Next US Crash between 2022 & 2023

by Serban V.C. Enache

Despite the desire of some to plunge the US economy into a recession under Trump’s term – probably the ultimate humiliation for the businessman President – the bust isn’t anywhere near the horizon. To argue this point, I will use the 18 Year Real Estate Cycle approach – discovered by land economist and real estate appraiser Homer Hoyt in the 1930s – and used with great success by other Georgist authors like Fred Foldvary and Fred Harrison. Both men predicted the Great Financial Crisis, Harrison as early as 1997.


Homer Hoyt observed that the Chicago real estate market, for almost a century, followed a nearly perfect 18 year cycle. The graph below shows peaks in land values, in construction, in the business cycle, and the intervals.

The cycle’s dynamics are as follows… It begins when home prices are at a level when rents from owning property cover the mortgage to buy it. When buying is preferable to renting, this triggers an upswing. Increased home equity encourages more buying. The financial sector fuels the phenomenon aplenty [80 percent of loans in the US are mortgage loans]. Land prices grow much faster than incomes and rents. After the 14 year mark the situation becomes unsustainable. A four year downturn follows. Fear kills excessive prices faster than greed hiked them. But the 18 Year Cycle theory doesn’t hold between 1925 and 1973 [World War 2, regulated finance, full employment policy, strong unions]. There is no perfect cycle or model. To have perfection would mean to have stagnation, and the nature of capitalism, indeed the nature of humans, infringes upon this state of ‘perfection’ with change. The seminal part isn’t really the time frame, but the key indicators signaling a turn in the cycle.

It’s also very important to note that traditional financial theory doesn’t apply to much of the world today, for countries who have free floating fiat currencies as opposed to gold or foreign currency pegs. I always cringe when I hear doomsday scenarios invoked on the grounds that near zero or negative interest rates herald an imminent collapse, because central banks can only keep interest rates ‘artificially low’ for so long. The authors of these predictions clearly don’t understand fiat money, and the fact that countries which spend and tax in their own free floating fiat currency can keep rates wherever they want for how long they want. They keep the rate fixed [at their desired level] by allowing their money supply to fluctuate according to demand – something you can’t do under a fixed exchange rate system. A currency sovereign may control the price [interest] of his currency or the quantity of it, but never both at the same time. You either control the price and allow the quantity to fluctuate. Or you control the quantity and allow the price to fluctuate. Obviously, the former approach is much more conducive to stable economic activity and planning. And on the private sector side, banks don’t lend out deposits when they make loans to customers. Banks are constrained in their lending by their capital and the actual demand for loans. Loans create deposits. The vast majority of money in our economies is created endogenously.

So, moving on from 1973 up to the present, unfettered predatory/speculative finance + Animal Spirits, a term used by Keynes to describe people’s willingness or lack of it to spend and borrow [reduced or increased desire to save] + accommodating monetary policy in the form of near zero or negative interest rates + uncaptured values of location [the root cause of it all] equals the 18 Year Land Cycle or a shorter version of it. Predictions can be slightly altered as we approach the end of the boom period. Knowing all this, I put the next US crash somewhere between 2022 and 2023. If Trump opts to go fiscal instead of relying solely on monetary policy to keep the economy ‘good’, then the 2023 mark is the more likely date. Those who expect it sooner as in this year or the next, invoking the negative yield spread between short and long term Treasury bonds, will be proven wrong, for the aggregate macro-economic data is at odds with the orthodox economic narrative. The US and other countries are stuck in a low economic growth, low bond yield, low inflation atmosphere. And financial markets aren’t happy with it, despite receiving undue bailouts and windfalls under the Obama and Trump administrations. The crash may come sooner if Washington gets the brilliant idea to try and shrink the fiscal deficit in a proactive manner.

Michael Hudson on Real Estate & Speculation

Historian and economist Michael Hudson in a seminar from two years ago on real estate & financial speculation. Well worth the listen. Can’t recommend it enough.

