by economists who accept certain narratives, who tend to confirm or to say what needs to be confirmed or said to keep the status quo. They’re the ones that remain in those advisory positions. You do get people who might try to push the envelope a bit in terms of definitions and policies, but they don’t tend to stay around.

LP: You note in your book that our whole society has become alarmingly top-heavy due to these top-heavy approaches. I was struck by the statistic that in a single year of the pandemic, 2020, there were 500 new billionaires created, just as regular people were losing their jobs, losing their health, and many were losing their lives.

NP: Yes, that statistic gets people’s attention. My other favorite is from the 2022 Oxfam report, which says that the top 10 billionaires were making $15,000 per second. When I do talks on the book, I make everybody imagine that, to think about the speed of what’s going on here. It’s because those billionaires are invested in markets that their wealth is propelling up so much. All the speculation, though, is driven by this excess amount of available money, by what the Fed has done.

LP: You refer to this as wealth accumulation without accountability. In what sense?

NP: If you’re participating in a market that’s going up, obviously the more you’re participating, whether as the head of a company that has options for stocks, or as an investor, or as the retail person who is placing just the little bit they have on it, then you’re going to benefit from that proportion of upside because you’re in it. If you’re not in it, you’re not going to benefit from the upside. That’s just the math.

What we’ve seen is actually more money created than what was sensibly needed to save the economy, and it’s obviously not going into the real economy. I’ve gone through the stats of the Fed’s books related to the $600 stimulus payments, the extra unemployment insurance, and even the PPP loans. The remaining money was leveraged into the financial system. What was on offer to the markets from the Fed dwarfs what actually went into the pockets of real people in the real economy.

As a result, the money just tsunamied upward in a very short period of time. That money unmoored from the real economy and did nothing for it. There were a lot of narratives flying around and guesswork on why the markets ballooned so quickly. What you didn’t have to guess was that trillions of dollars were created, not just by the US central bank, but by central banks around the world. And this was accumulated into the financial system and financial markets.

LP: How does this distortion impact our ability to confront long-term challenges, such as climate change?

NP: This goes back to the question of accountability. If money is being drawn into one place or one set of financial assets, the financial markets, it doesn’t go into preserving the social contracts or the Main Street economy or the fractures in Main Street economics. I think that as a result, government leaders of both parties get lazy about pushing through longer-term strategies. Because there is this external force of money, it distorts all of the decisions. Parties argue back and forth about where money should go where and so forth, but it distorts all that just that much further because of the ease with which money can be created and multiply and go elsewhere. The idea of long-term strategies, like fighting climate change, suffer.

Yes, we recently had a bipartisan infrastructure act passed, and that was positive (though it’s taking quite some time to actually agree on where that money’s going to go). But going back to what capitalism could be, what if that money that went to financial markets had gone to directly build solar or wind energy? Or the electrification of manufacturing plants? Or water purification?

If it could have gone to these areas more quickly, then you would see more of a shift. The pace of getting what’s needed to fight climate change would be faster if it weren’t way easier for money to flit about, especially when created in abundance, into areas where it can just multiply itself more easily rather than in awaiting to build a whole new production center and or new energy strategy. The fact that money can multiply so quickly in the markets makes it harder for it to stick around in one of those lasting areas —to build necessary, physical things, like new or upgraded power mechanisms.

LP: You write about developments in cryptocurrencies and the metaverse as responses to this distorted situation. How do you see them evolving in relation to it?

NP: When I wrote about crypto, I also wrote about decentralized finance. They’re not necessarily the same thing, though they do share commonalities in that Bitcoin, for example, was created off of blockchain technology, which has been around for decades. But let’s just focus on the fact that crypto grew exponentially in the wake of the financial crisis. That’s when the famous Bitcoin white paper came out. That’s when the idea of fighting against the bailing out of banks spurred this vision of having some way of financing, borrowing, lending, and keeping money outside of the auspices of the more centralized financial system, which had shown itself to be a) reliant on the Fed and the government and b) not particularly stable.

