Senator Pat Toomey- Pay China First Act

Gets stupider by the day…

“Sen. Pat Toomey (R-Pa.) introduced what Democrats are calling the “Pay China First Act,” which would require the federal government to pay all its debt obligations first and everything else — vets, schools, you name it — with what’s left.”

Okay, so we tell Ben Bernanke to press the “China debit/credit buttons” on the keyboard first. That should take about 2 seconds, and then we can get back to crediting and debiting everything else as we always do.

This is what supposedly qualifies for serious economic debate in the US these days.

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63 Responses to Senator Pat Toomey- Pay China First Act

  1. There are two things in life that have no limit:

    1. The federal government’s ability to pay its bills
    2. Congressional ignorance

    Oh, I forgot another one:

    3. The economic ignorance of Nobel prize winners.

    Rodger Malcolm Mitchell

    Reply

  2. Jim says:

    Re: “The gap between the CEOs’ world and the real world should be bridged by the official sector. But where are the politicians and government officials who can explain what we need and why? Who can confront the CEOs in the highest profile public forums, and push them on the social responsibility broadly defined?”

    One of the truly crucial issues of our time is the status of the corporation. This was brilliantly and profoundly discussed in Jerry Mander’s “In the Absence of the Sacred,” and has been discussed as well by Korten and others, notably E.F. Schumacher; but Mander nails it. Thanks to the corporation, people have been turned into instrumentalities of machine-like entities.

    Reply

    Tom Hickey Reply:

    Right, in the absence of the sacred, we get decisions like Citizens United, where legal fictions are accorded the rights of natural persons. It’s surreal. You couldn’t make stuff like this up.

    Reply

    ESM Reply:

    Corporations and other legal entities are formed by certain people for the purpose of advancing the interests of certain people. I don’t see anything surreal about allowing human beings to exercise their rights through such entities. Certainly, the 1st amendment does not limit the exercise of freedom of speech or religion to natural persons. A congregation of a church, or the church itself, is not a natural person, yet it certainly enjoys 1st amendment protections from government intrusion.

    Reply

    Tom Hickey Reply:

    Freedom of speech is about “speech.” How does a corporation talk without a mouth. Oh right, money speaks louder than words.

    ESM Reply:

    That’s a “dumb” comment. :^P

    Tom Hickey Reply:

    BTW, churches do not have freedom of speech exactly. They lose their tax exemption if they involve themselves overtly in politics, especially in support of candidates. Why should corporations be able to engage in politics and support candidates, and churches not?

    I am sure that Justices Scalia, Thomas Alito and Roberts have a rationale. I don’t buy it even before hearing it.

    beowulf Reply:

    That’s a good point Tom. Perhaps the only way to fight legalized bribery is with legalized bribery. 501(c)(3) nonprofit charities are the only kind of corporation that cannot make political contributions or advocate for any political candidate and are limited in the lobbying they’re allowed to do. As an ancillary point, they’re restricted in what they can pay out in compensation to senior officials. The cop on the beat is is the Internal Revenue Services, if they don’t obey the rules, they lose their tax exemption.

    We could amend the tax code that any for-profit corporation that voluntarily elects to accept 501(c)(3) restrictions is exempt from corporate income taxes. While we’re at it, apply the 501(c)(3) rules to other kinds of nonprofits like trade groups (or for-profit entities like REITs) that already enjoy tax exemptions.

    Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
    http://en.wikipedia.org/wiki/501%28c%29#501.28c.29.283.29

    WARREN MOSLER Reply:

    with only a fed real estate tax all those corp categories are moot as well

    Oliver Reply:

    This is an interesting point. The German language uses the term ‘juristische Person’ (legal person or corporate person) in contrast to ‘natürliche Person’ (natural person) to distinguish between individuals and collective entities before the law. The father of the corporate personality is a certain Otto von Gierke , a German historian and lawyer who taught the ‘Lehre von der realen Verbandspersönlichkeit’ (doctrine of the real collective personality) in which the collective can be considered to have a will of its own and therefore the same legal capacity as an individual. This is in contrast to the ‘Fictionstheorie’ which stems from Roman legal tradition in which corporations are viewed as a fictional point of reference. The result is often the same (so they say), but the distinction is interesting nonetheless, I find. And it probably explains why corporatism is so rampant in Germany, as it is deeply embedded in the legal culture and the German concept of ‘rule of law’, federalism and all its derivatives. A sort of ‘babushka’ view of the world and its defining entities in which each is considered legally equal to its constituents.

