Trump’s Win is a Warning: Europe Urgently Needs a New Deal

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By Thomas Fricke. Originally published at Spiegel Online; English translation cross-posted from the Institute of New Economic Thinking website

President Franklin D. Roosevelt’s policies allowed the United States to avoid the perils of right-wing populism that plunged Europe into war in the 1930s — Europe should learn from his example

It is like a cruel remake: First came globalization with its ensuing golden years; then the crash followed resulting in the crisis of confidence and unbridled popular rage —until eventually, almost everywhere, right-wing Pied Pipers emerged to challenge for power. This happened in the 1920s and ’30s following the great financial crisis, and the pattern appears to be repeating itself today: First came the “party years”, then the crash — however, with one distinctive difference since Election Tuesday: Unlike the European crises of 80 years ago, this time even the USA has been seized with a frightful political shock.

Given these developments, the following question comes to mind: What had the Americans done better in the past — in particular what had former President Franklin D. Roosevelt done better in a comparable historical situation? Elucidating this question could help us understand what went wrong this time. More importantly, it could help us to recognize what the Europeans should hasten to learn without delay, before a similar disaster unfolds (again!) on their continent.

Perhaps better sooner than later, Europe needs a New Deal on the scale employed by Roosevelt to counteract crises, enraged citizens, and fears of an economic crash. A bit of stability masochism and pension cosmetics à la Schäuble, Nahles and Merkel will hardly suffice to stop the rising demagogues.

Crisis Averted, but Its Underlying Causes Remain

At first sight, the notion that Roosevelt should be useful as a role model may seem odd. After all, this time around, central bankers and finance ministers in the US prevailed in what Roosevelt failed to achieve in his time: Preventing an extended period of enormously high unemployment after the crash, be it through low interest rates or through enormous economic stimulus packages. In fact, this time the depression did not materialize; moreover, the registered rate of unemployment dropped much faster than in Europe.

The hitch: All these measures did, in fact, avert the imminently threatening escalation of the crisis; however, its underlying causes were not resolved. In all likelihood they are to be found in the dramatic consequences of a unbridled period of globalization as was the case in the years prior to the crisis of the nineteen-thirties: In a similarly dramatic wealth divide into losers that appear similarly forlorn with similar subjective fears of social decline and similar anger at the elites; versus similarly aloof banks and ruling politicians appearing similarly helpless in the face of the crisis.

Treacherous collateral effect: That the central bankers managed to avert the collapse through injecting a great amount of capital into the economy even reinforced one or the other absurdity of some of the measures taken. For instance, the banks saved by the frequently cited taxpayers were the very ones that had played a decisive role in bringing about the debacle in the first place. This has generated even more rage. For instance, those benefiting from rescue operations by means of lower interest rates and rising prices are stockholders. They generally do not belong to the core group of the society’s losers.

Roosevelt Supported and Reimbursed the Losers

This may be one crucial factor why this time the Americans have decided for Trump (with about half of his voters wanting him without reservation); and why, in his time, Democrat Roosevelt was able to remain in office over three presidential terms even in a far more desperate economic situation, with an unemployment rate sometimes of 25 per cent.

Roosevelt’s trick? Although his performance was less successful by comparison in terms of rescuing the economy, throughout his three boosts of the New Deal he never missed an opportunity to support and to make amends to the (true) losers of the crisis, and to establish the prospect of a better future (or at least to maintain hope for the future).

In the first deal, from 1933 onwards, 3 million workers were employed over a period of ten years to reforest woodlands, to build dams, and to repair roads and railways. Financial support was paid to farmers suffering under price deterioration as dairy farmers do today. Money was also spent on teaching and construction jobs, as well as on electricity plants in order to provide electricity to even the remote regions of the country.

In 1935, Roosevelt pushed further ahead by means of similar programs and new job projects, introducing new legislation for the protection of workers and through new social legislation.

Part three followed from 1937 onwards with new additions: A minimum wage, further job programs, further social security measures, and a long list of initiatives.

In other words, a program that would long ago have prompted this country’s industrial representatives to threaten to relocate all production facilities to Mars (as China is not a good option presently), if those representatives were not already in hospital with symptoms of cardiac arrhythmia.

The Dogma of the Free Market and Its Consequences

Already, a few years ago, experts affiliated with economic historian Barry Eichengreen tried to analyze the reasons why in the 1930s some countries drifted into right-wing extremism while others did not. The scope of a country’s democratic experience was found to be one relevant factor. In the US in the year 2016, this factor cannot have been lacking. With regard to democracy, the Americans are seniors with a seat in the Council of Elders. Rather, economic factors were said to be of greater relevance.

There is hardly any other country in which the side effects of three decades of globalization have been felt so strongly; in which the real income of the middle class has fallen so clearly for a quarter century; and in which the differences between the super rich and the rest of the country have grown as dramatically as they have in precisely the two top capitalist-friendly countries of Reagan and Thatcher: In 2016, through Brexit and Trump, the established political systems of the US and Great Britain are now experiencing the greatest of shocks. A coincidence? Scarcely anywhere else has the dogma of the free market brought about so much implosion of industry as it has for the British and the Americans – nowhere was it more frowned upon by ultra-capitalist supporters to help the losers.

Nevertheless, there is little to suggest that the trend will exclude the continental Europeans: The situation is not really better in France or Italy. The next shock may very well occur in France, next spring, if the extreme right Front National party of Marine Le Pen wins the presidency.

We Need a European New Deal

In purely economic terms, Roosevelt’s program did not create a paradise at all. It took years before the aftermath of the Great Depression had been overcome. Instead, as the President he so convincingly conveyed his staccato of measures with a determination to put an end to the insanity of a slipped globalization and financial liberalization that this was enough to convince people not to turn to right-wing populists. And after a fatal crisis, the impression arose that politicians have control of destiny.

If this is true, it is high time that the Europeans take action now and design a New Deal as spectacular as the one Roosevelt once provided for the US — for those who have been left by the wayside, and for a really substantial investment push. There is nothing wrong with occasionally switching roles for the sake of making improvements.

Otherwise, the next political shocks could soon come from France and Italy and, who knows, maybe from Germany. Time is running out.

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  1. washunate

    I’m all for fighting the McCarthyism from the neocon warmongering wing of the Democratic party. We all know they are petty and insecure, smarting from the fact that those of us who support reality-based discourse are not willing to jump on the War is Good bandwagon just for the sake of Team Blue.