Some Key Takeaways

Land is the most important thing in economics, the largest resource, and that’s why it’s the least talked about in the economics profession, hostage and or ally to the vested interests.

Thorstein Veblen observed that finance capital is real estate. The object of real estate developers is to tax the population via rent and interest, to inflate the price of property and then find “a sucker to buy.”

In the US, 80 percent of loans are mortgage loans. And 80 percent of capital gains are comprised of land.

The purpose of a city is to ensure that people can live, work, and do business there. But finance capitalism [as opposed to the industrial capitalism envisioned by the classical economists] is all about turning the city into an investment good – which means eroding the aforementioned activities [living, working, and (wealth creative) business].

Hong Kong’s budget [which includes all the expenses of running the public infrastructure] is based on taxing the rental value of property. The tax scheme it employs is not the Georgist single tax system. Even though the HK Government taxes the rental value of property, it’s still facing rising property prices. That’s because HK doesn’t capture anywhere near the full value of land.

Australian Governments have been content to neglect the manufacturing sector and encourage private debt growth and asset price inflation, relying instead on the resource exports sector – with China being their biggest customer.

The Chicago Boys, the first thing they did in Chile after bringing down Allende, in addition to assassinating every land reformer and labor union leader, closed every economics school in the country. They realized that you can’t have a [pseudo] free market without having a totalitarian state [complete control over the curriculum]. The Chicago School controls all of the major referee economic journals in North America – hence the lack of criticism of unearned income [like interest, rent, and patents].

Breaking with the tradition of Classical Economics, the modern ‘free market totalitarians’ insist that there is no economic rent, that there is no free lunch.

Big lenders to developing countries [Hudson cites Argentina as an example] try to assess the growth in the balance of payments of the debtor nation in question, in order to pocket all that growth for themselves.

The FIRE sector [finance, insurance, and real estate] effectively imposes a private land value tax on the country. Would-be debtors outbid themselves, who will pledge more of the rental value to the bank.

Foreign oligarchs wish to place their money outside, in case their Governments will try and confiscate their illicit wealth. Instead of putting their money in the stock and bond markets, they prefer to put it into real estate. This leads to asset price inflation, making it harder for households, workers, and SMEs to live, earn, and operate.

To the ‘rich people create jobs’ myth, Hudson argues that many in fact are job destroyers. He gives the example of a corporate raider, who borrows money at 1 or 2 percent from a bank, with which he acquires a company whose stock yields 6 or 7 percent, he doesn’t want to hire more people; he wants to lay off workers, to cut corners, to use the pension fund to pay the bank, and to threaten workers with company default if they don’t give up their current pension plans and other benefits.

The way to make money fastest is in an economy that’s being looted. Adam Smith said the rate of interest [referring to the interest payments the population had to make to the creditors] is often highest in countries going fastest to ruin.

Hudson says that the one identity that’s left out in Identity Politics is the identity of the person who has to work for a living.

The dream of finance capitalism / rentier markets is neofeudalism: that all income above subsistence be pledged to the rent-seekers, to the usurers, to the monopolists, to the plutocracy.

The practice of a Government borrowing in foreign currency [swiss franks and euros for instance] to finance domestic projects, which will require domestic currency to be printed anyway is ‘fake economics.’ Instead of being stuck with paying principal plus interest in a foreign currency [to fatten bankers], it’s much better for the Government to simply print its own interest-free currency.

High population levels don’t inflate property prices. Hudson gives India and China as examples and contrasts them with Western countries. It’s how much the banks are able to squeeze from the population that determines property prices, not the population level itself.

John Stuart Mill said that economic rent is what landlords make in their sleep.

There’s agreement among all the mainstream parties that the top 10 percent wealthiest in society should benefit at the expense of the bottom 90 percent.

Why do politicians allow financiers to dictate to them economic policy? Bribery, campaign contributions, blackmail, and crime.

For old people and retirees, who can’t afford to pay land value tax, the Government can freeze the money obligation on them for a given time period. However, the back tax [the arrears] will be collected from the sale of the property when the owner dies or moves out. Nobody has to be kicked out in the streets.