    ESM Reply:

    @Tom:

    With respect to churches, I was referring specifically to freedom of religion, not freedom of speech. But of course churches have 1st amendment protections for speech as well. The tax issue is a complicated one and has little to do with the 1st amendment. For some reason (and I can’t think of a good justification), the country has decided that certain non-profit activities should be subsidized by the government through tax exemptions and tax deductions. There is a clear carve-out for political activities, however, which although non-profit, are not considered tax subsidy worthy.

    When a church accepts tax-exempt status, which it is not required to do obviously, it accepts certain restrictions on its activities, including engaging in politics or in profit-making activities beyond a certain point. Money raised from Bingo or bake sales has to be de minimis, for example. I’m sure that Microsoft can make as much money from Bingo as it wants.

    Tom Hickey Reply:

    ESM, that is a rationale, and I don’t buy into it. :)

    WARREN MOSLER Reply:

    maybe if we all got limited liability it would equal that playing field…

    Tom Hickey Reply:

    Exactly. catch up on the history of the corporation. Dee Hock has a good account in Birth of the Chaordic Age (1999). It’s the history of an extension of privilege conveyed by law. The basis is, “Capitalize the gains and socialize the losses.” It imposes the template of plutocratic oligarchy over that of liberal democracy.

    ESM Reply:

    @Warren

    We do all have limited liability. The US got rid of debtors’ prisons in 1833. And the personal bankruptcy code is quite generous I think to debtors. In Massachusetts, we have a homestead exemption up to $500K (if you apply — $150K is automatic beginning in March). In Florida, your home is off limits to creditors no matter how expensive it is.

    WARREN MOSLER Reply:

    true, thanks.

    i need to make it clear on this blog I’m speaking through my new limited liability llc

    beowulf Reply:

    with only a fed real estate tax all those corp categories are moot as well

    This is true. Congress could amend capital gains section of IRC for real estate accrued gains to be taxed annually on a mark to market basis (like futures contracts are) or wait to impose capital gains tax upon sale, but adding an interest penalty for every year accrued gains were not taxed (like passive foreign investment company stock). Either way though, state and local governments would wage jihad on Congress for butting into property taxation.

    Easiest way, economically and politically, is just credit state/local property taxes (or ideally, land values only) against federal income tax. This would quickly shift other state and local taxes to property (or land!) taxes, since it would take about 30 seconds for state legislators (well, no more than 2 or 3 years in Alabama) to realize any kind of tax (other than property)they imposed would simply force its citizens to pay federal taxes they didn’t have to. Federal income tax and state/local taxes (all sources) each raised roughly $1.5 trillion last year.

    If you want to manage aggregate demand with this tax regime, require local tax commissioners to collect property taxes quarterly or monthly, then scale down (or up) tax credit percentage in sync with unemployment rate. So something close to a 100% tax credit would make sense in this economy, but if we move to– in Bill Vickrey’s wonderful phrase– chock full employment, only a fraction of property taxes should be credited against federal income tax.

    ESM Reply:

    Not quite the same thing of course. Every legal system relies on a concept of escalating or ratcheting up the pressure until a defendant submits to the authority of the state. Ultimately, the threat of prison compels you to pay your parking ticket.

    For example, if you don’t pay, you can’t register your car; if you can’t register your car, you can’t drive your car; if you do drive, you get pulled over for a moving violation; if you don’t appear in court, you get your license revoked; if you get your license revoked, you can’t drive; if you get pulled over again, you’ll be arrested; if you resist arrest, the police will use force; if you use force in self-defense, you will go to jail for assault and battery against a police officer, etc.

    But it is not fair to say that the penalty for a parking violation is jail.

    Tom Hickey Reply:

    ESM: “But it is not fair to say that the penalty for a parking violation is jail.”

    I get what you are saying, but the fact is that the law is being used to compel debtors while the perps are walking free. Double standard that establishes privilege on one hand, and serfdom on the other. What was that about the road to serfdom?