Even though we’ve got, obviously, centuries of the establishment of different currencies, including the dollar (with the dollar becoming stronger and the reserve currency in the last century), the idea that something else can compete on a currency basis, or at least be another avenue if it were to be regulated and safer, was a direct result of what happened and how it was handled by central banks in the wake of the financial crisis. It’s also why that idea grew exponentially again in the wake of the pandemic, when the same things happened. Instead of saving the economy by saving Wall Street, the idea was that the Fed was saving the economy by — we don’t even know what — but ultimately money gushed into the markets again. That was one thing. But the decentralized aspect of it is also an interesting area of transformation and will be for some time — the idea of using technology to do financial transactions of all kinds away from the auspices of your Chase account or your Bank of America account.

In terms of the metaverse, I’m not talking about gaming and that type of thing, but of using technology to share, more directly, things like medical treatments or surgery secrets or what have you, across countries without everybody physically being in the same place, or engineering techniques that can allow easier fabrication of potential problems in new bridges that could be ironed out before the bridge is actually built or engineered so that you have more efficiency in the use of material. This is about pushing technology into something helpful for the building of real things and the creation of better and healthier lives for people through the auspices of virtual reality techniques.

LP: Some of that sounds hopeful, yet you use the word “permanent” in the title of your book. It sounds like we have no way of correcting this distortion between the financial markets and the real economy.

NP: I chose the term “permanent” specifically. It’s a big word. Given what happened in the wake of the pandemic and the fact that central banks could create so much money so quickly facing a crisis showed me that this can happen again and again. Not necessarily that big of an amount for that big of a crisis, but that we would have this unhinged, uncapped, untransparent process that can occur repeatedly.

Since I wrote the book, we have this high inflationary environment. The Fed is raising rates quickly, as are other central banks around the world. I think that’s creating a looming debt crisis for consumers, in particular, in the process, with the cost of money becoming so high for them so quickly. We’re starting to see delinquencies, defaults, and other problems arising as a result.

But be that as it may, in the U.K, the Bank of England, when faced with a pension crisis recently, was “forced” — as described by articles associated with it — but actually chose to create 60 billion pounds worth of money in order to buy gilts [the equivalent of U.S. Treasury securities] and to give a bid to the gilt market to raise the level of gilts. They chose to do that because gilts were declining precipitously and over-leveraged by a contingent of the pension fund community. The idea was that, as with any pension fund, you invest and the return that you get on that investment is part of what the pensioners needing to draw on their pensions get. But when there’s too much borrowing or there’s too much of a depreciation in the assets, then there’s a problem. You can’t pay what is owed to the pensioners.

That’s what happened in the U.K. As a result, the central bank is still raising rates – tightening policy — and on the other hand, they’re creating more money — loosening policy — in order to buy those gilts. I think we’re going to continue to see these types of situations. That’s what I mean by permanent. There’s always going to be this possibility of money coming into some part of the market when it needs it because (particularly in developed countries) central banks can do that.

How do we get out of it? We can’t. First of all, it’s important to note that this is happening and not to accept false narratives, like the story that a host of $600 stimulus checks paid out two years ago is causing inflation today. That’s just really annoying and stupid. We need to understand that the Fed didn’t inflate money in order to pay people those $600 checks or help fund the PPP loans and whatever else was going on at the time. That’s not what’s causing our inflation. There’s a bigger picture. One of the things I think we can do is literally ask ourselves the question, do you think that this monetary body in Washington has the ability to do anything that can actually make my electricity bills go down by virtue of raising the cost of my credit card debt or my personal loans or my mortgage? The answer should be no. We need to understand and think about these relationships so that at least we don’t accept what’s false and we don’t become blind, to what’s going on. The public needs to know this. Congress should know this. That’s what I hope my book can do: educate people.


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Lynn Parramore
Lynn Parramore

Lynn Parramore is Senior Research Analyst at the Institute for New Economic Thinking. A cultural theorist who studies the intersection of culture and economics, she is Contributing Editor at AlterNet, where she received the Bill Moyers/Schumann Foundation fellowship in journalism for 2012. She is also a frequent contributor to Reuters, Al Jazeera, Salon, Huffington Post, and other outlets. Her first book of cultural history, Reading the Sphinx (Palgrave Macmillan) was named a “Notable Scholarly Book for 2008” by the Chronicle of Higher Education. A web entrepreneur, Parramore is co-founder of the Next New Deal (formerly New Deal 2.0) blog of the Roosevelt Institute, where she served as media fellow from 2009-2011, and she is also co-founder of Recessionwire.com, and founding editor of IgoUgo.com. Parramore received her doctorate from New York University in 2007. She has taught writing and semiotics at NYU and has collaborated with some of the country’s leading economists her ebooks, including “Corporations for the 99%” with William Lazonick and “New Economic Visions” with Gar Alperovitz. In 2011, she co-edited a key documentary book on the Occupy movement: The 99%: How the Occupy Movement is Changing America.