My enumeration ceases here. But there are many other important points Hudson makes. I encourage readers to make time and watch the whole seminar. To me, the notion of seizing the Natural Commons for the people is not only economically sound, but morally just, whether one’s of a particular faith or no faith. Treating land as capital, as a commodity, an instrument for speculation – to me – is not only economically unsound and false, but a sin against Man and an affront to God. In spite of my atheist brain, that is how my heart perceives it.

Erdogan is Right about Monetary Policy

by Serban V.C. Enache

Last month, Turkey’s president fired the head of the country’s Central Bank, Murat Cetinkaya. “We told him several times to cut interest rates at meetings on the economy […] We said that if rates fall, inflation will fall. He didn’t do what was necessary.” His view on monetary policy was mocked by mainstream economists, who are either incompetent or just playing dumb. Sure enough, the CB did what Erdogan desired. That being said, Turkey’s key lending rate and interbank rate remain in the double digits. Meanwhile, private debt to GDP has stabilized at around 170 percent and the public’s desire now is to slowly unwind.

Here’s why Erdogan’s unorthodox view on monetary policy is correct. The CB’s lending rate is the cost of borrowing reserves; reserves are used by banks for accounting and settlement purposes. Banks DO NOT lend out reserves to their debtor customers. The ability of banks to approve loans is contingent on their capital and the actual demand for loans: the presence of credit-worthy customers willing to borrow money. Banks first approve the loans, and later acquire the reserves if they need them. So long as a bank meets the capital requirement, it can always borrow reserves [in case it’s short on reserves] from the interbank market [from banks with a surplus of reserves] or from the Central Bank itself. The lending rate is a cost on liquidity. During a period of deleveraging, which the Turkish private sector wants to do, it’s not wise to increase this cost. At the same time, higher interest on reserves and on Government bonds translates into larger financial flows into the economy through the CB & Treasury interest payments channel.

A counter-argument can be made that, with a lower lending rate, speculators could borrow Liras more easily and use them to buy foreign currency. This is a legitimate concern, however, since Turkish private sector debt has peaked, fewer economic agents have a good balance sheet to engage in such activities, and at the same time, given the overall situation, banks are more prudent now, since their equity positions are shaky. This particular concern wouldn’t exist if the country’s laws ensured asset side discipline for the banking sector. Contrary to conventional beliefs, you don’t discipline banks on the liability side, but on the asset side. A bank’s liabilities are stable in value, but its assets [loans made] oscillate in value. The riskier the loans, the riskier the spread between assets and liabilities, endangering the bank’s equity position. Erdogan’s desire to have the Central Bank lower rates is beneficial in two ways for the Turkish economy. First, it allows for a smoother deleveraging phase. Second, it minimizes the volume of funds entering the economy via the CB & Treasury interest payments channel, easing inflationary pressures.

Here’s what Erdogan’s Government should do with regard to asset side regulations. Banks shouldn’t have subsidiaries of any kind, since keeping assets off balance sheet doesn’t serve public purpose and it makes it harder in real terms for Government regulators to monitor them. Banks shouldn’t be allowed to accept financial assets as collateral for loans, because leverage serves no public purpose. Banks shouldn’t be allowed to lend off-shore [for foreign purposes]; bilateral agreements between states should cover that type of activity. Banks shouldn’t be allowed to engage in proprietary trading or any profit making venture beyond basic lending. Banks would issue loans based on credit analysis, not market valuation; they would not be allowed to mark their assets to market prices. Banks shouldn’t be allowed to buy or sell credit default insurance. Banks shouldn’t be allowed to contract in an interest rate set in a foreign country. Banks would only be allowed to lend directly to customers, service and keep those loans on their own balance sheet. No public purpose is served by selling assets to third parties. The interbank market should be abolished as well, since it serves absolutely no public purpose. The CB should lend directly to its member banks. The reserve requirement should also be removed, since banks can provision themselves with enough liquidity [from the State] by simply looking at the behavior of their customers. And under all these rules in place, limited Government deposit insurance can be upgraded to full insurance. Last but not least, in order to improve the ability of banks to manage risk and lower overall speculation, a principle from the Islamic banking model should be adopted. It works as follows – when a customer comes in to get a loan to acquire a piece of property [a house, an apartment, a vehicle etc], the bank buys that property and gives it to the customer for use, but the bank retains ownership over it, until the debt is squared. This provision serves another great purpose… it facilitates an easy transition from mainstream taxation to the Single Tax [Georgist] framework. With this rule in place, the responsibility for paying the land-value tax [LVT] falls upon the bank, not the debtor. The debtor makes the debt payments to the bank, and the bank uses those funds to pay the LVT.