    Matt Franko Reply:

    Tom,
    I was reading that during the Roman Empire, it is believed that one third of the population of the Empire were slaves, another third were indentured servants, the other third were the Roman citizens. So they have a way to go yet to get back to the old demographics…
    Resp,

    Reply

    Tom Hickey Reply:

    Matt, US citizens are like Roman citizens; they do have rights, even though at times this may not mean so much for some. The serfs of the empire’s crony and client states are the indentured servants, and the people of the undeveloped world are the slaves. It’s called global capitalism under the Pax Americana, which is actually a state of perpetual war on the periphery. “History doesn’t repeat itself, but it does rhyme” (Mark Twain).

  3. wh10 says:

    hilarious!

    but hey – maybe this would be a good thing. they might see how inconsequential the whole thing is and finally start understanding the way the monetary system actually works.

    Reply

    Tom Hickey Reply:

    Google 19337 recession. Just having conversations like this in Congress is insane. Aren’t they noticing what’s up (down) in the UK?

    Reply

    Tom Hickey Reply:

    Oops. “1937”

    Reply

  4. pebird says:

    Arent we already doing this with debt service payments? Toomey could not seriously say we should not fund anything until all 12 plus Trillion is “paid off”? shut down government for 3 or so years? Can you imagine what would happen to tax revenues?

    And I am sure that Social Security is excluded from the “debt” that should be repaid.

    What an idiot.

    Reply

    ESM Reply:

    No, what Toomey is saying is that if Congress doesn’t raise the debt ceiling, the government should continue to pay Treasury debt obligations as they come due (obviously, this only involves interest payments since the principal repayments can be “funded” with new debt without increasing the gross debt) before paying any other obligations of government. Theoretically, the Constitution already mandates this, but I suppose that in practice people may not be aware of this.

    This lays out explicitly that the game of chicken that Congress is playing (with whom I don’t know) involves shutting down the government and various entitlement programs, and not debt default per se.

    I think it’s actually clever politics, but dangerous in that it makes the likelihood of Congress not raising the debt ceiling much higher than before (from say, 0.1% to 1%). Congress can legitimately argue that failure to raise the debt ceiling is not the same thing as voting to default. It is simply forcing the Treasury to decide what spending programs to delay (perhaps indefinitely).

    Reply

    Tom Hickey Reply:

    ESM, the major game that is now being played in my mind is what Naomi Klein has called “disaster capitalism.” Rahm Emmanuel summed it up as, “Never let a good crisis go to waste,” that is, use it to push your policy agenda.

    Both parties are doing that in different ways.

    The GOP agenda has consistently been on of imposing fiscal austerity in the sense of cutting taxes to the bone, shifting the tax burden to income taxes paid largely by workers, in order to allow maximum capture of economic rent at the top. Cutting social programs as the added effect of forcing workers to save for future expenses, education, health care and retirement, reducing domestic consumption. This reduces imports and allows exports to expand. The multinationals are already making almost half their profit externally and they see that as the future as the emerging world comes on line. This is what is going on in the GOP-controlled House now.

    Reply

    ESM Reply:

    Tom, I have been traveling in conservative circles for about 15 years now (meaning that I spend only about 75% of my time interacting with liberals), and I have never heard anybody, except in jest, mention that the reason he advocates tax cuts and smaller government is so that the rich can exploit the lower class. Every conservative I know personally believes (or at least claims to believe) that the policies he advocates would make the country and world better off, and that the lower classes would benefit.

    Now, you can argue about whether certain policies will do the things that their advocates claim, but I think it is not helpful to ascribe nefarious motives to your ideological opponents.

    This is something that progressives do far more than conservatives, in my experience. Conservatives usually consider progressives to be misguided and unrealistic. Progressives seem to think conservatives are just plain greedy and evil.

    Greg Reply:

    ESM

    I’m quite sure you are correct about the conservative circles you travel in. The majority of the people I interact with on a weekly basis are “conservative” too. I have literally about 5 friends that I know voted for Obama, including my wife. None of these conservative friends would EVER express their views in the terms described. Almost all the people are good hearted people who have been raised in the American south and are simply against outsiders (Washington) telling them what to do.