18 comments

  1. I pray night & day that leftist leaning economists will realize that the real value and mission of the USD is to support debt-free economic trades within eCommerce transactions that now take place in a digital application.

    Without real-time value measuring (pricing) capability in support of debt-free trade, liquidity and market balancing would always be hampered. Congruence with economic reality is unyielding in economic law where it’s self evident to clearly see that an economy is a real-time event ! It always has been ! We are either congruent with this reality or we are dysfunctional. It explain much about our past.

    Considering that real-time pricing and real-time transactions are practical functions of the information age, I think it’s very safe to say that we could never pour new wine into an old wineskin. Everything has its time.

    Debt-free consumer driven transactions are now being conducted by grass roots consumers who now efficiently monetize their own personal sovereign gold and silver as debt-free mass based medium with real-time market based pricing by agreement.

    Thank God for the latest incarnation of the USD (1971) and thank God for its fully scalable property as price measure for gold.

  2. Not a very helpful article and the author seems to miss the point completely.
    Virtually ALL money created and injected into the economy is through commercial bank lending. This alone is a hard enough concept for citizens to understand, yet Prinz focuses on the Fed instead.

    Since the 1920’s and before, leading monetary economists ( Simons, Soddy, Fisher, Knight, Minsky, Friedman and 100’s more) have understood and warned about the dangers of our bank based money system. Money is created first for those who have the access to loans, the “creditworthy”. The obvious wealth inequality follows.
    Government is forced to borrow what is ostensibly its own money!

    This entrenched bank-created money process existed long before the Fed. The Fed was developed by bankers and for bankers to essentially save the banking industry from itself. This bank-money process was breached momentarily in the 1860’s by the Lincoln administration. Banks refused to lend to the government, charging exorbitant rates. Through the creation of “US Notes” (not Federal Reserve Notes) known as the Greenback – money was created directly by the Treasury for government spending. It allowed the Union to prevail. The banking industry put a stop to that competition in the 1870s by ending the creation of Greenbacks. Nevertheless, it led to the Greenback and the later Populist movements of the late 1800s. The pressure of the money-power, as usual, prevailed.

    Today there is an international movement to end the process where banks create money to lend, out of thin air, to collect the profits in the form of interest. Let banks instead lend existing investor’s and saver’s money as most people mistakenly believe they do now. End government borrowing and let our taxes and supplemental government money creation provide for the citizens. Dennis Kucinich and John Conyers in 2011 introduced a bill to do just that.
    https://www.congress.gov/112/bills/hr2990/BILLS-112hr2990ih.pdf
    And revisions to modernize are in the works.
    http://www.monetaryalliance.org

  3. All of what Ms. Prins says is well taken. However, no economist is analyzing things from the paradigmatic level that is, finding the single new operant concept which strategically applied changes the entire pattern of money and as money is an integral part of the economy the nature of the economy as a whole.

    All of the leading reformers such as Naomi, Steve Keen, Michael Hudson, MMTers, UBI and Ellen Brown have the problematic area well surrounded. That area is money, debt and banks. And they all want the same things, more money in the economy that builds investment and actual production without causing inflation. And ironically there is a single policy that will empirically enable this because it is the very temporal universe expression of the new monetary and financial paradigm. (Not to worry, there’s an entire policy and regulatory program that will also guide and stabilize the entire system.) And here is the new monetary and financial paradigm concept and that policy: Direct and Reciprocal Monetary Gifting, Monetary Gifting for short, and the policy is a 50% Discount at retail sale every cent of which discount is rebated back to the merchant granting it to the consumer by the monetary authority mandated to do so.