Here are two examples:

Phasing in Land-Value Taxation. I bought land through a bank loan, and now the Government has eliminated the property tax and instead introduced a 10 percent LVT. I’m stuck with paying the LVT and the debt I owe to the bank, which is not fair. Therefore, the Government introduces the Islamic banking rule retroactively, and the ownership of the land goes to my creditor, who can’t kick me out, as long as I honor my debt payments. With this change in ownership, the bank accepts a loss of 10 percent [the LVT]. It’s much easier for Government to deal with financial firms in an orderly, institutional manner, than directly with every household faced with this double-burden. The State can temporarily relax capital requirements, should it be necessary in the transition from the antiquated, regressive and perverse tax code to the new, fair and efficient one. The boys and girls at the Bank of International Settlements will, of course, grimace at such a bold and informed move.

Full Land-Value Taxation is in place. Banks won’t be happy to accept land as collateral, given the fact land has a 100 percent tax liability on it. And those that do will have to hope for a near zero profit at best. So gaining access to land will be possible in most cases without any upfront cost. A citizen will simply pledge to pay LVT to the State, and he or she gets the respective plot.

Going back to the issue at hand… mainstream commentators can mock Erdogan as much as they want, but they’re the ones who are wrong about interest rates. The ‘natural’ interest rate on fiat money is zero! Anything below zero is a tax. Anything above zero is a subsidy. Those who claim that higher interest rates lower the volume of ‘malinvestment’ are arguing for a regressive and inefficient way to combat it. According to their logic, all pharmaceuticals should be sold at a premium, to make it more expensive for those seeking to buy the drugs for recreational use, instead of treating illnesses. Why should everyone pay more because a few abuse these products? Why should the cost of money be higher, just because some use it for speculation, rather than wealth creation? The correct logic is to distinguish between productive and unproductive economic activity. Encourage the former and discourage the latter. Higher interest rates across the board [levied irrespective of the type of economic activity] is as regressive as it gets and it hardly does anything to contain malinvestment. Those who blame the real estate bubble on low interest rates [so-called artificially low rates] are wholly missing the root cause: privatized land rents – landlords and money lenders appropriating the value of location [value which they did not create]. Without this phenomenon, asset price inflation wouldn’t occur. Under full land-value capture, property prices would be kept stable. If Erdogan wants to escape the looming recession and secure his power, instead of engaging in damage control, his Administration should push in the Georgist direction, even if that means completely pissing off the vested interests within and without Turkey.

Dangerous Libertarianism

When one hears the word ‘diversity’, it is at the expense of unity? Then there is inclusion, but only inclusion when you agree with a certain political thought and worldview. And of course we can’t forget about identity politics. If you disagree, then you are called a dog whistle. How did we get here? Peter Lavelle talks with Joe Concha, David Swanson, and Arvin Vohra.

My comment: While I agree with the perverse effects caused by political correctness, such as censorship, echo chambers, and tribalism… I staunchly disagree with the aim of “destroying the welfare state.” Ironically, the libertarian guest suggested it first, and unsurprisingly, the same libertarian guest expressed his support for open borders. That’s what market libertarians are all about in the US, they want an ever growing pool of labor and no social safety net, no full employment policy, in order to promote the race to the bottom among workers. From this race to the bottom, in which workers compete for the smallest wages, only the ‘vested interests‘ profit [a term coined by Thorstein Veblen to describe the forces of rentierism, high finance, and cartels].

