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Yves here. I know some readers will take umbrage at the notion that Richard Vague did well in the credit card industry before having a Damascene conversion after investigating financial crises, which led him to recognize the danger of private debt.
It’s all too easy to forget that bank deregulation and what regulators saw as the more efficient use of costly bank equity via securitization were promoted aggressively, ironically not so much by many banks (who resisted adopting new technologies) but by enablers/big bank advisors like McKinsey and regulators themselves. I wasn’t on the retail banking side of McKinsey’s banking practice, but even so, I came across one of the comparatively few McKinsey slides that wound up being used at multiple clients. It showed the insurmountable cost advantage of using securitization. The message to banks was clear: “You will be on this bus or you’ll be under the bus.”
When I met Vague, he made clear he understood back in the day that he was engaged in regulatory arbitrage. He would repeatedly ask bank regulators: “You understand what I am doing, right?” They not only said they did, they made clear they wanted to see more of the same.
By John Siman, a classicist
Here is a remarkable metamorphosis for you: Richard Vague, who, in the years before the financial crisis of 2008, was the co-founder and CEO of two credit card companies (one of which grew into the largest Visa issuer in the industry), has, over the last several years, become a learned and visionary theoretician of economics.
In 2014 he published The Next Economic Disaster, in which he introduced a radically new approach for predicting and preventing (or at least mitigating) financial crises, and in 2019 he followed it with A Brief History of Doom, in which, armed with a breathtakingly expansive array of economic data, he analyzed the financial crises which have occurred in the world’s major economies over the past 200 years —and showed thereby how virtually all of them had resulted from overcapacity caused by runaway privatelending.
A week ago Vague, continuing to inform us of his insights, published a 30-page article with the exhortative title, “It’s Time for a Debt ‘Jubilee,’” and he generously agreed to sit down for a 45-minute conversation with me — I’ve posted it on YouTube: Interview with Richard Vague for Naked Capitalism
For readers who are unfamiliar with the genuine radicalism of Vague’s thought, here are, to get you started, four of his fundamental findings. They are, I think, earthshaking — in any event I certainly thought so when he first explained them to me:
First, economic crises, like the Great Depressionand the Great Recession, are caused by runaway lending in the private sector: widespread overlending for private projectsbegets widespread overcapacity which in turn begets widespread bad loans and widespread bank failures.
Second, inflation is notcaused by excessive government spending. As Vague writes in “It’s Time for a Debt ‘Jubilee’”:
During the entire 40-year explosion of government debt from 1981 to 2020, price inflation has plummeted, not increased; interest rates have collapsed, not risen; buyers for government debt have been plentiful, not scarce, as evidenced by those declining rates; and private sector spending has proceeded apace.
Third, even apart from economic crises, excess privatedebt should be our primary economic concern. Vague writes:
Government debt has increased markedly and gets the most attention, but we should be more concerned about the rapid growth in private-sector debt…. The problem of private debt could not be more consequential. It’s been an underlying issue in several of the decade’s worst problems, from the 2008 global crisis and slow growth that followed the Great Recession to the discontent that led to Donald Trump’s election in 2016.
Fourth, it is the necessary and proper role of the governmentto reduce onerous levels of private debt and to mitigateprivate financial crises. Vague applauds the Fed’s performance in 2008 and again this year, but he looks back with dismay on the President Obama’s failure to help the millions of Americans who got foreclosed on back then, just as he is now dismayed by the failure of the current President and Congress to get sufficient helicopter money to the millions of Americans who need help during this emergency. Thus Vague writes in a new article in The Hill:
The Federal Reserve, by its dramatic support of the credit markets, has given crucial support to the assets primarily owned by the wealthiest Americans. It has kept the well-off very well off. The reluctance of Congress to enact additional aid would seem to convey an unwillingness to provide the support most needed by average working Americans.
We need to listen closely to Richard Vague, and then pray that some of our politicians do so too.
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This is the kind of thing that could just as easily be released as a podcast.
You could set up an RSS feed over at libsyn for $5-10/month and just release whenever you get anything like this… minimal effort!
Sorry, you apparently haven’t looked into what it takes to do podcasts. You need to have sound editing equipment and someone to do the editing. You need to line up the guests, which means homework on them since you also need to tell them what you want to discuss. You need to do enough research of the topic yourself so as to not have a put-foot-in-mouth-and-chew moment. You need come up with the interview questions. This takes hours. It’s way more work than a regular post. Anything with more moving parts = harder.
