by Jerry Alatalo
“So long as all the increased wealth which modern progress brings goes but to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent.”
– HENRY GEORGE (1839-1897) American economist, single tax proponent
The worldwide economic crash of 2008 which humanity deals with up to today generated a massive conversation about economics and banking, in particular sparking great interest in alternatives offering better outcomes.
What has happened is that people have researched, studied, developed and articulated good alternative systems in the roughly seven years since 2008. The small group of people who control the global financial system have noticed the extraordinary interest in new alternative theory, and, for fear the alternatives will actually gain traction and become implemented, years ago began planning the trade deals called Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (TTIP) to effectively kill any alternatives.
The Occupy movement made the phrase “We are the 99%” part of the global culture, for the first time unveiling/introducing the 1% to all people around the Earth, and essentially lit the fire of an ideas-for-the-future war between the 99% and 1%. One has only to consider that both the TPP and TTIP – the largest multi-nation trade deals in history – have and are being written in secret to understand the immense importance of what is going on here, and why the deals’ details must become made available for examination by every person in nations potentially signing on – before the deals become voted on and/or made the law of the land.
Given the more urgent task of fighting for total transparency with regard to TPP and TTIP because of the enormity of consequences a very large percentage of the world’s people will experience if passed, it becomes easily understandable that focus on alternative solutions has been placed “on the back burner” so to say. If one’s house is on fire, it becomes necessary to put out the fire as opposed to spending time in the vegetable garden. Reports suggest that men and women in potential TPP / TTIP signatory countries are doing commendable work in opposition to the way the trade deals haven’t been presented in full for their consideration, along with strongly expressing legitimate concerns to elected representatives.
Economist Scott Baker gave an excellent presentation recently on highly practical, beneficial economic/financial alternatives for people living in the United States. With hopes of reinforcing efforts around the world for promotion of new and implementable ideas that offer citizens real options for improving living conditions, a video of his presentation is being shared here.
While his talk is directed to Americans the ideas presented are ones that apply in any nation. The four foundational concepts Mr. Baker builds upon and explains in the talk he calls “Super-macro economic solutions”, each when implemented capable of saving governments – the people – trillions of dollars:
- Sovereign money, aka debt-free money
- Land value taxation, aka Georgism
- Public Banking
- Ending government financial asset hoarding
Other steps for positively transforming economic conditions include application of proper regulation to minimize criminal behavior in financial sectors, which would result in re-directing trillions of dollars into government revenue accounts.
Mr. Baker explains why citizens should have no problems in accepting the changes he proposes:
- Because with good, clearly beneficial incentives people can change
- People are inherently reasonable and open-minded to good ideas
- People genuinely want better economic conditions
Sovereign Money – U.S. government can issue the nation’s money without the Federal Reserve
What can fiat money do for the economy?
- Pay for infrastructure
- Pay for social security
- Pay for R+D in science, education, foreign aid, new energy systems, etc.
- Plus any expenditure which has a positive money multiplier effect
The $29 trillion spent on banks after 2008 resulted only in asset bubble inflation.
An example of a positive multiplier is $1 spent on social security that translates into $2 of economic activity. Negative multipliers include tax cuts for the rich and military spending, which most likely result in a net loss in economic activity.
The next question Mr. Baker answers about sovereign money is “what about inflation?” The nation’s money quantity should be kept as close as possible to the amount needed to meet the nation’s productive capacity. In his view, private banks are not producing/creating enough money through lending, while the Congressional Budget Office in its reports asserts that another $trillion in circulation wouldn’t result in inflation.
Next, he asks “why borrow/rent our money when government could create it?” Since 1913 and the Federal Reserve Act that established the Fed, the Federal government has paid the Federal Reserve Bank for money with interest-bearing Treasury bonds whose interest rate is determined by the Federal Reserve Bank itself. The interest is an expense for the American people which becomes eliminated once the conversion to sovereign money occurs.
Federal Reserve notes or United States notes?
The Federal Reserve Bank owns 18% of U.S. Treasury bonds. Japan, China and other nations own significant portions, and by holding those Treasury bonds China has gained a competitive advantage through devaluation of their Yuan, making Chinese exports more attractive to international buyers and American products more expensive.