    So what does this policy do? Well, immediately it ends any possibility of inflation because $4.66/gal. gas now costs the consumer only $2.33/gal. but the gas company still gets their $4.66/gal. full price with the rebate aspect of the policy. As retail sale is universally participated in the policy has macro-economic effect. It also simultaneously doubles everyone’s purchasing power and so potentially doubles the demand for every enterprise’s goods and services which highlights another one of its authentic paradigmatic signatures in that it integrates the self interests of traditionally opposed constituencies, in this case the consumer and merchant. Lots of other policies, benefits, carrots and sticks in the full paradigmatic program.

    1. As long as there is commodity production you can not abolish money – the general equivalent. [Karl Marx in refuting Proudhon].
      ‘Monetary Gifting’ is basically credit, it does not change a thing. Besides it is fundamentally wrong in assuming economics run only on exchange value based markets. Initially you need to create money to pay for prices of production and to take it to the market, then you need to create the same amount to enable the merchant to buy the commodity. The consumer pays for it out of his wages (=part f price of production). No matter how you distribute the circulating capital among market participants you end up at least creating twice the amount of money of the commodity’s worth. This cycle starts again anytime an additional commodity is produced. All it does is creating sort of ‘fictitious capital’ in fiat, since here is no commodity equivalent for the surplus capital . Aside from being fundamentally wrong in the approach it is creating credit, regardless if it is formally debt or ‘purchasing power in money form’ . I get totally lost with the notion that this would not be inflationary……

      1. “‘Monetary Gifting’ is basically credit, it does not change a thing.”
        It is credit as in a gift of money…which changes the current monopolistic paradigm for the creation and distribution of new money…of Debt ONLY.

        “Besides it is fundamentally wrong in assuming economics run only on exchange value based markets. ”
        I never said economics run ONLY on exchange value based markets. It is however a very important and basic aspect of the economy, and the current monetary paradigm IS the biggest problem afflicting modern economies.

        “I get totally lost with the notion that this would not be inflationary…… ”
        The several sentences before this are flimsy theoretics and not very accurate IMO. My response to the quoted statement is simply: Look at the point of retail sale and suspend any abstract theoretics while doing so, and then do the math. Retail sale’s significance is that 1) it is the terminal summing point of all costs and so price including profit or not profit, 2) the terminal ending point of the entire economic/productive process where production exits the economy and becomes consumption, 3) the terminal expression point for all economic factors, in this case specifically inflation, and 4) it is universally participated in by every individual economic agent giving a policy at that point macro-economic effect.

        We’ve never had 50% inflation y/o/y and hyperinflations are very rare, require several preceeding disastrous circumstances like going to war, losing the war and having the winners impose onerous debts on you and finally having the private banking system leverage up currency speculators who short the currency which is what actually initiates a hyper state. Hence every hyperinflation can easily be avoided…if you impose rational restraints on Finance.

        Just do the math. Today I pay $4.55/gal. for regular gas. Tomorrow with a 50% Discount/Rebate policy at retail sale I only pay $2.28/gal. Explain to me how that is going to be inflationary???

  4. Having been around long enough for the tires to bald, I wouldn’t call this living. Quite possibly for the majority of the US’ public, this ‘living’ amounts to nothing more than the lower portion of the base of Maslow’s hierarchy of needs (an inadequate blending of physiological and safety needs.) As long as you have ‘faith’ in what the Fed fabricates, Fiat continues to have perceived value—in the ‘good old’ USA. Is ‘living’ in the U.S. really living; Or are we just commodities to be manipulated, exploited, and abused? Hell, is living in the U.S. a ‘real’ experience, or are we living in an artificial existence? Speaking of artificial, who sets insurance rates? Are rates based on validity or subjective collusion? Why don’t Americans have free education and healthcare (most other ‘advanced’ countries do?) Couldn’t the Fed just push a numeric key, followed with discretionary zeros, to pay for education and healthcare for all? I know: how are we going to pay for it; well, how did the U.S. pay for its $8T post-9/11 war on terror? https://www.brown.edu/news/2021-09-01/costsofwar

    1. No – the Fed can’t do that. The Fed was created by bankers for bankers. The only tool they have is to create reserve balances to grease the wheels of the payment system and indirectly impact interest rates for loans to the creditworthy. The Fed should never be given the power to do that anyway – that power belongs to the citizens.

  5. I often wonder if the more fortunate, the “working class,” have any cognizance today of the millions left jobless, many with $0 incomes. I suppose if they notice the obviously-poor at all, they brush it off as a “lifestyle choice,” or deserved suffering for the “crime” of being left jobless. I don’t know. By now, I’m convinced that there’s no way to change course, to restore “human” status to our surplus population, the jobless poor.