Yves do you know if there was a team that produced the excellent Jubiliee paper. He referred to ‘we’. Were there others; is there a team? He referred to a database of 47 countries.
Hi Yves, sorry for the delay in seeing this,
Actually, I host a podcast which releases every week, and I’ve interviewed dozens of guests, so I know exactly what it takes to do them :) I am under no illusion as to how hard it is.
I wouldn’t suggest it as a weekly thing for you to do, but whenever you do get an audio interview, you could put it out on an occasional RSS feed that people could subscribe to as a different format.
But, I understand if you don’t want to have some appendage that only releases occasionally.
The economics of globalisation has always had an Achilles’ heel.
In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics
Not considering debt is the Achilles’ heel of neoclassical economics.
What could possibly go wrong?
Hard, isn’t it?
No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
Look at all that debt building up in the economy before 1929 and 2008.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
At 18 mins.
Milton Freidman rehashed 1920s economics and managed to pass it off as something new.
He didn’t fix any of its major problems.
This isn’t global, is it?
What does it look like?
No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
The debt builds up until you get a financial crisis.
1929 – US
1991 – Japan
2008 – US, UK and Euro-zone
The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above.
The Chinese saw the debt building up in the economy (at the last minute, it was pretty close)
Davos 2018 – The Chinese know financial crises come from the private debt-to-GDP ratio and inflated asset prices
https://www.youtube.com/watch?v=1WOs6S0VrlA
The black swan flies in under our policymakers’ radar.
They are looking at public debt and consumer price inflation, while the problems are developing in private debt and asset price inflation.
The PBoC saw the Minsky Moment coming unlike the BoJ, ECB, BoE and the FED.
Not considering private debt is the Achilles’ heel of neoclassical economics.
That’s handy Harry!
I am a banker and my only real product is debt.
Who can I load up with my debt products?
With everyone using neoclassical economics the world is my oyster.
> The Federal Reserve, by its dramatic support of the credit markets, has given crucial support to the assets primarily owned by the wealthiest Americans.
Isn’t Jerome filthy rich himself. Why would a venal bankster do anything but help himself? That he is in charge at the FED is a license to loot. In further news, price discovery of paper assets has been strangled by the FED. Coincidence?
Powell is a an investment banker turned PE guy. That is why he was a controversial pick: he’s not a monetary economist or even a commercial banker.
Yes, excessive unproductive private debt is a massive problem, so the central banks should stop promoting it! Nobody is served by companies levering up to buy back their own stock (and then needing a taxpayer bailout every few years). Instead, they should stimulate companies financing themselves with equity instead. Wasn’t that the whole point of having a stockmarket?
Driving up house prices is another sin. House price inflation does NOT create wealth! It is still the same house! It is really a big con to make people take on more debt to be able to buy the same thing at a much higher price and trapping them into debt.
Inflation and low interest rates are bad. Negative real rates is a transfer of wealth from the poor to the rich. Of course, guys like Trump love this. I would too if I was $430 million in debt while owning property that benefits from bubbles. Lets reverse this.
A bit of deflation would help the economy, because it raises the purchasing power of wage earners. Their wages have lagged inflation for decades. Inflationary policies have been the main vehicle for creating wealth inequality in the last decades.
Of course central banks keep the myth alive that low inflation is somehow bad and the mass media and celebrity “economists” keep parroting that. But just look at the monster these easy money inflationary policies have created.
and low interest rates are bad. YuShan
Only because they are produced unethically, e.g. via welfare for the banks and asset owners.
Otoh, an equal Citizen’s Dividend and negative* interest on large and non-individual-citizen fiat accounts is an ethical way to lower interest rates.
*Since only individual citizens have an inherent right to use their Nation’s fiat and then only to a reasonable extent.
Just remember, there’s no such thing as any kind of right, inherent or otherwise, unless there’s a way to force its recognition. First year law school — where there’s no EFFECTIVE remedy, there’s no right.
Otoh,
“There’s nothing so powerful as an idea whose time has come” Victor Hugo
E.g. Covid 19 has proven that all citizens need fiat accounts of their own in order to receive fiat distributions since the government does not hand out physical fiat, aka “cash.”
The virus has also proven that fiat distributions ALONE can keep the economy going in our debt saddled economy.
I would never be able to purchase my house right now.