After WW1, a perverse blight was introduced to the economics profession. The Neo-classical movement came about, funded by these ‘vested interests.’ Instead of funding real economic growth, Wall Street was entrenching itself as the protector of privilege, plotted and executed scams of all types, distorting economies away from passing on the fruits of technology to populations – benefits such as rising living standards, falling costs of living, and lower business costs. The new economics was that of John Bates Clark and his colleagues who rejected the classical concept of economic rent [economic rent = income without any labor, without any enterprise, without any cost of production]. These neoclassical economists insisted that any type of revenue stream and wealth/ownership position was fair game. Classical and neoclassical economics are nothing alike! The latter is a wholly bastardized, corrupt version of the former. Mainstream economics today shares the same affliction, or should we call it propaganda, its use of mental gymnastics, adulteration of history, and use of refined mathematical equations… to conflate the Natural Commons with Capital [the product of spent Labor], to conflate wealth creation with wealth extraction, to conflate IOUs with commodities. I invite the reader to check out two of my older posts, Milton Friedman, the Liar and Thomas Edison explains modern money in 1921.

Mainstream economists conflate value with price, or tow the line that value is derived from prices. In other words, if in a particular time window, condemning people to poverty and unemployment is monetarily profitable, the value of those humans [workers] and production units [buildings and equipment] should drop to reflect the price. It’s insanity, and in their madness they successfully manage to determine the price of everything and the value of nothing. Instead, the goal is or ought to be to decommodify land, and turn society into a sane and equitable one, in which price follows value. That’s what the classical economists were all about, the labor theory of value + the rent theory of pricing. They understood that Labor is the creator of Capital, and that Land is completely unique and distinct to the aforementioned two. Because of the peculiarity of Land, the classical economists argued for a special tax on it.

Back when socialists and national strategists were expecting the Industrial Revolution to be a strong enough force to turn parasitic financial systems into useful avenues, and subordinate them toward the imperatives of technological and societal development, Thorstein Veblen warned of Wall Street’s crooked agenda to derail the entire phenomenon. Veblen could only look back to the time when economics sought to guide government policy, not oppose it. This sane tradition in Western economic thought can be traced to the 13th century scholars of the Just Price theory, to the physiocrats, all the way to the classical, historical, and socialist schools [both in the marxist and non-marxist traditions]. Veblen’s post-mercantilist and proto-socialist analysis, warning that finance capitalism was derailing industrial capitalism, was expunged from the mainstream curriculum.

The same goes for Henry George; his type of laissez-faire [in its full true meaning] would “open the way to a realization of the noble dreams of socialism.” George understood that the labor and investments of both the private and public sectors increased site values, and if these values remained uncaptured by the Government, they were free to be appropriated by landlords and money lenders in the form of rent and interest [unearned incomes]. George was also against patents, another form of rent extraction. But unlike those socialists who wanted full collectivization, George was of the opinion that property should remain in private ownership, that labor, buildings, sales, and enterprise should go tax-free, while the State captured land values.

“I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless. Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent.”

In a letter to James Madison dated October 28th, 1785, Thomas Jefferson wrote, “[…] As soon as I had got clear of the town I fell in with a poor woman walking at the same rate with myself and going the same course. Wishing to know the condition of the laboring poor I entered into conversation with her, which I began by enquiries for the path which would lead me into the mountain: and thence proceeded to enquiries into her vocation, condition and circumstances. She told me she was a day laborer at 8 sous or 4d. sterling the day: that she had two children to maintain, and to pay a rent of 30 livres for her house (which would consume the hire of 75 days), that often she could no employment and of course was without bread. As we had walked together near a mile and she had so far served me as a guide, I gave her, on parting, 24 sous. She burst into tears of a gratitude which I could perceive was unfeigned because she was unable to utter a word. She had probably never before received so great an aid. This little attendrissement (emotion), with the solitude of my walk, led me into a train of reflections on that unequal division of property which occasions the numberless instances of wretchedness which I had observed in this country and is to be observed all over Europe.