  6. Nobody among so called reformers nostalgic for long lost prosperity of American people during Cold War dares to tell the truth that it was not capitalism but nearly complete abandoning of capitalism in 1950s and 1960s facing ideological war with Soviet Union that brought American prosperity by means of imposing total economic command and control structure of governance of capital investments. Principles of equality, equity and egalitarianism if not implemented were at least given a forum and social value as was taxing rich at 90% rate.

    It was not finance capitalism that was fixed in those “glory” days to better serve peoples’ economy but it was socialist type long term corporate planning driven by specific. government policies mostly financed by government, anti-usury laws and aggressive taxing profits with surplus value to be channeled, instead of to elites to speculate with, directly toward Human (decent jobs) and material resource capital investments with no or minimal involvement of financial institutions.

    The dominant today financial institutions in. 1950s accounted in US for just few percent of GDP mostly serving big corporations around which corporate controlled B2B small business contractors’ market was developed pretending to be free enterprise market for propaganda reasons.

    Ford alone had 600,000+ small business often mom and pap type outfits in 1950s and 60s. That was a way to spread government and corporate capital among cash only, low debt mainstream local economy and we the little people to live of. Together plentiful jobs with GI bill, massive federal and state university grants as well as dramatically lowering or abolition of tuition fees in major state owned university systems like UC in California were an engine producing middle class in US.

    The capitalism was not applied to get those positive results, instead capitalism had to be completely denied to achieve them. The control over capital distribution was held not by corporate shareholders and managers but was in few hands of National policy makers who as a part of ideological confrontation with Soviets wanted Americans to live better even if it interfered with fundamental canons of capitalism like maximizing profits, externalization of costs and unfettered accumulation and concentration of capital.

    In financial realm not rules of finance capitalism but strict government social policies made sure that people’s savings were protected and not gambled away and that banks did not gain monopoly power in local mainstream markets. It was achieved by chartering US postal bank and state chartered public banks that provided low cost competition.

    The robust welfare state and government supported unions provided protection for workers.

    The dismantled 22 years ago Glass-Steagall and anti usury laws did the job of in large part protecting ordinary peoples from evils of everyday ordinary predatory finance capitalism.

    Pure finance Capitalism was back then criminalized outsourced to mafia connected loan shark noir characters standing on dark street corners where they belong. Today those same criminals run Wall Street, Washington DC and Silicon Valley.

    But still this middle class “paradise” of 1950s-60s did not last and ugly head of capitalism rose again as soon as existential threat to system of market capitalism itself from Soviet Union socialist ideology and revolution threat eased.

    The pro middle class reforms were step by step abandoned as no longer necessary for survival of capitalist elites. Taxes for rich were lowered, capital and currency controls removed, public banking dismantled, public funds privatized, public borrowing/debt greatly increased, big corporations/private funds funded government budget deficits grew fostering government dependency of private and public equity capital.

    The accumulated and concentrated capital unleashed its monopoly drive and its control over government and its institutions. As a result congress previously passed laws restricting capitalism were rescinded or circumvented by new legislations and by that destruction of pro middle class polices accelerated.

    Today finance capitalism is free, in full swing while American middle class is dead. Anybody who in principle support capitalism should stop complaining as he is living in capitalism, paradise and in human nightmare as both are synonymous.

    Any reform short of abolishing socioeconomic system of capitalism would make no difference to peoples who work for living as capitalism simply means rule of capital while any consideration of Fundamental needs of entire society and fate of all the people is rescinded.

    Many libertarians who complain about monopoly global capitalism of today must realize that historically monopoly it is not abomination of capitalism but result of its natural evolution stemming from systemic promotion of unlimited capital accumulation and concentration of capital in few private hands via means of unfettered competition.

    Historically it were repeated social Revolutions that acted to disperse capital among society only to return capitalism back in matter of decades into its final state of natural monopoly already Adam Smith and Marx knew.

    So let’s not fool ourselves, anybody who advocates sham of economic/financial reform of finance capitalism doomed to be defeated by concentrated capital are promoting their own narrow agendas of phony Revolution that serves own benefit alone leaving the rest in a rot as they were before.