A very wealthy rentier class makes a lot of money off of interest on Treasury bonds, a situation which would disappear when Treasury bonds become obsolete and unnecessary through establishment of a sovereign money system. Other reasons for converting to sovereign money include:
- The independent Federal Reserve Bank can neutralize government spending by increasing interest rates, especially when spending becomes necessary – during an economic recession
- Even during good economic times interest-bearing debt adds up to 50% to the cost of public projects like schools, roads, infrastructure improvements, public safety enhancements, and so on
- Sovereign money would result in much less corruption
- Sovereign money wouldn’t result in the government printing money “willy-nilly” as some warn, but an appropriately staffed organization would keep to targeted levels of money for the nation’s productive capacity
Land value taxation – Georgism
“There is enough, and to spare.” – Henry George (1839-1897)
Georgists believe monopoly in land is the cause of unjust inequality, and therefore advocate for land value taxation, sometimes called “single tax”. Currently, both homes/commercial buildings and land are subject to taxation, but Georgists propose that only land should become taxed. This view derives from the view that public revenues would best be:
- Light on production
- Easy and inexpensive to collect
“The Georgist proposal achieves the goal of ‘left-wingers’ for security and social action, but without restricting liberty. It achieves the goal of ‘right-wingers’ to attain freedom, but without privilege and monopoly”.
Scott Baker describes New York City’s taxation policies, where ‘special deals’ allow luxury condominium complex owners to pay 1/100th the property tax of condominiums costing 1/100th as much; parking lots paying 1/10th the property tax of neighboring properties which are built-upon and efficiently used; and the situation where 60,000 people in New York City are homeless while vacant and under-utilized land are both under-taxed and warehoused.
It is estimated that the average American family would see an annual increase of income of $6,300 if land value taxation became implemented. A single, land value tax would end:
- Taxes on wages, sales and fixed capital
- Land speculation – the main cause of boom-bust economic cycles
- Most rent-seeking activities
- Causes of most political and other forms of corruption
- Unjust inequality based on monopoly of resources
- Urban sprawl
- Blighted, warehoused neighborhoods
- Enormous tax breaks for developers, who would then build to sell at more reasonable prices
America’s only State-owned public bank is the Bank of North Dakota (BND), chartered in 1919 and now more profitable than all the “too-big-to-fail” Wall Street banks. The main advantage of BND for the people of North Dakota and neighboring states is effective empowerment of economic growth through banking practices that keep financial resources inside North Dakota and the region.
Many monetary reform advocates believe the creators of the TPP and TTIP have as one of their main goals making public banking illegal. Their premise is that nation-states shouldn’t compete against commercial interests in an unfair way or “unfair competition”. It is self-evident that public banking, while good for the 99%, represents the greatest threat for the 1% in the banking industry, as related to loss of profits – from greatly reduced numbers of high-dollar financial transactions.
Some experts on monetary reform have estimated that 40% of the cost of public projects goes toward payment of interest. State, county and city-owned public banks could eliminate most interest expenses that those governments incur when signing loans made to them by Wall Street mega-banks. Among the many other reasons for establishing public banks are:
- New financial rules/laws could cause bond rates to soar
- Minimal operating costs (no bonuses, fees, commissions / no highly paid CEOs / no need for buildings, branches, tellers / no advertising expenses)
- Banks have unlimited low-interest credit
- Counter-cyclical lending allows sustainable growth during economic recession
- Less corruption, more efficiency, more profitability, less expenses (Bank of North Dakota is scandal-free since 1919)
Ending government financial asset hoarding
Scott Baker admittedly kept this last of the four solutions for the end because of the complex nature of the subject. This section of his presentation could be described as more “esoteric” and perhaps requiring further research to reach a firmer understanding, although accountants and finance experts will likely easily grasp his points.
Basically, the point he’s making is that government entities of all sizes from town to city to county to state levels, from fire departments to public pension funds, are required to produce an annual report of their total assets in a “Comprehensive Annual Financial Report (CAFR)”, which includes:
- Governmental funds
- Proprietary funds
- Fiduciary funds
- Component units
Proprietary funds, fiduciary funds, and component units included in CAFRs are not included in governments’ yearly budgets, and are where most surpluses are located.
Mr. Baker describes a “proper” budget as made up of: 1) Balance forward of the previous year’s unspent revenues, 2) The current year’s projected revenues, and 3) The current year’s projected expenditures.
Apparently government budget processes omit the previous year’s unspent revenues; in other words, certain actual assets are not included in government yearly budgets. Without resorting to a conjecture-based analysis of CAFRs, we will leave it to the reader to read between the lines of Mr. Baker’s words:
“If a process can be made complex and obscure in order to benefit the elite, it will be”.
There are over 200,000 CAFRs in America adding up to trillions of dollars. Scott Baker is asserting that those trillions of dollars, or portions of those assets, could become utilized in ways which result in better consequences for citizens. CAFRs represent a somewhat obscure, unknown governmental finance subject researched by only a small number of citizens.
That said, where trillions of dollars are involved one could safely bet that, like on Wall Street, extensive levels of corruption and “rigging the system” are present.
Scott Baker presents four real and solid solutions for building a better economy and financial system in America – solutions of which there is every good reason to believe are achievable.
99% of men and women see that as a “win-win” proposition.
(Thank you to Henry George School of Social Science at YouTube)