Current Proposals


Proposals that Happen to Be
within the Mainstream Paradigm

For the Fed:

  1. In general, don’t use the liability (deposit) side of banking as a source of market discipline.
  2. Specifically, eliminate most of the interbank markets by lending directly to US FDIC insured banks vs any/all ‘bank legal’ collateral in any size at the Fed’s target interest rate.
    1. This would reduce domestic FF/LIBOR type spreads to minimal levels, remove bank funding risks, and eliminate the need for the Fed’s TAF and the lending facility.
    2. Banks are already permitted to own only what is permissible by the OCC and other banking law, and fund it with FDIC (government) insured deposits. Therefore, unsecured Fed lending to FDIC insured banks does not add any ‘taxpayer risk’ that the government already accepts and directly manages.

For the Tsy:

  1. Encourage foreign CB’s to re-engage in ‘currency manipulation’ via buying USD to help their exporters.
  2. Encourage monetary authorities to accumulate their reserves in USD financial assets.
  3. Open a securities lending facility that offers all Treasury securities through repurchase agreements to the primary dealers in unlimited quantities at Fed Funds less 0.25%.

For Congress:

  1. Outlaw biofuels – way too dangerous to human life and may already be in the process of killing more humans than WWII.
  2. Manage the output gap with tax cuts or net spending increases.
  3. Stop worrying about US solvency (including solvency of social security).
  4. Use fiscal policy as a tool to meet real economic goals.
  5. Reduce energy consumption by lowering the national speed limit to 30 mph for private motor vehicle transportation over three years:
    1. Reduces driving.
    2. Decreases energy consumption per mile.
    3. Redirects where people live due to the implied price of travel time.
  6. Eliminate tax advantages for savings plans including pensions and individual retirement accounts:
    1. Savings does not function to fund investment.
    2. There are other viable options to having individual savers and money managers directing real investment.
    3. Outlaw passive commodity strategies for existing pension and retirement funds.
  7. Eliminate income taxes and use a national real estate tax to anchor the currency
    1. I estimate compliance costs at up to 15% of GDP.
    2. Compliance issues reward, encourage, and promote a culture of cheating that extends to all law.
    3. The infrastructure is already in place at the local level for a national real estate tax:
      1. Compliance and legal costs are minimal.
      2. The tax rates can be progressive based on values, efficiency, and other standards that advance public purpose.
    4. Use luxury taxes to moderate consumption that is outside of public purpose:
      1. These taxes function to reduce consumption.
      2. The success of these taxes is judged by how little they collect and thereby serve to reduce the targeted consumption.
  8. Eliminate sales taxes and other remaining transactions taxes as these function as internal tariffs:
    1. Transactions taxes work against internal comparative advantage.
    2. Transactions taxes work against specialization of labor.
  9. Legalize all recreational drugs:
    1. Takes the money out of illegal trafficking.
    2. Eliminates drug-related violence.
    3. Moves the social issue from the police to the churches.
  10. Do not allow healthcare costs to continue as a marginal cost of production (business should not fund healthcare, government should):
    1. Distorts pricing and optimal resource utilization.
    2. Workers do not tend to be less healthy than unemployed people.

Proposals that May Be
a Bit Outside of the Mainstream Paradigm

Offer a national service job to anyone willing and able to work which lets the market determine the budget deficit:

  1. An employed bufferstock is a more effective price anchor than today’s bufferstock of unemployed.
  2. Adds to useful output.
  3. Reduces real costs of negative social issues.
  4. Acts as a countercyclical fiscal ‘stabilizer’.

Drop the Fed Funds rate to zero and leave it there permanently:

  1. Inflation is not a function of the nominal rate set by the Fed.
  2. Output and employment is not a function of interest rates.
  3. Nominal interest rates support the rentier class and thereby reduce real output at the expense of those working.
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44 Responses to Current Proposals

  1. Erik says:

    Please explain how saving does not fund investment and how investment is funded. Also, do you distinguish between savings in debt and equity form here, as the interest rate proposals would not directly affect return available to equity investors (savers) ?

    Reply

    WARREN MOSLER Reply:

    see the chapter on same in ‘the 7 deadly innocent frauds’ thanks

    Reply

  2. googleheim says:

    What about China, OPEC, Japan, UK all hoarding US Tsy’s ?

    Why not force them to spend them which by default is in our
    currency zone … ?

    Reply

    WARREN MOSLER Reply:

    we’re far better off if they don’t spend

    the trick is to alter our fiscal balance

    see ‘the 7 deadly innocent frauds’ on this website

    Reply

  3. IowaBoy says:

    Warren, would you agree that under certain circumstances, fines for illegal activity amount to a luxury tax, and therefore should be scaled according to the offending party’s ability to pay, in order to maintain effectiveness?

    Reply

    WARREN MOSLER Reply:

    depends on the illegal activity

    Reply

  4. IowaBoy says:

    Regarding the 30mph speed limit: Why not instead simply place a high luxury tax on all motor fuels?

    Reply

    WARREN MOSLER Reply:

    it’s regressive vs progressive.
    but both are policy options

    Reply

  5. IowaBoy says:

    Warren, regarding biofuels, do you include petroleum in your definition of same? If not, why do you consider biofuels in particular something to be outlawed, as opposed to petroleum?

    Thanks.

    Reply

    WARREN MOSLER Reply:

    burning up our food supply for fuel doesn’t make a lot of sense to me

    Reply

    IowaBoy Reply:

    @WARREN MOSLER,
    Biofuels are not necessarily sourced from foodstuffs, but that’s not what I was after. Rather, what exactly do you mean by “way too dangerous to human life and may already be in the process of killing more humans than WWII” ? Are you referring to biofuels exclusively there, or combusted fuels in general?

    Reply

    WARREN MOSLER Reply:

    i was thinking the food/acreage lost to biofuel use had caused mass starvation

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