People

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comment: what would be EVEN better: UBI + investment into one’s own independence!

will have biggest impact on well being of people and the well being of the habitat earth – if UBI is combined with education and possibilities for people to invest  (10-20-30% of their income) into their own independence from monopolies and finite resources (oil, coal, gas)

  • public bank giving loans (long running low interest) for:
    • food independence (easy, reliable crops, labor extensive, high quality growing food/gardening/land)
    • energy independence (high quality – well tested – low maintenance – off-grid energy systems for heating and electricity (wind and solar systems (no battery 30% independence with battery 60% independence + x) plan with $1000 repair budget for 5 years))
    • mobility independence (electric mobility?)
    • imho people should even own their own internet lines (to their next neighbour) (no fees no more for the last mile – but a little  maintenance 🙂 make sure the mice are not eating the cables)

Universal Basic Income Is Easier Than It Looks

Posted on December 28, 2018 by Ellen Brown

“Calls for a Universal Basic Income have been increasing, most recently as part of the Green New Deal introduced by Rep. Alexandria Ocasio-Cortez (D-NY) and supported in the last month by at least 40 members of Congress. A Universal Basic Income (UBI) is a monthly payment to all adults with no strings attached, similar to Social Security. Critics say the Green New Deal asks too much of the rich and upper-middle-class taxpayers who will have to pay for it, but taxing the rich is not what the resolution proposes. It says funding would primarily come from the federal government, “using a combination of the Federal Reserve, a new public bank or system of regional and specialized public banks,” and other vehicles.

The Federal Reserve alone could do the job. It could buy “Green” federal bonds with money created on its balance sheet, just as the Fed funded the purchase of $3.7 trillion in bonds in its “quantitative easing” program to save the banks. The Treasury could also do it. The Treasury has the constitutional power to issue coins in any denomination, even trillion dollar coins. What prevents legislators from pursuing those options is the fear of hyperinflation from excess “demand” (spendable income) driving prices up. But in fact the consumer economy is chronically short of spendable income, due to the way money enters the consumer economy. We actually need regular injections of money to avoid a “balance sheet recession” and allow for growth, and a UBI is one way to do it.

The pros and cons of a UBI are hotly debated and have been discussed elsewhere. The point here is to show that it could actually be funded year after year without driving up taxes or prices. New money is continually being added to the money supply, but it is added as debt created privately by banks. (How banks rather than the government create most of the money supply today is explained on the Bank of England website here.

A UBI would replace money-created-as-debt with debt-free money – a “debt jubilee” for consumers – while leaving the money supply for the most part unchanged; and to the extent that new money was added, it could help create the demand needed to fill the gap between actual and potential productivity.

The Debt Overhang Crippling Economies

The “bank money” composing most of the money in circulation is created only when someone borrows, and today businesses and consumers are burdened with debts that are higher than ever before. In 2018, credit card debt alone exceeded $1 trillion, student debt exceeded $1.5 trillion, auto loan debt exceeded $1.1 trillion, and non-financial corporate debt hit $5.7 trillion. When businesses and individuals pay down old loans rather than taking out new loans, the money supply shrinks, causing a “balance sheet recession.” In that situation, the central bank, rather than removing money from the economy (as the Fed is doing now), needs to add money to fill the gap between debt and the spendable income available to repay it.

Debt always grows faster than the money available to repay it. One problem is the interest, which is not created along with the principal, so more money is always owed back than was created in the original loan. Beyond that, some of the money created as debt is held off the consumer market by “savers” and investors who place it elsewhere, making it unavailable to companies selling their wares and the wage-earners they employ. The result is a debt bubble that continues to grow until it is not sustainable and the system collapses, in the familiar death spiral euphemistically called the “business cycle.” As economist Michael Hudson shows in his 2018 book And Forgive Them Their Debts, this inevitable debt overhang was corrected historically with periodic “debt jubilees” – debt forgiveness – something he argues we need to do again today.

For governments, a debt jubilee could be effected by allowing the central bank to buy government securities and hold them on its books. For individuals, one way to do it fairly across the board would be with a UBI.