    However, our present era is nothing like the New Deal era. In that era, we started from a point of very low government involvement. Today, we have the exact opposite problem, a government so massive it cannot be effectively managed, a government so power hungry that no aspect of private life is beyond its desire for control and dominion. In the 1930s, Europe was the primary (though, not sole) instigator of global imperialism. Today, we are. This notion that Europe of today somehow exists independently of its vassal state status within the Pax Americana is both inconsistent with reality and remarkably subservient to the very aims of the intervionists with whom we supposedly disagree.

    Europe has great infrastructure. Europe has great healthcare. Could things be better? Sure. Are there always specific opportunities for public investment? Of course. Bu they don’t need a New Deal, some sweeping realignment of domestic priorities. They need to stand up to the US empire before we, not them, destroy the world. That’s why there are so many rightwing populist movements for decentralization, for removing oneself from the American global order. It’s one of the only remaining avenues of dissent that doesn’t require full scale armed revolt against the DC/NY nexus of power projection.

    1. hemeantwell

      Yes. To focus on getting out from under the US, it’s very interesting to me that both Le Pen and Fillon are apparently much more friendly/open towards Putin. To shift to the focus of this article, it’s equally interesting that Le Pen will be pushing a left of center economic program, taking over what should have been the Socialist Party’s positions, and pitting her against a guy who’s more or less Thatcher in drag. And, it seems that the opposition to Renzi in Italy is in favor of winding down the confrontation with Putin. I’d like to think that we could look at this long term as a way of cracking open the hold the military-industrial complex has on our resources and lives. Fingers crossed on that one.

    2. Brad

      Right, Fricke’s economic determinism can’t see that Europe would have to exit NATO and it’s US-centric alliance system to make it work. After all, it was the political-military mobilization for WW2 and not the New Deal that succeeded in overcoming the crisis for the US. That meant acting *against* Europe, all of whose traditional ruling classes had been gathered under the fascist banner by 1940.

      Not all of Europe is “already great” when it comes to social infrastructure. Watch trains from Poland pull into a German station sometime. In strictly economic terms, Eastern Europe is a candidate for a “New Deal”. We should recall that one of the success stories of the US original were the projects directed at the underdeveloped regions of the US: the South and West. Unfortunately Eastern Europe right now has just the wrong kinds of governments for this. But then again so did the South.

      1. washunate

        Oh yeah, I agree there is opportunity for investment in public resources in narrow use cases far away from the major power centers of Europe. That’s my criticism of the author – he is trying to make it sound like the major nations are in trouble (France, Italy, and Germany are the three nations specifically mentioned) without offering any evidence or even non-evidence based analysis of what specific lack of investment actually exists there.

        The reality appears to be the opposite. The major opportunities for investment are not found in France, Italy, and Germany. Rather, they are found outside of the major nations. That is an international humanitarian question, not a domestic economic question, the very opposite of the New Deal which was a domestic program. (unless Fricke is implicitly advocating for the end of national sovereignty in Europe, which is a separate conversation not addressed by the piece and an area in which we might want to actually hear from some Poles, Greeks, Estonians, Bulgarians, etc., on the matter).

      2. Plenue

        Mobilization for war was just the New Deal on steroids. Apparently we as a species are only willing to to the total measures needed to fix a problem if it’s for the sack of death and destruction.

        1. UserFriendly

          Mobilization for war was just the New Deal on steroids.

          Yup. Fascism isn’t left or right its the decision to achieve full employment ala military.

          The problem is that we can’t ever seem to jump out of the cycle by replacing fascism with a healthy sustainable job guarantee.

          Laissez Faire -> Gilded Age -> Economic Collapse -> Fascism -> Egalitarianism.

          Rinse and repeat.

      3. Steve C

        The USA had full employment in 1936 if you count the CCC and other federal programs. GDP growth was 12 percent. FDR screwed the pooch in 1937 by turning to austerity. He never really recovered.

        Obama skipped the recovery part and went straight to austerity.

  2. Jim Haygood

    When Roosevelt took office in 1933, US debt to GDP was about 35 percent. It hovered around 40 percent for the rest of the decade, until exploding to 112% during 1941-45.

    Roosevelt’s 41% devaluation of the dollar during 1933-34 stopped the pathological 10 percent deflation that prevailed during 1930-1933.

    Currently, the eurozone’s debt to GDP hovers just above 90 percent, with some members such as Belgium (106%), Italy (133%) and Greece (180%) registering much higher values. Fiscal stimulus would mean even higher levels of growth-retarding debt.

    As the proverbial Irish villager who was asked the way to Dublin replied, “I wouldn’t try to get there from here if I were you.

    1. Damian

      Washington DC has wasted the patrimony of “flexibility” that is low Debt to GDP on bullets.

      Since 1950 the federal government spent $20 Trillion on war and the preparation for war and we have $19 Trillion in debt to show for it plus off balance sheet liabilities as well. Where is the asset side created to offset this liability? doesn’t exist!

      Roosevelt had 35% debt to GDP to work out solutions. Trump doesn’t have that opportunity.

      a big hole has been dug, along with a lot of constituencies with money to fight to keep it the way it is at the citizens expense which were not there in 1930.

      1. Praedor

        One problem: the US debt is (largely) non-existent. ALL “debt” that the US created by “borrowing from itself” is non-existent and can be written off without issue. It is IMPOSSIBLE to owe debt to yourself. You cannot borrow from yourself.

        The US issues its own currency and denominates it debt ENTIRELY in that currency. Hence, there is no issue at all. The US government CAN self-fund without collecting a single dollar of taxes simply by issuing the currency (spending it into existence). The ONLY purpose and value of taxes is to protect the use of US dollars domestically, to encourage useful social/economic/environmental behaviors while discouraging harmful behaviors. THAT is the only real use of federal taxation.

        There is no issue of inflation possible by simply spending money into creation to fund the government because we are no where near to full employment OR full economic output. Inflation ONLY becomes a possible issue if those two conditions are met AND the government then creates a load more money. Not a problem now, not a problem in any future here (full employment OR full economic output) so inflation is NOT an issue at all.

        MMT. Live it, learn it, ACCEPT it. It’s actual reality vs bogus debt-fearing gold-standard based bullcrap behind the current economic thinking on debt, deficit, and currency creation. We are using a gold-based model on a non-gold-based currency model and it DOESN’T APPLY.

        1. John k

          Yes, absolutely.