    They are however strongly in favor of things like “People paying their own way” and “Not relying on the state to do everything” (Both things which I completely agree with BTW) so when a private interest comes along and says that what the president is proposing will actually lead to less people paying their own way and a larger reliance on the state they vehemently oppose it. And they oppose it without ever realizing that the person telling them this is in fact himself “relying on the state” to preserve his business’ interest and in fact operating out of a system where other people are taking his downside risk for him.

    Many conservatives who decry govt arent actually looking at the fact that the govt is, in a very real sense, a corporation. It has been completely taken over by corporate interests so if you dont like govt today, what you are in fact saying is that you dont like working for a megacorporation that rules your life and wants to charge you for everything you do because it OWNS everything and you own almost nothing.

    These are the motives of all corporations. To put themselves in a position to profit from the publics spending preferences and needs. When the entire market is owned by one big corporation we are screwed. Its not a nefarious plot, its just how big business works. It has to be fed by market share.

    Until we all resist not only dominance by people we have elected to protect us but also ownership by people who havent earned their place by being a superior producer of what we want but by simply buying off those who might try to regulate a market, we are only trading one devil for another.

    I happen to believe that a devil which we can vote out is better than one that only answers to a private board of directors. Although I would prefer neither devil

    Tom Hickey Reply:

    ESM, I don’t think that all conservatives think this way consciously and intentionally, although I suspect that some reflective geostrategists get it perfectly well. There is a word for the innocent approach. It is called “intellectual capture.” In action in one’s own interests, one promotes an agenda regarding which one may not be consciously aware.

    Did you ever hear this hidden agenda (my comment of Jan 28th, 2011 at 2:28 pm) announced publicly? Probably not. But it is the operative agenda.

    As I said previously, I was a hereditary Republican that was radicalized as a naval operations officer during Vietnam, when I figured out what was actually going on geopolitically and geostrategically. BTW, I realized at the time after reading Bernard Fall that the US was going to walk into the trap that Gen. Giap was laying, just like the French did. They totally missed it and had to beat a hasty and disgraceful retreat, just like the French after the rout at Dien Bien Phu.

    Reply

    Matt Franko Reply:

    Tom,

    Do you think that anybody at CIA was looking at the external effects of the neo-liberal economic paradigm that the west has been implementing and via which we have been interacting with the non-western countries over the last decades being the cause of these revolutionary activities we are witnessing in Egypt this weekend? Or do you think that most US intel was assuming it would be a purely Islamic religious/Theocratic type revolutionary motivation to look out for?

    Is this another blindsiding of the CIA similar to it is believed that they did not “see” the fall of the Soviet Union? (Another failure of understanding the true economic scenario)

    An out of paradigm US national security apparatus makes us less safe and puts our true national interests at greater risk imo.

    Tom Hickey Reply:

    In the first place, foreign policy is based on national objectives which establish various missions and the grand strategies to accomplish them. Consequences are quite secondary to national priorities. For example, it can be argued that it is shortsighted to back dictators that can deliver countries through their control of the population. However, this has been and continues to be a principal strategy of the US. Do the folks in charge realize that this is a dicey game that contradicts fundamental US principes. Of course.

    Secondly, the Dod, CIA, and other organization tasked with carry out national policy and grand strategy, and the missions this involves are very aware of potential negative consequences of policy and operations. It is called “blowback.” It’s always a risk/return trade-off.

    For example, the CIA operates on the basis of perceived present need using expedience and figures on dealing expediently with blowback down the line as it emerges. They are well aware that it is dangerous arming “our” guys, because they can very easily become “their” guys. Remember how Osama and Saddam were both “our” guys to begin with, when it was expedient to use them as proxies to confront the USSR and Iran, respectively.

    Tom Hickey Reply:

    Another thing to consider from Simon Johnson here (emphasis added):

    The public policy issue of the day, from the point of view of such CEOs, is simple. There needs to be sufficient fiscal austerity to strengthen public balance sheets — so that states can more effectively stand behind their banks in the future, and to keep currencies from moving too much. Leading bankers, in particular, insisted on the paramount importance of providing unlimited government support to their sector during 2008-09; now they insist with equal or greater vigor that support to all other parts of society be curtailed.

