fixes the economy

by - 09:19

Fractional reserve banking is the devil.

The business cycle (or the “boom-bust” cycle, where feverish, expansionary booms gives way to painful, contractionary busts) does not defy explanation, as many believe. It is, as Karl Denninger over at Market Ticker aptly demonstrates, a necessary requirement of a banking system in which lenders are permitted to emit unbacked credit into the economy. In essence, busts result from the law of exponents: when net interest expense exceeds economic output (as it must for lending to be profitable at all), over a sufficiently long timeline, the amount of money owed actually exceeds the amount of money in circulation. Well before it gets to this point, of course, people (and businesses) start going bankrupt, as they simply do not have the money needed to make even basic interest payments. These bankruptcies and defaults become losses for the bank, and where loans are unsecured, these losses must be eaten. When they exceed the bank’s capital, the result is “systemic bleedthrough” — that is, damage to the rest of the economy. This happened in 2007 when interest payments on debt constituted approximately one-third of every dollar spent in the United States; rising gas prices destroyed people’s ability to simultaneously commute to work and make their mortgage payments, causing a cascade of defaults that nearly wiped out the financial sector.

That is one of the most terrifying paragraphs I have ever read. I wont go into it in detail because I assume somebody reading an alt right blog knows what the federal reserve is but suffice to say fractional reserve banking and the federal reserve system are based around creating money from debt. This is the root cause of most of our financial problems. Only under a system where a bank can create funny money whenever you make a deposit and then loan that out at interest could it be possible for there to be more money owed than actually exists thus making it impossible for all debts to be paid. I don’t think this is a good idea. The great tragedy though is that with a little modification this financial arrangement could be stabilized and prevent much of the chaos currently inherent in our monetary system.

How the hell would I do that? Quite easily: print money. Yes you heard that right. Printing money (or more accurately creating more electronic money) is the answer to many of our problems. The problem is that right now for money to be created debt needs to be created. The easy solution is to create money without debt. Of course there are some necessary caveats:

1. Only allow the government to create money.

What? You mean that is not how it works now? That is correct. Under fractional reserve banking private banks can create a certain amount of electronic money against every deposit it holds in reserve. This is what creates the fuck puzzle. If only the government can create money banks can only loan money they actually have…a novel concept I know.

2. Limit the amount of money the government can create

Print moar money…everyone can be rich amirite? Not really. Under normal conditions increasing the supply of something while demand stays static will result in the price of that thing going down. The same principle applies to money. We call it inflation. All inflation is not bad however. I read somewhere that 3% is the ideal inflation rate, enough to stimulate growth but not enough to fuck the market. That sounds reasonable to me. Limit the government money printing to increasing the supply of dollars by 3% a year. That might not seem like a lot but increasing the amount of dollars in the world by 3% is a huge fucking number.

So if the government is increasing the money supply by three percent a year how the hell do they circulate it? By spending of course! This brings us to our second method of fixing the economy. Now that monetary policy is squared away we need to talk taxing and spending.

Our tax system is an unholy mess even worse than our monetary system. You think the federal reserve is bad? Our tax code is 100x more fucked. Let’s look at this as a representative example:

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

Are you fucking serious? General Electric not only paid no taxes…it GOT 3.2 billion from the government in free money. How the hell do they do that? Tax credits. Essentially if you do a certain action the government considers worth a tax credit you claim it on your taxes and it reduces your tax bill and/or taxable income by x dollars just like a deduction…only if your tax credits exceed your tax bill the government actually pays you. Now that is one hundred percent fucked. The system of credits and deductions is actually a complex list of handouts which the government uses to reward certain behaviors. It is also an indirect handout to accountants who have to be hired by businesses to comb the tax code for all these juicy hidden bonuses.