          Fed has bought more treasuries than were issued for several years now… no inflation in this deflationary environment. Now just mint a hundred 1 trillion platinum coins and buy them back from fed, then burn the debt… or don’t bother, continue paying interest to the fed, which remits payments back to treasury.
          Only real problem is that buying all the issued debt reduces interest payments to the private sector, I.e. Less deficit spending, which is deflationary and, even though paid to the rich that don’t spend much, nevertheless reduces their spending and cuts jobs.
          Problem is private sector debt, far too high and therefore deflationary, not public debt, which can be extinguished with a keystroke, just as QE has in fact been doing… though an enlightened gov would realize gov could just as easily buy and extinguish the private sector debt, too.

          1. BecauseTradition

            Only real problem is that buying all the issued debt reduces interest payments to the private sector, I.e. Less deficit spending, which is deflationary and, even though paid to the rich that don’t spend much, nevertheless reduces their spending and cuts jobs.

            I’m certain deflation can be avoided without welfare for the rich.

        2. BecauseTradition

          Nor is there need for sovereign debt to pay positive interest (welfare proportional to wealth). Instead, except for an individual citizen exemption of say $250,000 US, we should charge people to use/hoard US dollars and other sovereign debt. Then who could complain about the National Debt since it would be self-extinguishing*?

          *Unless perpetual deficits were run, as they should be, to provide the necessary negative interest tax.

        3. Kurt Sperry

          Thank you. I can’t believe we have long-termers that still describe governmental budgets from currency issuers in simplistic household budget terms. The inflation scare mongering is the sure-fire tell of someone who doesn’t have a basic grasp of the situation. Even if you buy the hyperinflation fear totems, what would be sweeter for a nation with, say, a 100 trillion dollar debt than a situation where a bus ride costs 100 million. Debt? What debt? You could pay off the entire debt in days out of a collection of special tip jars at Starbucks.

          1. Plenue

            Haygood is a kind of impervious wall, I think most commentators gave up trying to explain things to him long ago.

        4. Socrates

          Honest question. What happens to private investors, or state and municipal pension funds which hold treasuries when they are written off?

          Do any foreigners own U.S debt? If so will there be consequences for writing it off?

          1. Yves Smith Post author

            Treasuries will not be written off. Please study up before making comments like that. This is uninformed scaremongering and discredits the site. And no, I am NOT going to explain this to your since I’ve covered this topic ad nauseum in previous posts.

        5. Moneta

          The us is not one single person. It’s 300m people. Even if your debt is internal it can be structured such as to make a rich group and a poor group. So debt is an issue.

          The money system will not save us as the money system is a reflection of our policies.

          Only if from the beginning we adopt policies of fairness and redistribution can MMT work. Without these, MMT will just accelerate the concentration of wealth.

      2. Jim Haygood

        Roosevelt had 35% debt to GDP to work out solutions. Trump doesn’t have that opportunity.

        Well said. Utterly absent from mainstream economic commentary (probably because economists must “remain viable within the system,” as Bill Clinton used to say) is any notion that a global military empire is a value subtraction economy.

        Neutral Switzerland — arguably the wealthiest country on the planet, per capita — spends 0.7% of GDP on defense, whereas the swaggering, global cop USA spends about 3.5% ruling the seas.

        Had seventy years of permanent war footing not systematically drained the US economy of investment, today the US would be far richer than Switzerland. Instead, the failed USSR is our military/economic model. Glasnost and perestroika can’t save us now, comrades.

      3. Johnny Lunch Box

        We should all do our part by eating more hot dogs and hamburgers. Spend more money at the casino and buy more lottery tickets. Watch more tv and go to the movies. Spend more time driving around aimlessly. Go to a ball game. Thats our economy these days so support it. We dont make anything in the USA these days.

    2. washunate

      It is ironic that one of the major acts of the FDR Administration, raising the dollar cost of gold, doesn’t get much attention today. One of my conceptual thought experiments is to imagine the government giving every adult American an ounce of gold, perhaps minted in a cool patriotic coin (we claim to own about a quarter of a billion ounces, which makes the math come out pretty neat). Then Treasury/Fed offers to buy it back for $100,000/oz. Solves everything from underwater mortgages to student debt. And for those who really like the shiny, they can keep it as a patriotic souvenir to pass on to the grandkids or whatever.

      But seriously, I doubt anyone around here cares about debt/GDP levels, so I think a more effective comparison is looking at the size of federal spending compared to GDP. Before the New Deal, federal spending accounted for about 5% of GDP. Today, we’ve quadrupled that to over 20% of GDP.

      And even that calculation excludes tax breaks/loopholes/deductions/whatever, as well as non-monetized backstops for big banks and so forth, which at something like $2 trillion a year, give or take, would mean the total impact of federal tax and spending policy is approaching something like a third of the economy (as measured by GDP) today. It starts to raise the interesting question of how big, exactly, the MMT crowd wants government to be if our existing government – which is absolutely massive – isn’t even close to big enough for them.

      1. a different chris

        I don’t think the MMT crowd “wants” our government to be “big” — or “small”, or whatever, as any of those terms (including “massive”) are subjective. I don’t even know where you get that?

        The rest of your post made sense so simply wondering what you were trying to say.

        1. washunate

          Yeah, it’s a little bit inside baseball at this point. There’s a long-running viewpoint from some perspectives using MMT ideas to advocate for bigger. (Specifically, saying that austerity is evil and stimulus is good, or said differently, that Sectoral Financial Balances means that government should increase the net transfer of currency units from the public sector to the private sector. For a lengthy example, look through this link.)

          Jim and I have been somewhat tongue in cheek critiquing this for years, from different perspectives. To grossly oversimplify, Jim advances the hard money viewpoint (gold standard to hardwire the value of the currency), and I advance the social insurance viewpoint (forget buffer stocks entirely, let’s just give currency units directly to people in need).

          There have been a lot of posts over the years saying aggregate size is important. What Jim and I have noted in common is that the initial premise – government currently isn’t big enough – is never actually defended. Rather, it is asserted to be true without meaningful explanation, evidence, logic, or moral reasoning.

        2. BecauseTradition

          I don’t even know where you get that? a different chris

          A JG would certainly require more in the expansion of government than a UBI, which would require almost none.

          Also the emphasis on jobs rather than justice is doomed anyway given increasing automation.