    Such social de cohesion, lack of solidarity and empathy toward fate of others is a result of brainwashed capitalist mind most so called liberals possess and are imprisoned in.

    No reforms would work as long as capitalism is left intact meaning rule of capital and commodity exchange markets, legality of exploitation, alienation of labor, legality of production and accumulation of surplus value, centralization of capital , legality of profit and usury of speculative financial capital formed from socially destructive arbitrary individual or narrow production decisions, etc.,

    Such capitalism whitewashing positions today represent perverted marriage of leftists and libertarians.

    Moreover, imposition of artificial individualism of economic decisions that must be inherently collective based on community consensus, legalization of always destructive socioeconomic competition or allowing individual failures of human endeavor which are always damaging to society at large and most of all legality of property and individual ownership of means of production and many other features of capitalism preclude any socioeconomically stable society regardless of role of money which always was used as most effective tool of looting, parasitic appropriation of forcefully alienated labor but not required in capitalism.

    Capitalist socioeconomic system is not aimed at producing goods to satisfy human needs but via private or state capital accumulation to economically and hence politically control population by groups of elitists, like energy elitists or food elitists, media elitists and political elitists etc.,local or global.

    Also the system effectively produces social outcomes of small or large scale inequality, inequity and elitarianism that is the core of people’s social misery, suffering which is the real product of capitalism as a social system where social relations and human bonds are negotiated by power, dominance and/or money. Selfless Caring and sharing are condemned, taxed and delegalized.

    Not many know in the west that their perceived wrongly past prosperity considered a “proof” of viability of capitalism like in US or Scandinavia 1950s-70s was paid by blood sweat and tears of countless of millions of enslaved somewhere else out of sight and mind of millions of mindless western ignorants who thanked non existent human face of capitalism for it.

    Not a cent of profits were ever shared by capitalists even in days of so called western prosperity, none. What western societies were allowed to consume in those “good days” was blood, sweat and tears from Soylent Green of humanity at large in the so called third world.

    What we need is socioeconomically and environmentally, self sustainable, democratically self-governed by consensus equal, equitable and egalitarian society of caring and sharing aimed at one thing alone to satisfy basic human needs of healthy food, safe shelter, companionship and opportunity to create what people need.

    1. I don’t have any problem with you’re critique of finance and capitalism. I don’t think that socialism, real socialism, that is government ownership of production is the answer though either. The capitalism/socialism duality is a false one and misses the core of the core problem which again is the monetary and financial paradigm. Paradigm changes are permanent while reforms are either palliative or immediately ineffective. That is why we need a paradigm/ENTIRE PATTERN change.

      I call my theory of the monetary and financial paradigm Wisdomics-Gracenomics. Why is that? It’s because it expresses the need to inject the solution to one of your key critques of capitalism which is that it has no real ethic other than power, profit and control.

      Wisdom is the superior human mental discipline. It is the integrative mindset itself and the intention to find only the truths, highest workabilities, applicabilities and the highest ethical considerations in apparent opposites. Hence Wisdomics. Love is universally accepted as the superlative human spiritual value and the active form of love is grace/graciousness. To be logical and effective love must not just be internalized. It requires expression (both as human action and as systemic policy) at which time it becomes logical (as within so without) and expresses graciousness.

      The current paradigm as the sole form and vehicle for the creation of new money is Debt Only, and it has not changed for the entire course of human civilization. By Debt Only I mean it has always denoted and demanded the burden of repayment. There isn’t anything inherently wrong with debt itself, but debt ONLY designates it as a monopolistic concept…and all monopolies are problematic.

      Historically, all new paradigm concepts have been in complete conceptual opposition to the old/current paradigm For instance, geo-centrism to helio-centrism, nomadic hunting and gathering to agriculture, homesteading and urbanization. So, economically and monetarily speaking, what is the opposite philosophical concept to burden to repay? It’s monetary grace as in gifting, monetary gifting for short. Monetary Gifting IS the new paradigm concept and its applied set of aligned policies will create the economic pattern change. Hence Gracenomics as in a monetary and economic expression of the natural philosophical concept of grace.