Why a UBI Need Not Be Inflationary

In a 2018 book called The Road to Debt Bondage: How Banks Create Unpayable Debt, political economist Derryl Hermanutz proposes a central-bank-issued UBI of one thousand dollars per month, credited directly to people’s bank accounts. Assuming this payment went to all US residents over 18, or about 241 million people, the outlay would be close to $3 trillion annually. For people with overdue debt, Hermanutz proposes that it automatically go to pay down those debts. Since money is created as loans and extinguished when they are repaid, that portion of a UBI disbursement would be extinguished along with the debt.

People who were current on their debts could choose whether or not to pay them down, but many would also no doubt go for that option. Hermanutz estimates that roughly half of a UBI payout could be extinguished in this way through mandatory and voluntary loan repayments. That money would not increase the money supply or demand. It would just allow debtors to spend on necessities with debt-free money rather than hocking their futures with unrepayable debt.

He estimates that another third of a UBI disbursement would go to “savers” who did not need the money for expenditures. This money, too, would not be likely to drive up consumer prices, since it would go into investment and savings vehicles rather than circulating in the consumer economy. That leaves only about one-sixth of payouts, or $500 billion, that would actually be competing for goods and services; and that sum could easily be absorbed by the “output gap” between actual and forecasted productivity.

According to a July 2017 paper from the Roosevelt Institute called “What Recovery? The Case for Continued Expansionary Policy at the Fed”:

GDP remains well below both the long-run trend and the level predicted by forecasters a decade ago. In 2016, real per capita GDP was 10% below the Congressional Budget Office’s (CBO) 2006 forecast, and shows no signs of returning to the predicted level.

The report showed that the most likely explanation for this lackluster growth was inadequate demand. Wages have remained stagnant; and before producers will produce, they need customers knocking on their doors.

In 2017, the US Gross Domestic Product was $19.4 trillion. If the economy is running at 10% below full capacity, $2 trillion could be injected into the economy every year without creating price inflation. It would just generate the demand needed to stimulate an additional $2 trillion in GDP. In fact a UBI might pay for itself, just as the G.I. Bill produced a sevenfold return from increased productivity after World War II.

The Evidence of China

That new money can be injected year after year without triggering price inflation is evident from a look at China. In the last 20 years, its M2 money supply has grown from just over 10 trillion yuan to 80 trillion yuan ($11.6T), a nearly 800% increase. Yet the inflation rate of its Consumer Price Index (CPI) remains a modest 2.2%.

Why has all that excess money not driven prices up? The answer is that China’s Gross Domestic Product has grown at the same fast clip as its money supply. When supply (GDP) and demand (money) increase together, prices remain stable.

Whether or not the Chinese government would approve of a UBI, it does recognize that to stimulate productivity, the money must get out there first; and since the government owns 80% of China’s banks, it is in a position to borrow money into existence as needed. For “self-funding” loans – those that generate income (fees for rail travel and electricity, rents for real estate) – repayment extinguishes the debt along with the money it created, leaving the net money supply unchanged. When loans are not repaid, the money they created is not extinguished; but if it goes to consumers and businesses that then buy goods and services with it, demand will still stimulate the production of supply, so that supply and demand rise together and prices remain stable.

Without demand, producers will not produce and workers will not get hired, leaving them without the funds to generate supply, in a vicious cycle that leads to recession and depression. And that cycle is what our own central bank is triggering now.

The Fed Tightens the Screws

Rather than stimulating the economy with new demand, the Fed has been engaging in “quantitative tightening.” On December 19, 2018, it raised the fed funds rate for the ninth time in 3 years, despite a “brutal” stock market in which the Dow Jones Industrial Average had already lost 3,000 points in 2-½ months. The Fed is still struggling to reach even its modest 2% inflation target, and GDP growth is trending down, with estimates at only 2-2.7% for 2019. So why did it again raise rates, over the protests of commentators including the president himself?

For its barometer, the Fed looks at whether the economy has hit “full employment,” which it considers to be 4.7% unemployment, taking into account the “natural rate of unemployment” of people between jobs or voluntarily out of work. At full employment, workers are expected to demand more wages, causing prices to rise. But unemployment is now officially at 3.7% – beyond technical full employment – and neither wages nor consumer prices have shot up. There is obviously something wrong with the theory, as is evident from a look at Japan, where prices have long refused to rise despite a serious lack of workers.