          It seems to me that there’d be less need for government to keep the population busy if we all had houses and little farms, orchards, vineyards, workshops, etc.

    1. jsn

      Jim Haygood thinks its bunk so if you follow his threads you’ll stay abreast of state of the art monetarism. It’s a useful perspective to understand even if you don’t agree.

  3. susan the other

    What would FDR have done if confronted with the utter failure of global free market capitalism and global warming/environmental devastation all at the same time? The only thing threatening FDR was communism. He didn’t really give a fig about the other stuff. Really, can’t we see this now? Now that it has turned out that neither communism nor capitalism has an answer to our mess. Socialism is good for politics but it doesn’t do much for the planet – so even tho’ we admire many of Europe’s solutions to society’s inequalities, they don’t have a handle on repairing the planet any more than we do. If we want to restart planet Earth and all live in peace and maybe some prosperity we are going to have to face facts. The biggest stumbling block to going forward is our stubborn misunderstanding of money and debt. All money isn’t debt. We can just mainline social cooperation and not incur any debt at all. We do not need the high priests of debt slavery to intervene on our behalf with god any more.

    1. FluffytheObeseCat

      FDR also had to contend with aggressive, militaristic fascists. Some of whom bombed us. 75 years ago.

    2. juliania

      ” Socialism is good for politics but it doesn’t do much for the planet.”

      What does good for the planet? People do, or can, making the right decisions.

      What does good for the most people? Socialism does. Caring for the whole of society does.

      Ordinary people lined the route of President Roosevelt’s funeral train procession. They knew that he gave a fig about them. Communism turned out to be just another name for tyranny – the few lording it over the many – which is what we have today. Roosevelt saw that coming, and he acted upon it. And his great wife, Eleanor, let us not forget, continued his legacy.

      1. hemeantwell

        Agreed. It’s unfortunate that the past performances of command socialist governments that were doing their damnedest to catch up to the US and didn’t factor environmental questions into their resource usage have been used to claim that socialism is not the answer to environmental problems. Capitalism = gotta sell to survive and socialism = let’s make things we need. If socialism didn’t mean that in the mid-20th century, it certainly is more easy to redefine it in those terms than it is to change the capitalist accumulation requirement.

        1. susan the other

          I share this sentiment. I’m impressed by the socialist governments in the EU that have withstood this latest GFC onslaught by the austerians, and are still functioning. I wish we had embraced more “social benefits” along the way. (as if we were not entitled to them). I think Cuba is the shining city on the hill. Against all odds. But the bottom line is this: global warming/environmental degradation is so extreme, or will soon be, that the measures that even good countries take are not enough. We need to do more and cooperate with each other; the good news is, we can. Sounds crazy but we could, in theory, put the turbo engines of capitalism to work for the good of the planet and just print digits to account for it until we get bored and annoyed printing pointless digits. And then we’d have MMT!

        2. jrs

          Basically Europe is not sustainable is what is being said and socialism here is being used to mean social democracy. And that is correct. The European lifestyle still doesn’t attain sustainability, it’s much better than the U.S. lifestyle, but not enough. So social democracy is not enough.

      2. Moneta

        Socialism is quite vague.

        If it gives everyone the opportunity to overconsume then it’s not very green.

    3. Daryl

      FDR was confronted with severe environmental disaster though? The New Deal included programs to both prevent further catastrophes of a similar sort and to provide immediate relief to those effected.

    4. beet girl

      This article talks as though every action can only come top down. Why didn’t it explore the idea of FDR reacting to the reality on the street. It implies that it was FDR who initiated policy…and that the US government initiated the solutions. And that it was only FDR that could have acted so rationally to a threat to his immediate family and tribe.

      Susan, you’re comment lives where the rubber(bullet) hits the road(human). It was the labor movement that defined policy in the 30’s. It was the fear of social disintegration and “revolution” that TPTB reacted to and tailored to. The blacklist was just a reaction from a relative position of power, not an original idea for policy. All FDR did was give concessions after acknowledgment of the untenable alternative.

      It is labor maltreatment that initiates the organization of workers and helps to initiate their realized collective position of power – and that really does not exist today…Well, maybe in North Dakota. We currently have social unrest and we have the some organization…I guess we really are not that far from class singularity. It might be a corporate fascist state or series of tribal collectives. Or is it a series of fascist corporate collectives and a tribal state.

      Sorry, but this article is transparent. It almost like a trial ballon from privilege to see if other privileged might want to be on the right side of history or something.

  4. Horatio Parker

    My comment disappeared…

    Whatever happened to MMT? I no longer see it mentioned on this site.

    1. Praedor

      I just did. Also, Yves and others DO mention it from time to time, just not ALL the time.

      It does apply here, however.

      Haygood is bunk himself. He doesn’t like MMT because it is contrary to pre-held POLITICAL preferences.

      Gold bugs hate it too because it negates their perpetual scream that “HYPERINFLATION IS COMING!!!!”. That is the scream they emit CONSTANTLY (and for decades) with nothing to even hint at it occurring. Ever.

      1. Phil

        No, they hate it because they know that stable currency is an index of social order, in all times and places throughout history.

        And they hate it because it is a blind, a con, used to justify the idea of spending other peoples’ money that somehow really isn’t other people’s after all, because the sovereign can control and manipulate the currency to make it so that the money came from nowhere, after all: as if that were not just another form of wealth-redistribution at the barrel of a gun, probably carried out at the worst time and under the circumstances least amenable to restraint by the People and their Representatives. Remember taxation and representation? Magna Carta, Declaration of Independence, and such? MMT completely circumvents all that nonsense. What a tool that is for the tyrant!

        Perhaps they hate it because it is the political-economic equivalent of advising some poor soul on Reddit to load up his credit cards and declare bankruptcy, because only his credit rating will suffer.

        It is a tool of the technocracy to put one over on the rubes, for sure.

        Because there is a class war on. It is being waged between the technocrats on one side and the bourgeoisie on the other. The bourgeoise are the people who benefit in some way by the ownership of capital–and, in a stunning revision of Marx, that group now includes such people as earn a true “living wage” (he would see the manufacturing employees as the petty bourgeois, I guess, though I am hardly an expert on Marx). At any rate, that class includes only the part of the classically defined working class that is too wealthy to receive government transfer payments.

        The underclass, which was classically defined as the working proletariat, now belongs in the camp of the technocracy–namely, those people who live by making rules that other people must obey on pain of punishment by the Leviathan. It also includes their beneficiaries: all those lawyers, politicians, bureaucrats, lobbyists, bankers, the military, the police, teachers, and anyone who receives a net government payout at any level.