Three and a half years ago, it was valued at half of what it is now considering the comps in the neighborhood. I make about five percent more than I did then. Did the house change? No. The market has gone up and up and has devalued my wages. If I purchased the house now I would have to work almost twice as hard to pay it off. I would not be approved of the mortgage I would need, considering my salary.
Every year ZIRP continues, it devalues my wages and makes it harder for the next person to buy my house.
Well, we’ve got to give money to the rich, which is what zero-interest is, because they’re rich, and ‘we’ — enough of us — worship riches and know we must pay wealth its due in the form of tribute to the wealthy. In order to prevent inflation while this is going on, all ‘we’ have to do is keep the funny money away from the proles (the other ‘we’) and their labor. None of this is inevitable or necessary; nevertheless, ‘we’ continue to elect and serve the aforementioned plutocrats. It seems to work for some people.
I don’t see the significant division between public and private debt/credit, however. It seems to me the business is a coherent, unified system. Wiping out existing debts will not do much unless the system and its practices (and ours) are fundamentally changed. Otherwise it will just grow back the way it was before.
That’s why historical Jubilees were necessary, as I understand it — the people whose minds develop the methods of looting and enslaving the political economy are always popping up in each generation, and tradition and practice carry the bad behaviors forward. Dare one mention the Rothschilds as an example? The Vampire Squid types also learn how to end up dominating the mechanisms of power and distribution, so the best the mopes can hope for is that enough Vagues gain enough of an audience to get the looters to recognize the downsides of blind continuation of looting. And that is a constant uphill battle.
I would be more cautious in thinking that deflation will help the little people — it helps lenders and hurts borrowers. Which of these two groups are more numerous, and where are they situated on the income and wealth scales?
Most debt is owed by the rich – Like Trump being $430 million in debt. These are the guys who benefit from inflation.
Poorer people on the other hand suffer from inflation. Their rents go up faster than their (stagnant) wages and they cannot afford to buy a house because if they try to save money for a deposit, their savings are being hollowed out by inflation. With every 1% inflation, their savings are used to subsidise Trump to the tune of $4.3 million a year!
Monetary policy should never be used as a transfer of wealth, because it is not under democratic control. All wealth transfers, if necessary, should be under democratic control. If you think subsidising Trump to the tune of millions per year at the cost of the poorer half of society, lets discuss the merits of that in an open democratic debate before passing a ‘make the rich richer again’ law.
IMO, separating private debt from public is the key, and many on the right and libertarians focus mostly or only on public debt and equate it with bad bad bad…which is unfortunate because public debt is more easily solved for a nation with a sovereign currency.
Private debt has been relentlessly encouraged by the Fed rate suppression and QE.
Am no expert on MMT, but it does seem to have made it easier to see (at least for myself) that public debt is far less a problem and fairly easily resolved, than is private debt. Perhaps MMT is attacked by the elites because it helps you to realize that their is no real public budget constraint, that debt can be as high as needed and resolved quite easily, thus the elites can’t use that constraint to tell us we can’t have nice things…all the while they provide limitless funding for their priorities like wars and tax cuts for the rich and corporations.
Even if MMT is total crackers, it HAS crystallized the public debt is NOT an economic budgetary constraint…at all.
Using the term Debt Jubilee in some places, gets you targeted and on the road to being disappeared. There might be a libertarian tendency that conflates only public debt as being as bad, while nothing needs to be done about private debt other personal self virtue of reducing spending and using the bankruptcy law as appropriate on a case by case basis.
And that simply is not accurate, especially with the Fed so forcefully encouraging and subsidizing private debt to great harm.
I was part of the Bank One/First Chicago NBD merger, which included Vague’s First USA credit card division as it merged with First Chicago NBD’s First Card division. The resulting train-wreck involving the card portfolios wound up costing Vague his job, and eventually led to the hiring of Jamie Dimon to run the merged Bank One after the dust settles.
Most interesting! Thank you for the info.
If debt jubilees are so important, why hasn’t there been one since the advent of coined money 2,600 years ago and more recently paper money?
Of course there have been ersatz jubilees where the host money is rendered worthless via Gresham’s Law or hyperinflation, which serves the same purpose (debt is wiped out along with the value of the currency) but how would anybody ascertain what’s good or bad money in the ether now, and as far as I can tell, monies generated from the internet don’t seem to be the cause of any instances of hyperinflation, so what’s the new paradigm of getting us to the debt dance where it gets expunged?