The official unemployment figures are actually misleading. Including short-term discouraged workers, the rate of US unemployed or underemployed workers as of May 2018 was 7.6%, double the widely reported rate. When long-term discouraged workers are included, the real unemployment figure was 21.5%. Beyond that large untapped pool of workers, there is the seemingly endless supply of cheap labor from abroad and the expanding labor potential of robots, computers and machines. In fact the economy’s ability to generate supply in response to demand is far from reaching full capacity today.

Our central bank is driving us into another recession based on bad economic theory. Adding money to the economy for productive, non-speculative purposes will not drive up prices so long as materials and workers (human or mechanical) are available to create the supply necessary to meet demand; and they are available now. There will always be price increases in particular markets when there are shortages, bottlenecks, monopolies or patents limiting competition, but these increases are not due to an economy awash with money. Housing, healthcare, education and gas have all gone up, but it is not because people have too much money to spend. In fact it is those necessary expenses that are driving people into unrepayable debt, and it is this massive debt overhang that is preventing economic growth.

Without some form of debt jubilee, the debt bubble will continue to grow until it can again no longer be sustained. A UBI can help correct that problem without fear of “overheating” the economy, so long as the new money is limited to filling the gap between real and potential productivity and goes into generating jobs, building infrastructure and providing for the needs of the people, rather than being diverted into the speculative, parasitic economy that feeds off them.

___________________

This article was first published on Truthdig.com. Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including Web of Debt and The Public Bank Solution. A 13th book titled Banking on the People: Democratizing Finance in the Digital Age is due out early next year. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.

(Source: https://ellenbrown.com/2018/12/28/universal-basic-income-is-easier-than-it-looks/)

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another opinion: every state needs a public bank (to invest into key areas)

opportunity in crisis: for investors to buy key companies cheap?

opportunities… for whom?

those that already have a lot.

opportunities for populists and demagogues – who is shouting louder – people believe has a solution.

Hitler did a lot of “good things” especially for the farmers – at the beginning of his regime.

But we all now the bottom line was catastrophic.

Super rich people funded Hitler because they feared of their wealth being confiscated and given to “lazy idiots” by socialists and communists.

So would not be the solution – ongoing talks – similar to a “grand debate” – (a little better than Macron’s idea) – with key actors – from super wealthy – super poor – academics and politics – to come up with a solution – before things explode again and again.

Germany Shows Signs of Recession – Is the Global Economy Next?

the infrastructure is already screwed massively.

The gov wanted to get private investors to privatize the railway and the motorways.

But this kind of failed partly. Because investors want to buy only perfect roads not roads that need massive investments before generating revenue.

Also: Ex Finance Minister Scheuble (after failing to fix the cum-ex billions of tax fraud) imposed a policy of “Schwarze Null” – not increasing the governmental debt – halting investments.

This is what Greece did and we all know what happend.

Again: If private companies and families save money – that is okay – but the gov should not stop spending in crisis (when nobody is spending/investing) – because this risks halt of all of the economy and mass uneployment (as happened in Greece, Portugal was wise to go a different way)

August 15, 2019

 

Heiner Flassbeck argues that the China-US trade war is not having as much of an impact on the global economy as many assume.

China’s currency is not undervalued, despite its recent devaluation.

Rather, the undervalued Euro gives Germany a real competitive advantage in world trade.

It’s actually Europe’s economic weakness that is dragging down Germany, not China (src)

GREG WILPERT: Welcome to The Real News Network. I’m Greg Wilpert in Baltimore.

Indications are increasing that the US-China trade war might be leading the global economy towards a recession. One indicator of this is that Germany, which is often considered to be the economic motor of Europe, experienced an important decline in industrial production during the second quarter of 2019. It dropped by 1.5% in June, and is expected to drop another 1.5% in July because of declining orders from China. This is not yet a recession, but a technical recession, which is what happens when you have two consecutive quarters of economic contraction. The trade war between the US and China is making Chinese imports cheaper for Germany and making German exports more expensive, thus reducing the demand for German industrial products. Also, there is the fear of a no-deal Brexit now that Boris Johnson was appointed Prime Minister of the UK, and there are very low interest rates that may be creating a new financial bubble.