        So let’s not be blinded by measures of absolute wealth: class has nothing to do with wealth. It is defined by the relationship of the person to the means of production; to the source of the wealth, not its amount. People who communicate for a living, who make rules for a living, belong to one class. People who make things, work, accumulate capital, employ people who make things, are in a different class. Obviously there are very rich people on either side: Eric Schmidt, Warren Buffett. There’s a reason Buffett came so late to the silicon smorgasbord: it revolted his sensibilities.

        Because we have lost our traditional elite, which was an aristocracy of inherited wealth that tended to transcend, once in office, the source of its good fortune, and was not corrupted, because American government now for the first time offers enough wealth and power to corrupt its office-holders completely and inevitably, we are face to face with a true class war, where members of the class contend directly for control of the polity. The last election was unusually bitter and divisive for that reason.

        So, to bring it around, MMT is an obvious intellectual child of the technocracy. Because even an idiot bourgeois knows that you don’t get something for nothing.

        1. Socrates


          I think this is the best site for commentary on the internet, but I too am thrown by popularity of MMT here.

          It’s not just that it seems obvious bunk.

          It’s that the commentariat here is rather proudly anti-imperialist… and yet those supporting MMT seem oblivious to the fact that it could only work with a fiat currency backed by an imperial army… and then only for a while.

          That’s because all foreign currency reserves are ultimately destined to be extinguished in exchange for actual goods or services.

          I realize that there is some magical thinking involved in believing that USG could just pay off debts to domestic owners by creating currency units. Will that cause massive inflation? OK, give everybody an income supplement, I guess… what could go wrong?

          But isn’t the problem clearer when one thinks of foreign holders? What happens when we send China a few container ships of $100 bills, or just credit it all to a sovereign fund and call it even… how does that NOT result in hyperinflation?

          And when foreign nations will neither buy our debt nor accept our TP-come-currency for their goods… what happens then? How do MMTers suppose we will wean ourselves off of our massive trade deficit? The hard way, I suppose… a rather urgent program of import substitution.

          Perhaps I’m looking at this wrong, and MMT is just the logical culmination of all the feckless monetary, fiscal, and trade policies that we’ve been implementing since the Pax Americana.

          Seen in that light, MMT will indeed put an end to it all, bring the jobs back, and usher in another attempt at sound monetary management. It won’t be pleasant… but bring the jobs back it will…

          Actually, I think I’ve seen that movie a few times overseas. The question is… will Canada and Mexico bail us out to avoid a mass influx of destitute Americans. And how?

          1. Yves Smith Post author

            I beg to differ. The UK, Canada, the Eurozone, Japan, and Australia among others are all fiat currency issues. This isn’t even a remotely complete list. Most (above all the Eurozone, which is hostage to German ordoliberal economists) are afraid of running deficits even though they should most of the time. But there’s no reason they couldn’t. Inflation is the constraint on currency issuance. MMT backers say that consistently. And it’s inflation that leads to currency depreciation.

        2. Alejandro

          ‘[S]ocial order” is not synonymous with a fair and just society. With power and ‘wealth’, which is ends and which is means?

          Usury and rent extraction are all about getting “something for nothing”. What portion of {price} is productive contribution and what portion of {price} is organized extractive power? Seems, in a sense “industry and business” is a false conflation, and finance has captured both.

          Class war waged as usurers-posing-as-creditors versus debtors…where creditors are winning by sucking the life out of debtors through the “magic of compound interest”, rigging fiscal policy, legislating the justice out of bankruptcy and making “redress of grievances” seemingly just beyond reach.

      2. Moneta

        I don’t like the focus on MMT because it is what has led us to the concentration of wealth we currently see.

        If you want more redistribution it’s the policies that need to be reworked. The money printing machine will not do it on its own.

        MMT+ more bad policies = more concentration of wealth.

        1. financial matters

          Definitely. MMT is just descriptive but by describing the system gives choices on how money can be spent as an alternative to TINA.

          If you look at programs MMT advocates are usually for they do tend to be distributive like a job guarantee and other new deal type programs.

        2. Norm

          Any approach, idea or policy, be it socialism, capitalism, austerity, or MMT, has its uses and misuses. E.g., it’s just as easy to say

          Austerity + more bad policies = more concentration of wealth

          But as I read this thread, the whole discussion of MMT got started as a direct response to the assertion that debt/GDP levels are a determining factor on whether to “New Deal” or not is a viable approach.

          Given our beloved TPTB’s perennial ability to get things wrong they’d probably abuse the hell out of MMT, but if given the task of getting a bunch of imbeciles to turn a screw, it is always better to get them to pick up a screw driver and put down their hammer.

  5. Jim

    Comparisons of Trump to Hitler are silly. Every time the left looks around they see Hitler – Trump is Hitler, Putin is Hitler etc. Get a grip!

      1. Phil

        Much as I love you, Mr Strether, those examples are utterly inadequate. You need open-label, high-value-brand nationalism and militarism, if you are looking to exemplify real fascism. The Nazis and the Italian fascists wore no masks: “holiness and heroism,” daggers and armbands, marches and rallies. The KKK? Be serious–there is no heroism in a hood. Besides, racism wasn’t strictly a foundational requirement for the Italian fascists, although it was always present in politics, being ideologically ubiquitous back in the day.

        What you are looking for as an American example–a culturally accepted hero-styled media-sponsored government-backed corporate-public-partnership racist militarist imperialist genocidal national territorial expansion–is the near extermination of the American Indian.

        Glad that’s all over with now! Cough **DAPL** cough.

        1. Lambert Strether

          > open-label, high-value-brand nationalism and militarism

          I dunno. The KKK in the 20th century made its money selling uniforms to its members, just like the Nazis! And if the KKK wore masks, the judges, police, and fine upstanding citizens who relied on its enforcement powers weren’t masked (except at night, of course, some of them).

          See comment above on the pragmatics of the framing.

    1. voxhumana

      Yeah… and wouldn’t Trump be better compared to that great US industrialist (and Adolf’s good friend) Henry Ford?