      Always go to the core of the core of the problem, and find the operant concept that applied changes the entire pattern of the system, body of knowledge and/or area of human endeavor. In other words when you’re down by 6 with 30 seconds left in the fourth quarter it’s time to “go long, go deep”, and although there may be tears in the night, there can be joy in the morning…if we abandon orthodoxies and obsessive dualing opposites and choose paradigmatic analysis instead.

    2. Great analysis but I wonder if it suffers from the the typical left aversion to facing the role of money in the economy. The implication is that things were great in the 50’s and 60’s and suddenly the forces of evil came in to sweep it all away. No, the seeds that ended the hiatus were already sown then. Since FDR failed to address the money problem despite the pleadings of leading economists of the time (maybe he had no choice) the cancer that the banks represented was only in remission. No amount of regulation alone can overcome the immense power afford to those who actually create and distribute the nation’s money – private commercial banks. Until the left takes a lesson from the Populists of the 1880’s and 90’s. the money power will prevent the return to the good ole’ days of the 1950’s.

      1. Yes, I agree the problem has been long palliated and/or missed. It is idiotic that the banks are granted the ability to create (or deny agents) access to money which is the very life’s blood of economic and individual survival, but it is titanically idiotic that they are enabled to create it ONLY as debt. As Michael Hudson and David Graeber have pointed out the deepest reason empires tended to invade their neighbors was because private indebtedness destabilized their domestic economies…so they felt the need to steal their assets by force.

        The systemic power to create our money (upwards of 97% of it) must also be addressed, but no reform, not even a genuine public bank, which I would also like to see happen, will finally resolve the paradighmatic problem. It will take a new applied paradigm concept and its aligned policy program to end our being forced onto all fours for over 5000 years by the current monetary and financial paradigm. Only paradigm changes are permanent.

  7. “as one digs deeper into the national character of Americans one sees they have sought the value of everything in this world according to the answer to a single question: how much money will it bring in?” Tocqueville
    “the only God in America is money”. Malcolm X
    “Americanas are farcical when it comes to money and force manure–the 2 things they worship. my country has created 1 art form: the TV advertisement. you should not expect a democracy from a society like this”. Gore Vidal
    “the double symbolism assigned to money by americans is considered paradoxical by europeans”. Geoffrey gorer

  8. Yes, “reform” implies maintaining a current system that is inherently flawed. To use the historical model of money created through debt as a justification for perpetuating that model, ends any hopes of radical transformation and democratizing our medium of exchange. Our current set of progressive intellectuals seem incapable of grasping that.

    1. Indeed. The biggest problem with something actually new and effective is that it faces the long unconscious acculturation of the present paradigm. In this case over 5000 years because whether new money was created by the Palace or by private banks…it was always created ONLY as Debt. We are much more stupid than the ancient empires most of whom utilized periodic debt jubilees (a form of monetary gifting) to reset their domestic economies and renew their social contract in order to prevent internal revolt.

      In a fractured polis with a sizable idiocracy that is fightin’ mad an immediate, mathematical and temporal universe anchored doubling of their purchasing power ought to be a policy that progressives would leap ecstatically for. Most do not see it, not even the reformers on the left. What the left had better worry about is that the right latches onto the 50% Discount/Rebate policy FIRST because it is as beneficial for enterprise as it is for the individual, and hence grabs the attention and allegiance of independents who have suffered loss of purchasing power since the 70’s when we began shipping manufacturing over seas.

      1. Also, the republicans are quick to recognize power, know how to rally their voters in pursuit of it and getting and keeping it is their overweening ethic.

  9. As an aging lefty, I don’t see much hope of the left touching the concept of money creation. There is no obvious drama or villain to provide the catharsis. Our money system is due to an historical path from goldsmith vouchers to modern day banking.

    People have been led to believe that their lack of money is somehow due to them not really deserving it. The idea that there is just not enough money in the economy to meet the needs of the citizens never occurs to them. Money is only created for the “creditworthy”.

    When it comes to money the cartoon comes to mind with one fish saying to another, “How’s the water”.
    The response:
    “What the f**k is water?”

    1. Yes, paradigm perception is a lot like breathing. Normally we are completely unconscious of it, but when we can’t do so its significance looms.

      However, all we really need is a platform to communicate the simple math of the 50% Discount/Rebate policy and its personal benefits.

      Students are probably the best constituency to begin such communication because they have not acculturated the cynicism and apathy that is so prevalent.

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