I believe that the change occured during the time of the Roman empire. The Romans were very keen on enforcing debt and making the rich richer, it is apparently one of the reasons for the end of the Roman era. We have continued a lot if their legal and financial structures, as well as their roads and heating systems.
Blame the Romans.
The Romans wiped out debt by issuing debauched Denarii, the commonest coin in the land. They went from being 95% silver to having no silver in content aside from being silver-washed, which really ought to called Copernicus’s Law, as he figured it out well before Gresham.
Old Denarius: 25 = 1 gold Aureus
New Denarius: 3,000 = 1 gold Aureus
p.s.
In terms of numismatic value, a Denarius made of good silver was often subject to what are known as ‘test cuts’ in order to see if it was one of the reliable old guard, and i’ve seen coins with as many as 7 or 8 test cuts, and the marketplace treats them like lepers compared to a coin w/o test cuts, they’re worth a lot less.
Now the idea that 7 or 8 people didn’t trust the money enough to take a file and cut into it, tells you a lot about how things were going in the Roman Empire, circa 244 AD.
Silver and gold served as anti-counterfeiting measures in ancient times.
They are long obsolete for that purpose.
Moreover, needlessly expensive fiat is a scam that benefits private interests, not the general welfare.
Sorry, Wuk, the defeated Axis powers were granted a debt jubilee from their former rulers (but payrolls remained payable). See Michael Hudson’s …and forgive them their debts for specifics. Debt Jubilees have occurred recently.
As Hudson documents, the Babylonians, and Hebrews mandated “clean slates” as early as 1500 BC. See Leviticus 25.
Hudson also points out that Jesus’ ministry opposed the Pharisees who colluded with their Roman occupiers to exempt loans from Jubilees.
And speaking of occupiers….Oddly enough, even though we granted jubilees to our enemies, our World War II allies, the Vietnamese, were granted no such debt amnesty. Jeffrey Race (War Comes to Long An) reports this omission was a major motivation for Vietnamese to continue fighting the U.S.
Race himself learned the language on the boat over, and rather than huddling in some “strategic hamlet” actually interviewed the population, prisoners of war and defectors. The U.S. had taken the side of the colonial French oligarchy, and wanted to continue to enforce their rights to collect debts incurred during the colonial era. The population knew widespread debt peonage awaited them if they lost the war.
As for your point about inflation: The (Cato-published) history of hyperinflations validates that none were initiated by printing money. They all stem from shortages of goods and balance of payments problems. In Zimbabwe, the Rhodesian farmers left, and a country that previously fed itself had to import food (shortage of goods + balance of payments problem)..
In Weimar Germany, the French, impatient that their World War I reparations in the form of German-produced telephone poles were tardy, marched into the German equivalent of Ohio (the Ruhr) and shut German industry down. This shortage of goods, and the balance of payments problem of war reparations happened long before that fellow with the wheelbarrow full of deutschmarks went down to purchase a loaf of bread.
I quote Stephanie Kelton: “Not a single one of … 56 cases [of historic hyperinflation documented by a recent Cato study] were caused by a central bank that ran amok. In virtually every case, the inflation was not caused by too much money but too few goods.”
I don’t know if that’s Gresham’s law (bad money drives out good), but it seems the money end of things followed, rather than led the inflation.
The incredible thing about Vague’s work is that virtually no one (besides Bernie and AOC’s squad) is discussing a jubilee as a serious public policy. That’s what we call moving the Overton Window!
German debts would’ve been denominated in Reichsmarks for a country & currency that ceased to exist after early May of 1945, how exactly were we going to enforce that?
Oh, we could’ve gone the WW1 route and demanded that Germans pay for their actions in the war, but how do you get blood out of a shriveled turnip that was the fatherland post WW2.
And please, lets have more historic instances of debt jubilees in modern times (as in the last thousand or so years) i’m anxious to hear about all of them, and you’d think there must be plenty the way the jubileeists prattle on about the subject matter.
As far as money printing causing hyperinflation, that’s certainly the case with our very own Continental Currency and later with CSA currency, both were backed by nothing (Confederate notes included a promise printed on them to pay the bearer after the war, once the south had prevailed)
and became worth nothing. The CSA $ does ok initially when the south was winning, and then you can watch a steady devaluation against gold (the USA issued around 20 million ounces in monetized coin form in all that glitters from 1861 to 1865-the CSA not even 1 grain worth) in particular as their fortunes waned with losses against Union forces.