The property of this country is absolutely concentrated in a very few hands, having revenues of from half a million of guineas a year downwards. These employ the flower of the country as servants, some of them having as many as 200 domestics, not laboring. They employ also a great number of manufacturers and tradesmen, and lastly the class of laboring husbandmen. But after all there comes the most numerous of all classes, that is, the poor who cannot find work. I asked myself what could be the reason so many should be permitted to beg who are willing to work, in a country where there is a very considerable proportion of uncultivated lands? These lands are undisturbed only for the sake of game. It should seem then that it must be because of the enormous wealth of the proprietors which places them above attention to the increase of their revenues by permitting these lands to be labored. I am conscious that an equal division of property is impracticable, but the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree, is a politic measure and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise. Whenever there are in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labor and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation. If we do not, the fundamental right to labor the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment, but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state. […]”

Before any type of meaningful debate can be had on [different] ways to achieve the same end, we should all start from the same premise – otherwise the debate is going to be pointless. In the 13th century, Thomas Aquians developed a most solid case against usury and price gouging – that the lender was receiving income for nothing, since nothing was actually lent, rather the money was exchanged. A unit of money could only be fairly exchanged for another unit of money, so asking for more was unfair. Aquinas later opposed any unfair earnings made in trade, basing the argument on the rule that a Christian should treat others as he himself would like to be treated – which means the Christian should trade value for value. Aquinas believed it particularly immoral to raise prices because a certain buyer had an urgent need for what was being sold and could be persuaded to pay a higher price because of local conditions. “If someone would be greatly helped by something belonging to someone else, and the seller not similarly harmed by losing it, the seller must not sell for a higher price; because the usefulness that goes to the buyer comes not from the seller, but from the buyer’s needy condition.” Aquinas would therefore condemn practices such as raising the price of building supplies in the wake of a natural disaster. Increased demand caused by the destruction of existing buildings [negative supply shock] does not add to a seller’s costs, so to take advantage of the increased willingness of buyers to pay constituted a type of fraud in Aquinas’s view.

Land is the 1st factor of production, made by Nature, not man. The Natural Commons extends to the broadcast spectrum too. In 2017, at the Union of Theological Seminary at Columbia, historian and economist Michael Hudson gave a speech called “The Land Belongs to God,” in which he explained what Jesus’ first sermon was all about.

At first Jesus said: “Good to be back in Nazareth, let me read to you about Isaiah.” In Luke 4 says it that this was all very good, and they liked him. But then he began talking about debt cancellation, and they tried to push him off a cliff. So basically you have the whole origin of Christianity as a last gasp, a last fight, to try to reimpose this idea of the economic renewal – of a Clean Slate – that goes back at least to the 3rd millennium BC and probably all the way to the Neolithic. So you have this last attempt to try to get a Clean Slate, and we know what happened to Jesus. His followers were not able to bring it about. So by the 1st and 2nd centuries of our era, what could the Christians do? You’re never going to get the Roman Empire to announce a Clean Slate
[this debt jubilee includes not just financial debts, but restoration of property confiscated by creditors]. As a matter of fact, when the kings of Sparta, at the end of the 3rd millennium BC, tried to cancel the debts, the oligarchs of Greece called in Rome. Rome went to war against Agis, Cleomenes and then Nabis and destroyed Sparta. They were going to fight against anyone who wanted to cancel the debts. Mithridates in Asia Minor in the 1st millennium fought against Rome, canceled the debts, and also killed about 30,000 Romans in the ancient Near East. It was a long bloody fight, and they all lost.