      I know nothing about reformed (nor am I a man of faith) but some juicy excerpts:

      “…Henry Ford is often seen to be something of an enigma among the Wall Street elite. For many years in the 20s and 30s Ford was popularly known as an enemy of the financial establishment. Ford accused Morgan and others of using war and revolution as a road to profit and their influence in social systems as a means of personal advancement…

      “…On the other hand, when we probe behind these public statements we find that Henry Ford and son Edsel Ford have been in the forefront of American businessmen who try to walk both sides of every ideological fence in search of profit…

      “…It was Henry Ford who in the 1930s built the Soviet Union’s first modern automobile plant (located at Gorki) and which in the 50s and 60s produced the trucks used by the North Vietnamese to carry weapons and munitions for use against Americans. At about the same time, Henry Ford was also the most famous of Hitler’s foreign backers, and he was rewarded in the 1930s for this long-lasting support with the highest Nazi decoration for foreigners…

      “…On December 20, 1922 the New York Times reported that automobile manufacturer Henry Ford was financing Adolph Hitler’s nationalist and anti-Semitic movements in Munich. Simultaneously, the Berlin newspaper Berliner Tageblatt appealed to the American Ambassador in Berlin to investigate and halt Henry Ford’s intervention into German domestic affairs. It was reported that Hitler’s foreign backers had furnished a “spacious headquarters” with a “host of highly paid lieutenants and officials.” Henry Ford’s portrait was prominently displayed on the walls of Hitler’s personal office…

      I guess Hillary figured out that saying Trump is the new Ford might backfire…

      1. River

        Read Fordlandia….wild read. What later became the TVA was Henry Ford’s idea, but he angered the wrong senator so it was scrapped. Plus it would have given Ford too much power.

        As for Fordlandia, it would make a pretty good HBO special or even a movie. Creating an industrial utopia in Brazil. One part of the book had two managers looking for rubber seeds but blowing all the money on hookers and booze at numerous Brazilian towns, while being followed by another manager to trying stop them. Very reminiscent of Heart of Darkness/ Apocalypse Now.

    2. Arizona Slim

      Thank you, Jim.

      I was just on the Faceborg and jumped into a thread of liberals-still-in-meltdown. I asked them what they were planning to DO about the latest Trump outrage. And, no, kvetching on FB doesn’t count.

      My response? Justifications for kvetching.

      To which I said: People, drop the tears and pick up the fight.

  6. Kemal Erdogan

    As was in between the wars, the grip of financial capitalists is absolute in European countries that matter. So, this is a futile attempt. I am convinced that EU will fall apart, perhaps with a major confrontation against Russia. Americans watching on the sidelines to pick up the pieces from both sides.

  7. fritter

    I’m not sure this is an accurate/deep analysis. For one thing, during FDRs time there were a lot of people who actually farmed in the fly over country and could provide their own food (minus dust bowl issues). My family had one such in Louisiana and fared pretty well, considering. The other is the way unemployment is measured has changed drastically. I’m not so sure that the situation is as different as the author would have us believe on the employment front. He seems to have a rather.. rose-colored tint to his glasses. To claim that the master of the universe have kept the employment rate down… farcical.
    Then he refers to the rise of fascism from the radical right in europe. I thought the fascists were “leftists”. Generally we associate socialists with “left”. At that time the National Socialists Workers party was far more interested in working with corporations to implement fascists rule than anything we would today refer to as “left”, but still. I don’t think that justifies the connection to the radical right though. I think it more likely that the correlating factor is the anti-establishment sentiment, not the actual policy goals. If you are extremely unhappy with how things are, then anything different is going to look good. Exactly what we have seen with Trump. I see no mention of countries who’s extreme inequality ended .. violently. There are plenty of those as well.

    The author seems to be having trouble seeing the world’s history through the partisian lenses he has been provided. When my glasses don’t work, I get new ones.

    1. hemeantwell

      Then he refers to the rise of fascism from the radical right in europe. I thought the fascists were “leftists”.

      The strong presence of the left in the Nazi movement is very much worth looking into. I’ve been reading work by Tim Brown that brings out surprising aspects of the competition between left fascists and communists to keep maintain their supporters, particularly among the paramilitary organizations. Although you lose some worthwhile details, the basic distinction between communists as aligned with the Soviet Union while left fascists insisted on a nationalist politics will get you pretty far. Brown quotes SA stormtroopers voicing great resentment at “Bonzes,” or parasitic, compromising leaders, in their organizations, seeing them as a stratum that needs to be gotten out of the way after the socialists and communists are taken care of. On up in the Nazi hierarchy a favorable, “corporatist” orientation to corporations and the Wehrmacht tended to reign, but on down below the severe pressures of unemployment and class struggle found direct expression among Nazi cadres, and expropriation of the expropriators was an accepted theme.

      One article I’d recommend is Brown’s “The SA in the Radical Imagination of the Long Weimar Republic,” in Central European History 46, 2013.

        1. hemeantwell

          Define “left fascist,” please. Without quoting Jonah Goldberg, please.

          Instead of offering a definition, here are some quotes from the Brown article:

          “We must begin with the observation that, for contemporaries, the SA was understood as standing at the juncture of radical left and right, both in social and in ideological terms. This assessment was seen variously as a threat (by liberal and conservative commentators), as an opportunity (by the Communist Party), or as a combination of the two (above all by the NSDAP, which aspired to use the SA to destroy or subvert the radical left, but worried when SA men began to take subversive national-social-revolutionary ideas too much to heart).”

          “Arguably more destructive for the working-class movement in Germany than physical assault with the SA’s ability to penetrate the working classes, to take advantage of the breakdown of class allegiances and the problems within the SPD and the KPD to win over workers. From a social perspective, the SA represented National Socialism’s bridge to the working masses and, in particular, to communism’s target constituency, the industrial proletariat.”

          “…the SA represented the coming together of militarized youth and the nation, becoming, in effect, the emobdiment of the Nazi version of a “classless society.” Joseph Goebbels…emphasized the proletarian makeup of the SA (particularly in Berlin) to draw the connection between class and nation, using the SA as a living, breathing symbol of the proletarian [was seen as reproducing] in physical reality, concepts such as “the Volksgemeinschaft, values such as selflessness, readiness for action and sacrifice, and [a] nationalist and socialist will.”

          “Such values were widely understood and overwhelmingly approved of by radicals in the Weimar Republic. In showing “socialist” (i.e. plebian) masses marching for the cause of the nation [Triumph of the Will is full of this] the SA represented what everybody — the youngsters of the bundisch groups, the National Revolutionaries, and, on some level, the Communists — thought should be happening.”