Fiats lose their value once the sovereign ceases to be able to enforce collection of its taxes, fees and fines so denominated in the currency over which it exercises a monopoly of issue.
State failure comes first, its fiat fails second. The “hyperinflationistas” have the causality backwards.
We won the Revolutionary War, so why was the money we printed ‘Not worth a Continental’?
British counterfeiting of Continentals.
The colonial confederacy (predates the Constitution) did not empower the feds to collect taxes. That’s why the money was worthless.
Taxes drive money.
Taxes drive money.
Taxes drive money.
When the Civil War confederacy ceased to exist, its money became worthless too.
And in Vietnam, rather then extinguish the debts to the French, and their oligarchy, the U.S. chose to translate them into whatever currency the Vietnamese had.
So the Germans and Japanese enjoyed a jubilee, while (our allies!) the Vietnamese did not.
private debt and public debt are not separate issues. It is like the chicken and the egg… a wheel of life… these things go round and round..
the choices we are making in the public debt sector, are creating the need to “go into debt” by the people of this country/USA.
the monetary system, and the us dollar seem to be able to withstand the last 40 years of runaway national debt… but… that ” money” does come from “somewhere”. It comes from the space in people’s minds that they can’t “afford” more, like a national healthcare system, or a functioning government… The things that are tangible in people’s lives, are things we “can’t afford”…
So the choices on what we create our national debt for, causes people to spend their money…. on things their “money” ought to be paying for.
This system we have where the banks that make up the federal reserve, would love for the gov’t to go into more debt… but were we to end the creation of public debt, in order to create our money; we could use the flow of dollars created to pay for these things we all need .
The title of this piece talks about “greenbacks”. Those were dollars created without any debt. and were permanent. and lincoln did this during our civil war when the notion of a continued united states was in question. Now , after a hundred years of this federal reserve created fiat system, we as a nation are in a better place. And we can do what has been done in the past , and make it work.
As MMT enthusiasts like to pretend, we are sovereign in our currency creation.. but we WILL be sovereign, when we MAKE the US Dollars,and owe no debt…. Then After the congress enacts a NEW LAW, to replace the Federal reserve act, that places the money creation of this country in the hands of the private banking sector, which by nature charges interest and creates debt markets to “make us our money” then we can Really start eliminating the debt servicing payments that come out of the national budget, And start directing where the money created by “the treasury” for nothing, goes.
With a change in law,
The US can become a sovereign currency issuer.
Then we can enable the gov’t to transition to one where “life ,liberty, and the pursuit of happiness”, is actually the point.
Then when there is a crisis, and in the coming onslaught of changes to come, there will be…many…Then this creation of ours, “government”.. will be better able to suit our needs, without peddling our posterity to bankers and financiers.
This is a bit incoherent.
The logic of federal fiscal policy isn’t “tax and spend.” It can’t be. Where would people get the dollars with which they pay the taxes. By virtue of the operational nature of reality, it’s “spend first, then retrieve some money in taxes.”
So what do we call the dollars spent, but not retrieved by taxes?
Answer #1: the dollar financial assets of the population.
Answer #2: National ‘debt.’
National ‘debt’ is like bank debt. Your bank account is your asset, but to the bank, it’s a liability. Debt-o-phobia says we must march down to the bank with our torches and pitchforks and demand the bank reduce its debt. An honest banker would say: “But that would make your accounts smaller!” and the debt-o-phobe mob would say “We don’t care! We hate the word ‘debt’…it’s just bad!” Not very sensible, if you ask me.
But debt is a consequence of *any* currency issuance. The dollars *are* debt…whether national accounting records them as such or not (e.g. greenbacks). Greenbacks is just a side trip. Aside from providing an example of bad double-entry accounting, they have no significance as an example currency–except the way they enabled Lincoln to avoid paying usurious interest to fight the Civil War.
So what are we owed for that ‘debt’ embodied in a dollar (besides a dollar to replace the dollar)? Answer: relief from a dollar’s worth of taxes.
“Taxes drive money” is the MMT thing. Taxes are necessary to give the money value, not to provision government programs.
. . .so then let’s make the tax code progressive.
Taxes don’t provision government programs. The twenty-year war (occupation) in Vietnam was funded without raising taxes.