So all the Christians could do was have charity. Well, the problem with charity is that you have to be rich in order to lend to somebody. […] You can buy the debt and pay somebody else’s debt and give money away, but that doesn’t really fix the system. The result was, it really was the end times. The choice was: either you’re going to have economic renewal and restore people’s ability to support themselves; or you’re going to have feudalism.
That basically is how the Roman historians described Rome as falling. The debtors were enslaved, not only the debtors but just about everybody was enslaved […] Finally, you needed to have a population, so you let people marry and you gave them land rights – and you had slavery develop into serfdom. Well we’re going into a similar situation today, where I think we’re going into a kind of neo-feudalism. The strain of today’s society is as much a debt strain as it was back then
.

When the market libertarians of today speak of freedom, they speak of the feudal class’ freedom to do what it wants with YOU and not be accountable! The type of unearned income that they hate isn’t income derived from privatized land rents, from usury, arbitrage, from cartelized markups, or from patents – no, not at all – their hatred is reserved for food stamps and welfare checks, money that actually ends up in the pockets of sellers of goods and services and workers, money that circulates in the economy, and doesn’t sit idle on poor people’s balance sheets, like it does on the balance sheets of the rich and ultra-rich.

Besides, the welfare system is a Federal Program. Welfare dues aren’t “unfunded liabilities,” as the pathetic deficit hawks like to claim, nor are they under threat in case of lower tax collections, as the dumb deficit doves insist. Federal Government programs are financed from Federal Government fiscal debits, not tax revenue. The purpose of Government money taxation is threefold. 1-To create a permanent demand for the Government’s currency, giving it thus extrinsic value. 2-To drain income out of the economy [a tool to regulate levels of Aggregate Demand and thus control inflation]. 3-To incentivize and or penalize various socio-economic activities. I encourage the reader to see a paper from 1946 by Beardsley Ruml, then Chairman of the NY Fed, called Taxes For Revenue Are Obsolete.

Can the traditional welfare system be reformed? Yes. Should it be reformed? Absolutely! A Job Guarantee program and or a Basic Income would be much better than the means-tested welfare system, which comes with bureaucratic overhead and, worst of all, the perverse effect of “trapping” people in it, because if a person gets a job and the employer decides to fire him or her immediately after, that person has to go through the bureaucratic gauntlet again, so it deters them from actively seeking work. We should also regard the employment figures in a circumspect manner. The assessment of unemployment has changed during the years – if you work a couple of hours a week, the State statisticians catalog you as “employed.” If people have lost hope of finding jobs, and no longer register at the local offices, the State statisticians label these people as “voluntarily” without a job, so they don’t count them in the actual unemployment figures. Labor force participation has been going down in the USA.

And would it matter if the participation rate rose, while wealth extraction grew at pace with wages and profits or outgrew them? Theoretically, we could have full employment tomorrow if everyone agreed to work for peanuts, but that society would be categorically worse off in net terms!

If we compare welfare and health insurance conditions in the US to the leading countries in Europe, we see that the US is actually closer to 2nd world states, than to the 1st world states. The average libertarian in the US bears little difference to the so-called libtard, I call them libertardians. They want open borders, no regulations, endless rent-seeking, and oppose hawkish foreign policy only because the State is engaged in it; they’d prefer private companies [mercenaries] to do the killing, the bombing, and the invading.

Government thus has to intervene in economic life for the benefit of all not only to redress grievances, but also to establish enterprises that promote economic efforts but, because of their size, are beyond the means of individuals and even private corporations. These are not paternalistic measures to restrain the citizens’ activities; on the contrary, they furnish the means for promoting such activities; furthermore, they are of some importance for those great ends of the whole state that make it appear civilized and cultured. Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they are/constitute major prerequisites for the prosperity of a modern state. The building of schools, too, is a suitable field for government to prove its concern with the success of its citizens’ economic efforts.” That’s a quote from the founder of the Austrian School of Economics, Carl Menger, whose basic tenets the contemporary Austrian adepts utterly reject and rabidly loathe. In fact, the modern deficit hawks today [the libertardians and the cuntservatives] would label the classical economists as dangerous, evil statists, and communists, if they were inclined to actually read their work. That’s how hopelessly indoctrinated they are. Two different quotes more and I’m done – and the authors are Adolf Hitler and Kenneth Boulding.