    “This is where cognitive dissonance creeps in. Most CEOs feel that the provision of general public goods is not their responsibility, although they are very happy to help guide (or capture) the provision of public goods specific to their firm.

    But it is reckless decisions by some in the financial sector that produced the crisis and recession — this is what accounts for the 40 percent of GDP increase in net government debt held by the private sector in the United States (to be clear: it’s the recession and mostly the consequent loss of tax revenue). And CEOs are happy to lead the charge both against raising taxes and in favor of deficit reduction.

    “This adds up to public goods being weak and so much under pressure around the world. No one can put significant resources to work helping to bring down unemployment. No one is seriously addressing the loss of skills faced by the long-term unemployed. No one is offering real resources to help improve education for lower-income children or adults who did not finish high school.

    “Self-anointed ‘fiscal conservatives’ claim the budget issues we face are all about discretionary nonmilitary spending. This is nonsense. The U.S. faces an incipient fiscal crisis (a) in the shorter term, because of what the big banks did and what they are likely to do in the future, and (b) over the next few decades, if we fail to control rising health care costs (both in general and as funded by government budgets).

    “The gap between the CEOs’ world and the real world should be bridged by the official sector. But where are the politicians and government officials who can explain what we need and why? Who can confront the CEOs in the highest profile public forums, and push them on the social responsibility broadly defined?”

    WARREN MOSLER Reply:

    and of course no one questions the inapplicable notion of ‘strengthening public balance sheets’ in their own fiat currency.

    Tom Hickey Reply:

    From Ayn Rand Railed Against Government Benefits, But Grabbed Social Security and Medicare When She Needed Them:

    “Her [Ayn Rand's] ideas about government intervention in some idealized pristine marketplace serve as the basis for so much of the conservative rhetoric we see today. ‘The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand,’ said Paul Ryan, the GOP’s young budget star at a D.C. event honoring the author. On another occasion, he proclaimed, ‘Rand makes the best case for the morality of democratic capitalism.’

    “‘Morally and economically,’ wrote Rand in a 1972 newsletter, ‘the welfare state creates an ever accelerating downward pull.’

    “Journalist Patia Stephens wrote of Rand: ‘[She] called altruism a “basic evil”; and referred to those who perpetuate the system of taxation and redistribution as “looters” and “moochers.” She wrote in her book The Virtue of Selfishness that accepting any government controls is “delivering oneself into gradual enslavement.'”

    I would say that Rep. Ryan is intellectually captured. This is pure ideology with zero empirical warrant, and a lot of what we know scientifically contradicts it.

    Matt Franko Reply:

    Tom,
    Another GOP generation whose minds are poisoned by Rand? “Captured” is a good word there. That is a very revealing statement by Ryan. It is no surprise that he is unable to understand the true realities of macroeconomics and currently advocates for balanced budgets and job creation at the same time. One cancelling out the possibility of the other.

    I came across some info on Michelle Bachmann, another of the younger GOP crop of candidates. According to her Wiki page, she was a govt IRS tax attorney, prosecuting civil and criminal Tax enforcement cases, while on the other hand she helped raise over 20 foster children. I have a friend who lost his family due to a tax case, while his children didnt go to foster care, I’m sure if circumstances were a bit different, they probably could have. So 9-5 Bachmann worked to bust families up while then when she got home in the evenings she worked to raise some children who may have become without a family due to her helping to enforce our unjust tax laws earlier that day.

    They cannot see how they are actually working against their own efforts.

    Tom Hickey Reply:

    Right, some people are naive and others disingenuous. Some people really are trying to do the right thing, and other are self-serving. It is difficult attributing motives. What’s that about “Judge not…”

    beowulf Reply:

    The founder of the congressional tea party caucus was an IRS attorney? That’s kind of funny.

    ESM Reply:

    Good grief you guys are inconsistent. You’re supposed to be the ones that want more government, not less. So why are you disparaging a perfectly respectable job like IRS attorney? In fact, MMT proponents should recognize that having a credible tax enforcement mechanism is crucial to making a fiat currency system work. I have nothing against the IRS in principle. It is the tax laws that I have fundamental concerns about.