How is this any different than what core MMTers have to say?
It’s not but useful to have people to come to pretty much the same place by independent routes.
Amen to that — could we have dreamt up two figures with more disparate backgrounds than William Mitchell and Warren Mosler? And yet they came to very similar conclusions concerning fiat monetary operations independently prior to their collaboration.
Thanks for posting this interview.
I would love to see a similar interview with Prof. James Galbraith. He is equally level-headed on this and other crises.
Prof. Galbraith has pointed out that bad debt is eventually cancelled, but the important question is just how it is cancelled.
In the 1930’s it was cancelled either by total poverty in the US and UK, or by warlord governments in Germany and Japan. After WWII, the debt incurred by Nazis was largely forgiven legislatively by the Allies — and this led to the postwar boom.
My own writing has specific schedules for cancelling most student debt and medical debt and at least some credit card debt….see NewLawsforAmerica@blogspot.com
Why does this spurious bit of debt jubilee dogma keep being repeated?
…when Nazi Germany ceased to exist, so did their debts. We had nothing to do with doing away with them, they went away of their own accord.
Allied occupation money was the currency of the land from 1944 to 1947, and to throw a spanner in the works, we gave the Soviets the printing plates that had the same exact design, so they could pump out as much as they wanted, which became an issue around the time of the Berlin Airlift, which coincides with the new Deutschmark being introduced, and no we didn’t give the USSR the printing plates on those, ha!
Why do monetarists and gold bugs keep repeating their dogma?
Until we have a just money system, previous unjust money systems will have their appeal.
Not to mention that a return to the Gold Standard would be a windfall for gold hoarders.
> Why does this spurious bit of debt jubilee dogma keep being repeated?
Perhaps it contrasts vividly the difference between what happened when the Germans were required to pay back debts and moar after losing WW1? No less a light than Keynes clearly objected, and was proven right about a decade later.
The name of the currency is a sideshow.
Still listening to this interview so I haven’t heard all of it yet, but I heard that some members of the Fed are thinking about giving money to Americans directly.
https://wolfstreet.com/2020/09/27/the-wolf-street-report-whats-behind-the-feds-project-to-send-free-money-to-people-directly/
Since Wolf Richter talked about it, I want to take it seriously, but has anyone else heard any talk on this?
One has to ask why the hell the Fed, that quasi-private thing that has repeatedly trashed the part of the economy that the vast majority have to try to live in, and fed the gluttonous blood funnels of the Vampire Squids, why the hell should The Fed have any role in “giving money directly to Americans”? Since there will of course be “frictions” and mordidas galore in any such activity?
Two things:
Richard Vague at approx 25:50: “There has been such a division between what the Republicans want and what the Democrats want that it looks like nothing will get done prior to November. You know, we can always hope, but I think that hope is slim. So, I think a lot of what will or won’t happen boils down to what happens in the Nov election. You know, if the Democrats keep the House, gain the Senate, those two things alone will portend, I think, relief?, perhaps even profound relief, beyond what we’ve received thus far. That doesn’t happen, we gonna still be in this quagmire and of course the biggest factor of all is the presidential racewhere different leadership, I think, would bring a different, a very different, and much more favourable outcome.”
I am curious to know why he thinks that Dem congresscritters, let alone the Senator from MBNA, would support such action. Perhaps he is depending on his support of them to sway them?
There are also whiffs of presidential aspirations, another story this. Would this be a good thing? I’d like to know more, will read his stuff and check his history. If he were running I might consider him a lesser evil. He is not for Medicare for all (raise age to 55), but he is for mortgage ‘restructuring’ although I don’t see that his plans address that with any urgency. At any rate, he is not (so far) an actual war criminal, so far as I can tell.
Per that Jimmy Dore segment linked this morning, Pelosi declines to use what she herself describes as the “awesome power of the Speaker of the House” to provide any kind of concrete material benefit (and goes on vacation while the mopes bleed out) because another round of even pittance stimulus checks/helicopter money would have Donald Trump’s name on the checks. Which would be unacceptable politics, allowing Trump to claim credit for the policy, to allow that to happen before the election (if ever.) And as to the promises to put relief for the plebs in “the next legislation,” why, she has to keep her powder dry, right?
These people live in a great bubble of impunity. Popping that bubble is more a Sisyphean than Hurculean task, as things are configured.