          Brown quotes a visitor to Germany: “The Nazis have appropriated an old socialist song, just as they have done with the red flag, May Day, dramatic recitations, the five-year plans [!] and a thousand other things. [syncretic Christianity?] The blood-red flag has simply become the swastika flag, and the workers’ world, considered too internationalist, has become the workers’ state. No need to exercise your brain. What’s essential is that the masses maintain the illusion of singing a revolutionary song.”

          The article then goes on with a discussion of the Stennes revolt within the SA in 1931. Here’s paragraph from Wikipedia:

          Stennes had following among leftist oriented SA in Berlin, Pomerania, Mecklenburg and Silesia. When he left the SA and NSDAP he founded the National Socialist Combat Movement of Germany (Nationalsozialistische Kampfbewegung Deutschlands, NSKD) and made connection with Otto Strasser, as well as Hermann Ehrhardt, ex-leader of the defunct Viking League (Bund Wiking). He recruited about 2000 SA men from Berlin and elsewhere along with 2000 Ehrhardt followers, and the leaders protested that the “NSDAP has abandoned the revolutionary course of true national socialism” and will become “just another coalition party.”[34]

          1. Lambert Strether

            Thanks, that’s useful. So the Democrats had better get their sh*t together or this will happen, yes?

            Arguably more destructive for the working-class movement in Germany than physical assault with the SA’s ability to penetrate the working classes, to take advantage of the breakdown of class allegiances and the problems within the SPD and the KPD to win over workers. From a social perspective, the SA represented National Socialism’s bridge to the working masses and, in particular, to communism’s target constituency, the industrial proletariat.”

            My basic quarrel with the Nazi framing is that we have plenty of horrific domestic examples. The reason I mention the KKK in particular is that one would think the effing Democrats would use that frame to appeal to one of their core constituencies (to temporarily adopt idpol* thinking). But no! They’re using framing because they have a vague memory of European History 101 from college or they read The Diary of Ann Frank in high school, the subtext being this is #NotNormal because “it hasn’t happened here,” when in fact, it has happened here. How about we use our own history instead of the imported European variety?

            * Again, too lazy/rushed to hat tip the commentariat coiner of “idpol.” Whoever you are, take a bow!

          2. I Have Strange Dreams

            Oh dear. So much confusion arising out of the Nazi’s use of the word “socialist”. The Nazis envisaged a “classless” society in that there would be no socialist class consciousness as all class antagonisms would be replaced by a mystical devotion to Blut und Boden. There would be happy factory workers, jolly peasants, productive capitalists loyal to the Vaterland (and making a nice personal profit on the side), fecund Hausfraus and slaves. Lots and lots of slaves. But, as Üntermensch they would not count as human. Senior SS officers would rule over personal fiefdoms as feudal lords (Gauleiter) did. oh, and in case there is any doubt about the Nazis being socialist, even moderate social democrats would be sent to camps to be worked and gassed to death.
            I am really failing to see the “Workers of the World, unite!” ethos here.

    2. EricT

      In Germany at the time, Capitalists and Socialists really hated Communists, who were rising to fill the political void being left by the Depression. Hitler co-opted the Socialist parties using the pressure brought on by the Communists in Germany to help him rise to power. Sort of the way Republicans have gained power, by joining the wealthy class with the poorly educated lower classes. And in a very similar way, the poor Republican groups get the same shaft as the Socialists in Germany got with Hitler. Please don’t use labels to make a judgement, they are manipulated by the media all the time to confuse the body politic. As the parable says, “You will know them by their actions.” And Fascists are not “leftist”, because the left does not support authoritarianism, unlike Fascists. Authoritarianism is only necessary when the majority of the population has figured out what the ruling minority is planning and won’t go along.

    3. I Have Strange Dreams

      Please, for the sake of decency, stop propagating the absurd, perverse and deranged lie that Fascism is a left-wing phenomenon. To do so is to engage in dishonesty on a par with that of holocaust denialism. You dishonour the dead and mock the living. You are spitting on the graves of millions and perpetrating a great crime against reason, logic and historical truth. You are entitled to your own opinions, but not your own facts.

      The intelligence agency in Germany responsible for internal security, The Federal Office for the Protection of the Constitution (Bundesamt für Verfassungsschutz), is quite clear that Fascism is an extreme right-wing political phenomenon. It is sad that so many Americans, the victors against the Nazis, are less committed to preserving the truth of the horrors of German fascism than the Germans themselves. But, as Gore Vidal said, “We are the United States of Amnesia, we learn nothing because we remember nothing.”

      To help those suffering from Glenn Beck induced psychosis here is a quick primer on the meaning of Right and Left from Not Trivial by Laurie Endicott Thomas:

      The methods used in politics can be classified along a spectrum. On the right-hand end of the spectrum, the strong rule the weak by force—or at least by threats of force. At the left-hand side of the spectrum, people work out mutually acceptable solutions through discussion.

      This political meaning of right and left came originally from the French legislature. The aristocrats sat on the right, which was traditionally a position of honor. The common people sat on the left. Thus, people who supported the interests of the rich and powerful came to be known as rightists or right-wing. The people who stood up for the common people became known as leftist or left-wing. The idea that a king rules by divine right is a right-wing idea. The idea that a government’s legitimacy derives from the consent of the governed is a left-wing idea.

      A dictatorship is rightist by definition, even if it proclaims that it is Marxist.

      And a bonus quote from the great Mr. Vidal:

      “As societies grow decadent, the language grows decadent, too. Words are used to disguise, not to illuminate, action: you liberate a city by destroying it. Words are to confuse, so that at election time people will solemnly vote against their own interests.”

      1. JTFaraday

        If the signification of “the left” originates in the French Revolution, whatever the merits of French revolutionary violence– carried out by “the left”– it really cannot be transmogrified into this kind of sweetness and light where “people work out mutually acceptable solutions through discussion.”

        The discussion model in modernity is arguably elitist– that of liberal elites. Because they felt reasonably sure they could maintain control of the discussion. They lost that control in the French Revolution, and they lost it to a violent “left.”

        This makes her foundational definition of “the left” a violent one, not a deliberative one. Who lead the purges?

        1. I Have Strange Dreams

          The French revolution was a revolution of the center – the liberal middle class – the peasants had barely the strength to survive. The middle class came out on top, the aristocrats were rehsbilitated, and the peasants were shat upon.