My answer? Abolish the whole fucking thing. No deductions, no credits, no refunds, you pay the exact percentage your bracket says you pay. This has actually been done before in a limited form. The original idea behind tax cuts is to lower the actual rate while closing loopholes (which is what deductions and credits really are) and it has raised net tax receipts in the past (notably under Reagan). I would do the same thing. Eliminate all deductions and credits (which would also let us fire a hell of a lot of IRS people and corporations wouldn’t need so many damn accountants, I would consider this a worthy cause in itself for those reasons alone) and reduce the marginal tax rates to:

25-50k a year pay 5%
50-75k a year pay 10%
75-150k a year pay 15%
150k-250k a year pay 20%
Over 250k a year pay 25%

Now on paper this looks like a tax cut for everybody. That is not actually the case. People who make under 250k a year would pay much less generally but people and companies rich enough to afford it can hire accountants and pay nothing or even get money. This comes to a screeching halt under my new plan. However as a sweetener for the rich I would abolish the corporate and capital gains taxes. This would also eliminate many “compliance costs” which are an indirect tax themselves. This does not mean corporations and wealthy investors pay no taxes though. If corporations want to be legal persons (on an unrelated note I think that idea is shady as hell but unlikely to change) then corporations should be treated just like anybody else and pay the exact same tax rate an individual would pay with their income. The same goes for investors. All income gets treated and taxed the same and at the same rates.

But what about people who make less than 25k a year? That’s a special case. The fact of the matter is that as automation continues and accelerates the need of the economy for unskilled labor is only going to decrease. The economic value of our poorest people is essentially only their ability to consume. This is why I propose a form of negative income tax.

The way it works is the government guarantees every adult an income of 25k a year. If you make 20k a year the government writes you a check for 5k. If you make nothing the government gives you a check for the full amount of 25k. This sounds like a handout (which of course it is) but it makes sense. People too stupid to get even the simplest job can still contribute to the economy by buying hot pockets and spinning rims. The economy needs consumers. Why should we go through the inefficient process of paying them to do pretend work? I say just give them the money and have done with it.

This is not the only handout I am proposing either. I want family subsidies. I know what I said about marriage that one time but hear me out. Essentially the only way to “grow” the economy in a non funny money system is either to increase productivity or increase the population. Babies are a net boost to the economy pretty much categorically. So I am proposing two family subsidies

1. A once in a lifetime payment of 100k dollars to a newly married couple on their wedding day

The important thing is you can only get this once. There is no getting married, divorced, and remarried to game the system. The 100k number is arbitrary. I could see it going as high as a million dollars actually. The central idea is that every newly married couple gets this one time payment to do whatever they want with it. Smart couples will use it to buy a house or start a business. Dumb couples will blow it. Either way it gets spent and new families get a chance at a strong start

2. A once per child payment of 10k dollars

I like the idea of replacing monthly or biweekly checks with all at once payouts. I’m applying that here. Instead of WIC which pays single mothers to be single mothers I am advocating that every married couple (as long as they stay married) get a 10k check from the government on the birth of every child. This creates an incentive for married couples to stay together and it cushions the financial blow of a new baby which might allow the “responsible” people to actually reproduce. The underclass will still get checks for having children just like they do now except they will have to be married. Just like the first subsidy this number is arbitrary. I could see it being raised.

The negative income tax and the family subsidies would be the main form of entitlements the government paid out under my proposal. Yes I am fully aware that under this system that two totally worthless people can collectively make 50k a year without working a second, get 100k when they tie the knot, and 10k a year more by having a baby. But guess what? Over time the economy is going to need fewer workers, not more. Widespread unemployment is going to be a fact of life forever. Probably 10 million people could do every job that “needs” to be done in America right now. Why should we go to the trouble of creating busy work for all the superfluous people? Just pay them and at least they can be consumers. Business will be that much better for people who actually produce things.

Of course this is not all I would do. We have already discussed education reform here at Yetzer Hara and I think that policy is still sound. Theoretically we could train millions of engineers, computer programmers, and other people with real skills every year if my proposed reforms were implemented. I would imagine those people who actually produce things could stand to make much more than the bare minimum if the consumer base had a guaranteed income. However I would seriously consider a protectionist tariff in addition to make sure all of those American consumers support American producers. Free trade has failed us guys…sorry but that is the truth.

I would also have a consumer debt bailout. It wouldn’t require anything super fancy, just tell every bank that was bailed out by the government that in repayment they have to write off just as much debt owed to them by Americans who make less than 250k a year. A bank gets a billion from the government? That bank has to forgive a billion dollars in credit card payments and mortgages held by regular people. This wouldn’t be that hard. The money and the debt only exist on a bank computer screen anyway. Also since banks can now only loan money they actually have there will be less loans given out and interest rates will be higher, thus preventing many Americans from falling into debt slavery in the first place.

It is literally heartbreaking to think how easy all these changes would be and how quickly they would fix our economy when you consider that none of this will ever happen. At least you my loyal reader got a glimpse of my genius.

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