Fiscal cliff: Time to call his bluff
"Financial open" has all the features of the operation under a false flag, noisy and violent directed to soliciting concessions opponents. Neil Irwin of the Washington Post called it "self-induced crisis austerity mode." David Weidner in the Wall Street Journal calls it a theater being enacted to put pressure on policy makers in the field of budgetary financing:"Open" in fact - just fabricated the annual budget ... The most likely outcome will be a combination of tax increases, spending cuts and the rumble of kicking an empty pot on the road.
In this case, the media covering this topic, "panic, to inflame the corresponding event somewhere between the approach of the storm and an alien invasion." In the summer of 2011 such hype in the media with success has led to the fact that the Dow Jones Industrial Average fell almost 200 points. But this time the market in general ignores the interruption, whether self-reachability of the agreement, or not giving it znacheniya.Kazhetsya, the purpose of the action - to destroy the social and health care, that is exactly what for decades tried to achieve a radical group of conservatives.
The problem is that no agreement would be sufficient. If we Ruhnu off a cliff, then taxes will rise for everyone, and GDP can be expected to fall by 3%. If no agreement is reached, it will not increase taxes for everyone, and will cut some social programs. But the main problem - high unemployment and drooping economy - will remain with us. More effective solutions.
Taxpayers and governments who have gone too far, as you know, dare to more drastic measures, and considering there are options that could solve the basic problem .. here are some, deserves the attention of the media:
1. The tax on financial transactions.
If children's shoes and boxes for lunch obkladyvayutsya almost 10% tax, the sale of financial services is still carried out with impunity. The idea of a tax on financial transactions - the Tobin tax - for many decades is under wraps: but now he's teething. The European Commission has supported the plans of 10 states - including France, Germany, Italy and Spain - to start taxing in order to raise funds to fight the debt crisis. Sarah van Gelder, from the magazine Yes! He considers that this tax will not only help reduce the deficit, but also hit the recipients of the highest incomes and cool the speculative fever of Wall Street.
Saymon Torp, blogger-financier of France, leading figures of the Bank for International Settlements, showing the amount of US financial transactions almost $ 3 quadrillion in 2011. Taking into account the data from other sources, it displays the figure of $ 4.44 quadrillion. Even using a "conservative" estimate of $ 3 quadrillion, the tax is only 0.05% (1/20 of 1%) would be sufficient to get the $ 1.5 trillion a year - that completely replaces the tax on personal income and does not require any cost.
2. Focus on the coin with a trillion dollars.
If Republicans insist on the letter of the law, the Democrats would respond to their law. The Constitution says that Congress shall have power "pull the money" and "regulate the value, respectively," and there were no restrictions on the value created by the Congress of money, as pointed out by the chairman of the subcommittee on monetary circulation in 1980.
I offered a solution in the article "Debt Network" in 2007, when it was only a "strange idea". But after the 2008 banking crisis, this idea has attracted the attention of specialists. The Washington Post article on December 7 entitled "Can the two platinum coins to resolve the debt crisis?" Brad Plummer wrote that if Congress does not raise the debt ceiling - that is an integral part of the negotiations on the financial precipice - "some of their strange ideas can attract more attention. "
Ed Harrison at Credit Writedowns summed up thus:
Treasury to mint coins $ 1 trillion, or any desired stoimosti.Kaznacheystvo puts it on account of the Treasury buys FRS.Kaznacheystvo obyazatelstva.Izyatie obligations - such as the exchange of assets, as well as QE2.Rost reserve balances are not inflationary, as already manifested mitigation credits 1.0, QE 1.0 and QE 2.0.Eti actions of the Treasury does not create a new network of financial assets in the non sektore.Krizis ceiling predotvraschon.Plammer debt refers to Yale Law School professor Jack Bolkina confirming that she Coy scenario is quite legitimate. He also refers to Joseph Gagnon of the Peterson Institute for International Economics, says: "I like it. There's nothing obviously problematic from an economic point of view. " To the objection that this is a legal focus, which exposes to ridicule the law, Paul Krugman said: "It just sounds silly - but such behavior of Republicans in Congress. So why not answer them, using legal tricks? ".
3. Claim that the debt ceiling unconstitutional.
14 An amendment to the Constitution requires Congress to pay its debts on time and in full, and Congress does not know how much tax he will gather, as long as not all accounts are presented. debt ceiling bill was introduced, first held in 1917, and has since been revised several times. The constitution above, and follow her need.
4. Interest-free loans to the government's own central bank.
If the government to refinance its entire debt by the Fed, it can save almost half a trillion dollars a year in interest because the Fed makes allowances for the government. The recently announced monthly QE4 adds $ 45 billion to buy back government securities to the $ 40 billion of mortgage-backed securities, stated at QE3, but the timing end of the program is not specified; $ 45 billion a month - more than half a trillion per year. When added to the federal debt, which already holds the Fed, the entire $ 16 trillion federal debt could be redeem for 28 years.
This is not such a wild, untested idea. Interest-free loans from the central bank were taken by Canada in 1939-1974, 1946-1973 in France and Australia and New Zealand in the first half of the 20th century, with great effect, and without creating price inflation.
5. Conclusion in reserve part of the military.
If we look at past costs, it turns out - almost half of the federal budget goes to the military. The data speak for themselves.
6. Forgiveness of debt.
Economists Maykl Hadson and Stiv Kin found that the only way out of debt deflation is debt forgiveness. This can be achieved redemption Fed's $ 2 trillion in debt for student loans and other securities, asset-backed, and either write them down or refinance without interest or very low interest rates. If banks can borrow at 0.25% - this is why people can not?
7. Banks are owned by states and municipalities.
Municipal governments are on the brink of its own failure. Anne Larson at Dissent magazine denounces the practice of issuing loans greedy Wall Street, causing more and more municipalities are suffering across the country.
Predatory Wall Street action can be avoided ogranizovav municipal state-owned banks and local banks, which will use the public finances for the benefit of society. Profits return to local governments in the form of dividends. German researcher Margrit Kennedy has calculated that a stunning 40% of the cost of public projects - on average - go to interest payments. Municipal banks are reducing the cost of borrowing to pay interest to the government, along with other benefits, discussed in detail here.
To free the hostages and let come better times
It is said that the financial precipice holds Congress hostage demands of conservatives, but the real hostages - debt slaves of our financial system. The requirement for "financial responsibility" is used as an excuse to introduce sweeping austerity measures for the people - the measures by which to win 1% and 99% will be in the grip of debt.
The government did not require the financial responsibility of the failed financial sector. Instead, Congress showered him with hundreds of billions of dollars, and the Fed added another trillion. No obvious harm such measures did not cause an economy that lives better than drawn-EU belt. A couple of trillion dollars, aimed directly at the real, productive economy could give a significant growth.
According to Federal Reserve data for July 2010, the cash reserves were actually $ 4 less than in 2008 (reduction was in the shadow banking system, previously filed as the M3). This means that $ 4 trillion may be returned in cash reserves before the problem becomes general price inflation.
Samonavedonny crisis austerity differs from the genuine crisis, including unemployment, households crisis fattened military and unpayable debt. Cuts in social services, the sale of public assets and raising taxes does not heal the disease. Maintenance of a viable and productive economy requires a well timed jump to the new. The new economy requires new methods of public financing.
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