  8. TG

    Let me make one suggestion for the core reason that in the 1930’s the United States got a New Deal, and today we are not. I propose that they key difference is the extent to which the mainstream corporate press today is so concentrated that it has been essentially impossible for any challenger to the status quo to get any traction.

    We have had a lot of basically decent people on the left and the right sounding the alarm – Ralph Nader, Pat Buchanan, Jill Stein, Ross Perot, etc. But the corporate press has perfected the art of bloodless political assassination: don’t cover the issues, cover only the ‘horse race,’ find some weakness in their personal lives and hammer hammer hammer on this one issue and then, when they have been made to look ridiculous, censor them from all coverage. Sanders almost beat this system but not quite – Trump may have beaten this because he was immune to shaming, immune to threats against his livelihood, and presented such a spectacle that he could not be ignored. Still, whether Trump is ultimately a net negative or positive, it’s pretty clear that his tactic is not repeatable by others and anyhow is not a good basis for a healthy politics.

    Again, Trump has a lot of negatives but the recent campaign has shown just how biased and corrupt the corporate press is. Trump is many things, but a Russian agent? Anti-semitic? Homophobic? Absurd. And now the Wash Post saying that all the alternative news sites are Russian proxies? This is not new: it’s just that in the last two decades it’s been such an effective tactic that they’ve gotten away with it. It’s just that now it has been made obviously visible.

    Suggestion: more even than reigning in Wall Street and tearing up MFN for China etc., we need to break up the big media monopolies, ban news agencies from being owned by or owning other businesses, etc. Before everything else is shut down by naked force.

    Will Trump block the latest mega-media merger, or not? That might be a key sign on where he is really going.

    1. linda amick

      My mantra is TRUST BUSTING all the way around.
      I never hear it mentioned directly by ANY politician in political platforms. If ever we are able to get back to controlling corporations rather than them controlling us, we will need to get back to anti-trust laws that limit size and range of corporations.

  9. Bugs Bunny

    I sympathize with the opinion and wish we had strong political actors here in Europe who could carry off such a democratic social coup but I foresee instead the installation across the EU center of a nationalist right with anti globalization rhetoric but that will compromise to prevent intra European violence. I think that’s the best we’ll get in the near term. Keep fighting for the future. Sad.

  10. NotSoSure

    I agree. Europe needs a New Deal, whereby Goldman Sachs is named the de factor government of the people. Why bother having someone like Trump, I mean just elect Lloyd Blankfein.

    New Deal == Old Deal But Worse.

  11. Richard

    It’s just awful. When I read the comments on here, NOT ONE PERSON seems to understand how serious and grim the situation is. NOT ONE. Going on and on about communism and Hitler and gold and inflation is all so utterly irrelevant, it hurts the brain!

    DEBT is the one factor which will bring the entire world to its knees. “We owe it to ourselves” and all that junk is entirely beside the point. Ruination awaits every nook and cranny of our society – and gold will NOT save the day. Nobody will want to buy ‘gold’ any more than a drowning man at sea will buy an ice cream cone from a passing boat.

    Everyone is hooked into the debt cancer at some level. The unravelling of the leveraged financial world will never be achieved. It is too far-gone. Only ultimate human destruction will take care of the situation. What we have is the perfect backdrop for the annihilation of 95+% of the human race.

    Yeah. How many people would like to rewrite what they wrote above in light of that conundrum?

    1. 1 Kings

      Shoving all deriviative contracts up ‘banker’s’ bungholes would get rid of a lot of that debt.

    2. BecauseTradition

      Debt is owed in good ole, INEXPENSIVE fiat so the debt problem is obviously solvable without destruction of humans.

  12. TheCatSaid

    This stunned me:

    Already, a few years ago, experts affiliated with economic historian Barry Eichengreen tried to analyze the reasons why in the 1930s some countries drifted into right-wing extremism while others did not. The scope of a country’s democratic experience was found to be one relevant factor. In the US in the year 2016, this factor cannot have been lacking. With regard to democracy, the Americans are seniors with a seat in the Council of Elders.

    Serious People still think the USA is a democracy? For many decades we have been relying on election results which cannot be substantiated by clean data. (E.g., even where there are paper ballots, have we the people been able to inspect and count them? Was there a secure chain of custody of those ballots?)

    Then there are the small matters of campaign finance, combined with media consolidation and intelligence agency active manipulation of media. Add a corrupt judiciary for insurance. End result: policies that have zero correlation with what voters want.

    We do not have a democracy.

    We’ve been taught in school that we have a democracy. Media repeat it incessantly. Most of us have come to believe it. That does not make it true.

    Is there a way to democracy from where we are at? I think democracy can only be created from the ground up at the local level. It can never be taken for granted–just as no election results should ever be “believed”–regardless of who supposedly won. As Bill Black said, if fraud can occur, fraud will occur.

    As for Europe–policy decisions are made at bureaucratic levels that have no democratic mandate or accountability. This structure was “baked in” when EU institutions were formed and in subsequent treaties. Yannis Varoufakis believes EU institutions can be reformed, but I’m not convinced that corrupt institutions will agree to be used as the means for their own reform. Turkeys don’t usually vote for Thanksgiving.

  13. Sound of the Suburbs

    The limitations for everything always come down to money.

    The monetary system is a man made construct, its time to change the rules.

    Most money exists as binary numbers in memory locations, writing a different number into a few locations could make all the difference.

    Banks and Central Banks do it all the time.

    They create money out of nothing by writing binary numbers to memory locations.

    Money comes out of nothing and goes back to nothing and it dictates everything.

    Money and debt are opposite sides of the same coin.
    If there is no debt there is no money.
    Money is created by loans and destroyed by repayments of those loans.

    From the BoE:

    Change the rules.

    1. BecauseTradition

      Change the rules. Sound of the Suburbs

      Yes, along ethical lines such as:
      1) no welfare proportional to wealth such as positive interest paying sovereign debt.
      2) no government insuring of privately created liabilities.
      3) allowing all citizens to directly use fiat with the same safety and ease as depository institutions, i.e. in account form at the central bank or equivalent* and not be limited to only physical fiat, bills and coins.
      4) no fiat creation by the central bank except for its monetary sovereign (e.g. US Treasury).

      *e.g. A Postal Checking Service that is forbidden to make loans on its own, leaving that to the discretion of individual account owners. Otherwise, the banks could rightly complain of unfair competition. Plus the PCS would be part of the problem if it engages in lending on its own.

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