    That being said, I do think the IRS is run as a revenue maximizing enterprise rather than a neutral enforcer of the laws, and that leads to injustice.

    WARREN MOSLER Reply:

    wouldn’t need more than a handful if all we had was a federal real estate tax.
    just sell the house if it doesn’t pay. don’t even need to know who owns it

    beowulf Reply:

    The name “Tea Party” is a reference to the Boston Tea Party, whose principal aim was to protest taxation without representation. Tea Party protests have sought to evoke images, slogans and themes from the American Revolution, such as tri-corner hats and yellow Gadsden “Don’t Tread on Me” flags. The letters T-E-A have been used by some protesters to form the backronym “Taxed Enough Already”.
    http://en.wikipedia.org/wiki/Tea_Party_protests

    The Service is just enforcing the revenue laws passed by Congress. IRS employees probably do as competent and even-handed job as any group of people could do to administer a poorly designed and inefficient tax code. I just think its amusing that a self-appointed leader of a tax protest group is herself a former IRS employee.

    ESM Reply:

    But like you said, the IRS is simply enforcing the tax laws passed by Congress and signed by the President. The Tea Partiers don’t blame IRS employees for enforcing the laws; they blame the people responsible for creating the laws. Would you think it ironic if a policeman or a judge became a Tea Party leader?

    By the way, I think Bachmann’s background is perfect to head a tax protest movement. She probably understands better than most how convoluted and destructive our tax code is.

    Tom Hickey Reply:

    ESM, I wonder if she understands the difference between gains earned from production and unearned gains from economic rent. Until this is appreciated, no tax code is going to work. The incentives will encourage unearned gain through rent seeking instead of income from gainful employment and productive investment.

    Greg Reply:

    If the IRS were just a neutral enforcer of the laws it WOULD maximize revenue. Unfortunately the rich and powerful end up buying tax evasion attorneys while little guys get hit for 5,000 in back taxes just to show they mean business. I dont think the IRS is about maximizing revenue AT ALL.

    WARREN MOSLER Reply:

    worse, they ‘force’ you to settle for what you expect to pay for atty fees even when they know you aren’t guilty.

    Matt Franko Reply:

    “I wonder if she understands the difference between gains earned from production and unearned gains from economic rent.”

    Tom, not in a million years. That understanding is impossible for where she is right now (blinded to major portions of The Truth). She would call you a “socialist” or “communist” or some BS for even bringing it up, and her Tea Party morons would lap it up.

    Resp,

  5. danw says:

    A question:

    Do you (all) think that Toomey (etc) understand the operational realities, and that he is just playing the “I’m a good conservative” card? Or does he really NOT understand how money works in a fiat system? Or…a hybrid reality…he understand how money works, but he believes that we cannot deploy operational realities, because to do so would (in his opinion) unleash massive destabilizing factors (such as a currency crisis, or big-time cost inflation, etc.)?

    Reply

    Tom Hickey Reply:

    Clueless.

    Reply

    Ramanan Reply:

    You mean the Chinese can’t sell the Treasuries to other people ?

    (Of course, as Barry Eichengreen also knows, if they sell a part of it, it affects the remaining part. )

    Are visits of Geithner and Hillary Clinton to China misguided ? Is the Chinese pressure on the US unreal ?

    Reply

    Tom Hickey Reply:

    “Are visits of Geithner and Hillary Clinton to China misguided ? Is the Chinese pressure on the US unreal ?”

    Geithner and Clinton are clueless, too.

    danw Reply:

    lol….ok

    Reply

    Matt Franko Reply:

    Dan,
    imo, he doesn’t understand it. Most if not all in high levels of govt policymaking cannot understand this. They are too conflicted. Toomey took over the Club for Growth after Steve Moore moved on from there to WSJ or wherever he went.. so Toomey is a “True Believer”, zombie-like in this regard ;) .

    I think the path is going to have to be that people can/will get this knowledge of true macro (MMT) before they seek office, then IF they can get in they can form policy accordingly. From hearing Warren describe his encounters with the entrenched powers, it looks like it is literally talking to a brick wall.

    Resp,

    Reply

    danw Reply:

    My story is instructive:

    I came to “understand” MMT and the true realities of fiat money relatively slowly. I’d say it’s taken about a year. It began having dinner with my friend Karim (he posts data here), during which time we “argued” about public vs. private debt.