How would the commentariat compare Richard Vague’s proposals with those in Dennis Kucinich’s NEED Act from 2011? Or the “Greening the Dollar” program in section N at the end of Chapter IV (Economic Justice & Sustainability) of the Green Party’s national platform?”
I think the big difference between the helicopter money and greenbacks proposed in this article, and those other two platforms/proposals, of the Green party, and HR 2990 112th congress/ , is that this assumed situation continues within the framework in place now; while the other two examples purposefully put the horse before the cart, and first would reform the monetary system of the US, by having congress enact a new law. Which would repeal and replace the existing law, the federal reserve act; and change the nature of how money is made.
My take on the article doesn’t clear up , who gets to make a profit, out of handling the handing out of money to people. So I assume that the current process,practices,and entities would apply. JUST like every other day… just different numbers…. and maybe a new “special vehicle ” at the fed… or some such.
Any person in need, can appreciate more money… and if we continue to create the debt , in order to “spend” the relief… then someone gets to service all those contracts along the way… and also get the benefit of “cheap” money… and considering “they” is the behemoths of wall street… lets be honest who benefits.
That is what has been happening for the last 100 years… and “they”… is fat and happy. And WE ain’t.
And considering “the greenback” was specifically created in the face of similar dire circumstances, to NOT be an instrument of debt…
People ought to look at the options and the history…IMO
I think the difference the bringing monetary reform into the issue is to make a better system, and THEN, run with it…. rather than just create some new lipstick color for the proverbial goose that lays the golden eggs…. for the banking elite, called “greenbacks” and “helicopter money”.
We are in the control of systems we created… and the monetary system and banking are an “uber-system” uber alles… and to fight all of the “good fights” out there in dire need of fighting for… little will ever be done before the money system is working FOR the people, as opposed to against us.
People need to let go of the idea that “the fed” is us.. the fed is “them”.
So, in my opinion, the proposal of greenbacks and helicopter money, need to come from a new improved treasury function… as was intended in the constitution…. and birthed by lincoln… but still dormant this very day…. One day we could be monetarily sovereign
and help ourselves.
I
Richard Vague does not propose to displace the Fed, but simply modify some banking practices, whereas HR2990 eliminates the Fed as a pseudo independent agency. The money power is returned to the Treasury of the federal government which becomes the monetary authority and directly regulates the money supply through the issuance of “greenbacks”, ie, US Treasury Notes, created ex nihilo, without debt. Private banks no longer control the money supply through the creation of debt and the issuance of Federal Reserve Notes. The Green Party seeks to redefine economic activity entirely, eliminating capitalism as we know it. Ending the Fed and debt money make common ground between the two.
Richard Vague has a very appropriate last name. Perpetual Bonds? He tried to call it “Perpetual Money”. That’s a good one. It sounds like perpetual private money fer shure – (but no no – don’t call it “debt”) from people like George Soros for an as-yet unexplained gain. There is no interest involved? Surely that depends on what kind of interest we are talking about. So this leaves the possibility for some mechanism for discounting the amount of “private money” received by the borrowing government. But it looks like public sovereign money because the government prints up 1.5 Tr in a perpetual, revolving private debt mechanism, one Tr goes to direct fiscal spending (maybe, maybe not) and a half trillion goes back to George Soros. And this one-third of all government issued money can go to George perpetually because it’s an open-ended deal. No interest asked. Right. A perpetual private bond which funds public borrowing for a percentage – which isn’t considered to be “interest.” And Mr Vague hedged himself all over the place when asked about MMT. He did not want that discussion at all.
I’ve got to admit, Vague’s fear of calling “perpetuals” exactly the same as “dollars” is puzzling in the extreme. Dollars don’t bear interest. They’re debt, but so are perpetuals. I know, he’s proposing they not be counted as debt, but that’s just bad accounting. Here’s what sectoral balances really look like. Note that surpluses (above the line) mirror debt (below the line).
Anyway, “debt” isn’t scary, or even a problem. Your bank account is your asset, but to the bank it’s a debt. So what? See Randall Wray’s comments here.
Richard Vague confronts the inevitable collapse of this privatized monetary model without mentioning Ellen Brown, or Michael Hudson, or the American Monetary Institute, which means he does not intend fundamental changes, but certain modifications only. He foresees the collapse of this deeply corrupt financial model unless it can be made kinder and gentler, but the nationalization of the system does not figure in his solution. As a financializer himself, who has awakened to the damage he has done, his solution to the failure of financial capitalism is to create more “financial products”. The concept of public banking is alien to his core belief in “free” markets and his debt jubilee is no true debt forgiveness at all, but a negotiation with creditors. He does not want to give offense the those elite parasites at the top of the food chain who owe their privileged existence to the miracle of compound interest.