Joining me now to discuss the German economy in the context of the US-China trade war is Heiner Flassbeck. He’s the Director of Flassbeck-Economics, a consultancy for global macro questions. Also, he’s the former Chief of Macroeconomics and Development of the United Nations Conference on Trade and Development. Thanks for joining us again, Heiner.

HEINER FLASSBECK: Thanks for inviting me.

GREG WILPERT: Germany is known as the economic engine of Europe as I mentioned, or at the very least its industrial engine. How real do you think is the danger of recession in Germany, and would such a recession drag down the whole European Union with it?

HEINER FLASSBECK: Well, first of all, that with Germany being the engine of Europe, I have my doubts because as I’ve said many times on this program, Germany has been exploiting the other countries by exporting its way out of the crisis and exporting its way into a good recovery compared to the bad recoveries that the other European countries had. So far what we see is indeed we have a German economy that is extremely exposed to the world economy, and in particular China, you mentioned it. This is showing now in a reduction of demand from the rest of the world.

But, but, the big but is that also from Europe, demand from Europe at this moment of time is shrinking more than demand from the rest of the world. So what we have is [foreign language 00:02:32], European [foreign language 00:02:33], a weakness of Europe for a really long time because Europe is struggling with this super competitive Germany and is pushing down wages. We have with this low wage increases in the last 10 years, more or less, we have very weak domestic demand. That is why any reduction from export, any shock from the export side, is immediately driving or getting the European economy off track.

GREG WILPERT: When you mentioned the more general European context of the German economy, it sounds like you’re discounting perhaps the role that the US-China trade war and the devaluation of the Chinese yuan are playing in the economic problems that Germany is currently facing. Is that correct, or what role exactly do you see the trade war playing for Germany and more generally for the global economy?

HEINER FLASSBECK: Well, everybody says the trade war is the main thing. I have my doubts it is the main thing. It’s surely adding to the uncertainty around the world, including the Chinese small depreciation that happened a couple of days ago when the US called it a “currency manipulator,” which is a big word for a little thing. But overall the Chinese position, the competitive position, hasn’t changed very much. If you look at the real effective exchange rate, and that is the only reliable measure for competitiveness. That is, the competitiveness compared to all the trading partners of the country, including the exchange rate and including the inflation differentials or unit labor cost differentials. Then you see that China is still at a very high level.

Europe on the other hand, has a very low level, and US also is on a quite high level. So the point is still, that I’ve been making also many times, that Europe is still a little undervalued. Europe is definitely more undervalued than China, and so far the focus of Mr. Trump on China and the fist-fight, his in-fight with China, is very irrational. It should focus more on Europe. Europe is the bigger thing worldwide. Although the bilateral relations – in the bilateral relation, China is more important than Europe. But for the world as a whole, and this is what really counts and not the bilateral relationships, what really counts is the global picture. There, Europe is in a dangerous situation. Then you see in addition to all this, to our dependence on exports, the German dependence on exports, we see all over Europe, except for the monetary policy – it’s quite stupid, it’s quite stupid policy reactions in particular on the fiscal side.

GREG WILPERT: Well, I want to get to that point in a moment, but first I’d like to ask you about something you just said, which is, you said that Europe is being undervalued, and that Trump ought to be focusing on Europe. I mean I want you to explain, “What do you mean by that?”

HEINER FLASSBECK: Well, Germany still has an extremely high current account surplus. The valuation, again, the real effective exchange rate of the Euro is rather low compared to many years before. So far, if there is a competitive advantage in this world that a big region has against other regions, then it’s Europe against the United States. So far the Trump complaints about the German surplus, he said, “The Germans are bad, very bad,” it’s not fully unsound. It has its justification, and indeed what we should see in Europe is a much stronger focus all over Europe on domestic demand.

Europe is as closed an economy as the United States. The overall export share is very low, below 20%. Only Germany has an export share of 50%, which is really unreasonable for such a big country. An export share at 50% is absurd. So Germany has the wrong structure, and mainly Germany has to change. But the point is, Germany is not doing trade policies. The trade policies are done in Brussels, and so Trump does not really know whom to address with his accusations. But as I said, Europe could solve its own problems and does not have to look permanently to the world market.