    Next, I had to vomit out of my system all of my conflationary dogma: in other words, I had to become utterly clear about the difference between OPERATIONAL and ACCOUNTING realities vs. POLITICAL AND NORMATIVE realities. (Thank you Tom Hickey)

    So…a year later, and I GET why people like Toomey do not understand that they are making political points about economic issues, and the two present very differing sets of realities.

    Now, that said, I think we still have some major problems, particularly with regard to how our monetary policies (perhaps unintentionally) impact foreign lands, and how positive feedback loops (riots in North Africa and on the Arabian Peninsula) defy operational realities.

    It is a monumental challenge that we face. How do we employ the monetary realities in a fiat system in a manner that serves the public purpose…WORLDWIDE! For my money, a suffering Egyptian is no different from an suffering American.

    Reply

    Tom Hickey Reply:

    Could not agree more. Everyone is a position of power worldwide has to start thinking about the world as a closed system, or else. Pursuing national interests internationally is childish, and it results in nations settling upon childish solutions like war.

    On the other hand, here is the hidden agenda of US policy:

    ” In a 1948 State Department document, diplomat George F. Kennan offered this observation: “We have about 50 percent of the world’s wealth, but only 6.3 percent of its population.” The challenge facing American policymakers, he continued, was “to devise a pattern of relationships that will permit us to maintain this disparity.” Here we have a description of American purposes that is far more candid than all of the rhetoric about promoting freedom and democracy, seeking world peace, or exercising global leadership.”

    Col. Andrew J. Bacevich, PhD in Cow Most Sacred: Why Military Spending Remains Untouchable

    Matt Franko Reply:

    Tom,
    Can you provide some perspective for us today. This is surreal. You have all of these muckety-mucks up in Davos going on about how great things have turned out blah-blah, living it up, back slapping, etc… while the entire North African rim on into Arabia is ready to implode on itself live on TV… you could not write a movie script that audiences would find credible that would tell a story with this much irony…. this is very disturbing. Resp,

    Tom Hickey Reply:

    Well, it is not like no one could have seen it coming, Marx for one, and Schumpeter for another, from different angles — and that is not even taking current conditions into account. And this is just the beginning of massive changes that are going to be cascading down for some time. The old order is crumbling. :o

    WARREN MOSLER Reply:

    yes, some, but not like it did in the 60’s…

    http://www.youtube.com/watch?v=mYQZSDOWwww

    Tom Hickey Reply:

    Matt: “Can you provide some perspective for us today.”

    The best I can do is direct you to Meher Baba’s discourse on The New Humanity. (Don’t bother reading this if you are a strict materialist, though.) He and other sages predicted what would be coming by way of transformation, and this discourse is a brief summary of that vision.

    The world is now in the midst of a phase transition from one order to another, and this is happening at the spiritual level as well as the material. As one of my teachers said decades ago: The old laws will cease working and new laws will arise, but there will be a transition period during which there will be turmoil. Those who realize what is happening will be able to remain calm in the face of change, but others will be terrified. What he meant by “laws” was the underlying patterns of nature that produce and direct change.

    In Hegelian terms, the old Zeitgeist (idea set) is dying and the new Zeitgeist is being born. This is generally a revolutionary period historically in that major institutions are radically transformed, obsolete ones supplanted, and new ones created.

    Ravi Batra also investigates this ih his books. The Downfall of Communism and Capitalism (1978) gives the paradigm. This paradigm is summarized and applied to current events in The New Golden Age: The Coming Revolution Against Political Corruption and Economic Chaos (2007).

    WARREN MOSLER Reply:

    It’s what Pirsig calls ‘dynamic quality’
    read Lila yet?

    Matt Franko Reply:

    Tom,
    Thanks for the perspective.
    Had to Google it but no, I’m certainly not a ‘Materialist’! (I think Christian Universalist)
    I see much Truth in what Meher Baba has written here, thanks again. Resp,

    WARREN MOSLER Reply:

    met him once at a club for growth meeting.
    big on headline conservative rhetoric,
    airhead when it comes to monetary operations.

    Reply

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