Debt jubilees – isn’t that something Mr. Hudson has written and spoken about at length?
Yes, the amazing thing here is that Vague is proposing specific policies rather than general solutions. The devil is in the details, and he’s providing details.
Renegotiating your mortgage and exchanging some of your equity for lower interest rates is not “debt jubilee” and it is not a policy that will reduce excessive private debt, which Richard Vague has been instrumental in creating. This fellow does not understand the problem in the first place. Michael Hudson, on the other hand, does understand what’s happening and why. He’s not in the business of creating policy. His business is to educate people like Richard Vague. Does Mr. Vague understand, for example that the engine of economic history is the struggle between creditors & debtors? Does he realize that he’s an apologist for the creditors of this world? His specific policy is to throw the masses a sop. Don’t believe he had a conversion experience on the way to Damascus.
as per my comment above, and MMT and the house of cards… all Vague is talking about is making another level of the same cards as before… it is still just a house of cards… There is nothing actually different.
OK, you and jadan have a point. Vague is the “creditor-friendly” jubilee advocate. But sheesh! The idea that no jubilee is possible, and stricter bankruptcy (thanks Hillary!) will solve these problems is the extent of the current public policy conversation. I’d suggest Vague is making progress, albeit imperfectly.
Perhaps Helicopter Money is not the best descriptor. It means dumping money out of a helicopter and letting who ever is quick enough to get it.
It should be called Drone money, because it can be directed to individuals.
If it is directed equally, maybe even “Drip Irrigation” which not only uses water efficiently, but does not promote the growth of weeds..
These are all good moves to a clean slate, which is the only place a real competition can begin.
Thanks for the article
Any debt reduction is useless if people live beyond their means, because you’ll have to keep repeating it.
However, one of the main reasons that the poorest part of the population live ‘beyond their means’ is inflation. Essentials like House prices/ rent / healthcare costs rise much faster than wages, so some have to go into debt just to make ends meet. What are the reasons for that? Too low interest rates, too much credit expansion and monopolies that drive up prices. I suggest we tackle these things first. Fed policy should target (and achieve) 0% inflation and we need serious anti-trust laws.
If after that the (legacy) debt burden is still too high, there is a very easy and fair way to get relief: free universal healthcare for everybody. With these costs out of the way, peoples existing debts should be easily manageable, provided that people live normal prudent lives, living within their means, not buying stuff they cannot afford.
Free healthcare would wipe out future medical debt, which is a huge burden for the majority with either high-deductible insurance or no health insurance at all.
Free college tuition (plus students living at home) would wipe out future student debt.
Mortgage debt and credit card debt cannot be wiped out so easily. Maybe the bankruptcy laws are in principle enough to keep these debts livable.
Also, mortgage payments are usually a lower burden than rent payments on rented property. If one argues that mortgage debt should be wiped out, one should also argue that rent should be free. Which of course doesn’t make any sense!
The problem is really inflationary policies that drive up (house-)prices and therefore force people to take on more debt. We could use some deflation instead.
Falling house prices aren’t even a problem for people with mortgages, because mortgages are slowly payed off. If you have a 20 year mortgage and therefore pay off half of that in 10 years time, it doesn’t matter if your house sells for 50% less after that. Also, when moving house, the new house will be cheaper too. Granted, the house ownership hasn’t generated any “wealth”, but that was never the function of houses. It is supposed to be a place to live. This situation is no different than what renters have always faced and that was never seen as a problem.
Those two examples, medical care/debt and education debt.. are what I was talking about upthread. These two major expenses people “spend their money on” and go into private debt for… are two places where if the monetary system was reformed and these functions in our society were “paid for” by the power that creates money debt free, i.e. the government… The rest of us wouldn’t have to.
So the choices of us as a whole, were to reform our monetary system, could change our lives and allow us a safety net, and allows us to re-think what we need to make to sustain ourselves. money and time… are things that can be re-ordered in importance.
Does anyone know if there was a team that produced the excellent Jubiliee paper. He referred to ‘we’. Were there others; is there a team? He referred to a database of 47 countries.