GREG WILPERT: Well, that’s exactly the next issue I want to turn to. Now, you recently published a series of articles on your website, Flassbeck-Economics, with the title, “The Great Paradox: Liberalism Destroys the Market Economy.” Now we don’t have enough time to delve into all of your argument in detail here-

HEINER FLASSBECK: Unfortunately.

GREG WILPERT: … but I’d like to get the general gist of it and look at how it relates to the economic situation today. That is, your articles look at how liberalism, or what would some would call “neoliberalism”, contributes to the continuous slowing economic growth ever since the 1970s. Now, how does economic liberalism relate to Germany’s and Europe’s economic problems?

HEINER FLASSBECK: Well, to make a long story rather short, the point is rather trivial. The point is that under the neoliberal hegemony in the last 30 years, it began in the 70s. More than 30 years, it’s close to 50 years now, the market economy turned into something quite strange. Namely, a system where the company sector does not play the role that it should play in a market economy, which is to be the main investor and to be the main debtor. This combination to be investor and debtor is long gone. In most of our economies, including the United States, it’s gone for 15 years or 20 years even, so that we are faced with the situation that people save.

People still continue to save. Private households are saving money, but also the company sector is saving money. So in this situation, it is impossible that a market economy can function because the only way out then is you need someone who takes on debt. You need someone who invests these savings or the money that is needed to compensate for the demand restriction, demand fall that comes from the savings, so who’s going to do that? The only guy around for the whole world is obviously the government. The only guy around for big regions like the United States and Europe is the government. Only the Germans have found a nice solution with their export surpluses, so they ask other countries to be the debtor so that they are out of the trouble.

But that is obviously not a solution for the world and it’s not a solution for Europe. So Europe has to accept that fiscal policy must play a much stronger role, as it does in the United States. United States claims to be the best market economy in the world, but who is the demander so to say, the investor of last resort? It’s the government. Look at your figures. The figures are dramatic. In European terms they’re dramatic. They’re not dramatic in objective economic terms, but in European terms they are dramatic. More than 4% current deficit. More than 1,000 billion in the next fiscal year. Close to 800 billion last fiscal year. So in Europe everybody would say, “This economy is going to collapse. The government is bankrupt and we need other countries to finance the government.”

So far, the Europeans have to learn the lesson that neoliberalism has taken out the dynamics of investment, of private investment in the market economy, and there’s only one institution that can replace private investment and private dynamics. That is the government. That is the transformation of the whole economy that has taken place in the last 50 years. The only region in the world that is not accepting it are the Europeans. And this is the big failure and this is a big problem.

GREG WILPERT: Well, I think that’s a very interesting and very important point. Although I would also perhaps point out that it’s important to keep in mind that the US deficit is to a large extent also based on a fairly low taxation rate, and extremely high spending rate on military expenditures. Half of the budget going towards the military, which is obviously not necessarily the solution, but which some people have called “Military Keynesianism.” Wouldn’t you agree ?

HEINER FLASSBECK: That is right. It’s not a solution in the long term, but in the short term the market doesn’t care where the demand comes from. Does it come from the government military sector, or the government private sector, the government investment sector? Nobody cares. That is the simple point. To solve the problems of the moment, you need the demand. And where the demand is coming from is not the first question. It’s only the second or third question. In Europe there is no demand at all, and that is the biggest problem that you can have. I do not defend Trump’s tax reduction. That was stupid. In a situation where when the company sector is a net saver, to reduce the taxes for the company sector is really absurd. But the United States showed that it’s nevertheless possible, despite all these errors, despite these foolish policies, it is possible to have an ongoing recovery, and the unemployment rate is low. There is no doubt about it.

GREG WILPERT: Well, we’re going to leave it there for now, but I hope we will have you back on very soon.

HEINER FLASSBECK: Sure.

GREG WILPERT: I was speaking to Heiner Flassbeck, Director of Flassbeck-Economics. Thanks again, Heiner, for having joined us today.

HEINER FLASSBECK: Bye-bye. Thanks for having me.

GREG WILPERT: And thank you for joining The Real News Network.

New Jobs in the military? (US role model? again? hope not)