Economic Articles from 2016
How Did a Nation Crippled by Wall Street Billionaires End Up With Them Running the Country?
By Pam Martens and Russ Martens
Posted December 31, 2016
Just yesterday the Government Accountability Office (GAO) released a study showing that there is a growing number of older Americans whose Social Security benefits are being reduced by the government to repay delinquent student loans. The government uses the benign sounding word “offset” to explain these reductions. According to the report, in 2015 there were 114,000 Americans impacted by these offsets, resulting in many living below the poverty level.
When serially charged banks like Citigroup couldn’t pay its bills during the 2008 crash, here’s what the U.S. government did to lend a helping hand: it injected $45 billion in equity into Citigroup; provided asset guarantees of over $300 billion; while the Federal Reserve secretly sluiced over $2.5 trillion in revolving loans to Citigroup for more than three years – much of which was at a loan interest rate of less than 1 percent as the bank charged its struggling credit card customers double-digit interest rates. More…
The Italian Banking Crisis: No Free Lunch — or Is There?
By Ellen Brown
Posted December 27, 2016
On December 4, 2016, Italian voters rejected a referendum to amend their constitution to give the government more power, and the Italian prime minister resigned. The resulting chaos has pushed Italy’s already-troubled banks into bankruptcy. First on the chopping block is the 500 year old Banca Monte dei Paschi di Siena SpA (BMP), the oldest surviving bank in the world and the third largest bank in Italy. The concern is that its loss could trigger the collapse of other banks and even of the eurozone itself.
There seems little doubt that BMP and other insolvent banks will be rescued. The biggest banks are always rescued, no matter how negligent or corrupt, because in our existing system, banks create the money we use in trade. Virtually the entire money supply is now created by banks when they make loans, as the Bank of England has acknowledged. When the banks collapse, economies collapse, because bank-created money is the grease that oils the wheels of production. More…
Six Steps Trump Can Take Toward Better Monetary Policy
by JP Cortez and Stefan Gleason
Posted December 24, 2016
Since Nixon severed the final link to gold in 1971, the US dollar has lost more than 80% of its purchasing power, wreaking havoc on ordinary savers, conservative investors, and households on fixed incomes. Today, inflationary monetary policy continues to be a foundational tenet of all presidential administrations as politicians and central bankers have heedlessly been borrowing and printing currency without restraint in order to bankroll today’s bloated and insolvent federal government.
Movement in the direction of sound money is badly needed, and even without abolishing central banking, there are several steps that the Trump administration can take toward improving monetary policy. More…
By Michael Hudson and Sharmini Peries
Posted December 22, 2016.
When Adam Smith and John Stuart Mill and even Marx wrote about free markets, they meant a market free from the idle rich. These were primarily the idle landlords who collected land rent on a hereditary basis without working. Also, financers and the bankers, who had long insisted that governments create monopolies to give them in lieu of debt repayment.
The whole idea of industrial capitalism was to get free from these unnecessary costs. An economy doesn’t need a landlord class to collect rent. It doesn’t need monopoly rent. But around the late 19th century the landlords fought back and they claimed there was no such thing as unearned income. They claimed that rentiers were productive, not parasitic.
The essence of classical economics was to say there’s a difference between value and price. Value is what it really costs to produce goods and services. This cost can be expressed in terms of what it costs to hire labor at a living wage. Everything that’s not a real cost is just a privilege, a legal right to put up a toll booth and extract rent. More…
Here’s Where the Next Bank Deposit “Bail-In” Will Strike…
by Nick Giambruno
Posted December 17, 2016
Once a deposit is made at the bank, it’s no longer your property. It’s the bank’s. What you own is a promise from the bank to repay. It’s an unsecured liability. That’s a very different thing from owning physical cash stuffed under your mattress. Money deposited into the bank technically makes you a creditor of the bank. You’re liable to get burned from a bail-in should the bank get into trouble.
People in Cyprus had to find this out the hard way in early 2013. People awoke on an otherwise normal Saturday morning to the shock that the money in their bank accounts had been taken by a bail-in to recapitalize the banks. More…
Cash Is No Longer King: The Phasing Out of Physical Money Has Begun
by Shaun Bradley
Posted December 16, 2016
The unprecedented collusion between governments and central banks that occurred in 2008 led to bailouts, zero percent interest rates and quantitative easing on a scale never before seen in history. Those decisions, which were made under duress and in closed-door meetings, set the stage for this inevitable demise of paper money.
Control and confidence are two of the most important things in the system we live in. Once these digital spider webs have been put into place, the ability for an individual to maintain privacy or anonymity will all but disappear. Only through understanding the subversive actions being taken can people protect themselves from having to put their future in someone else’s hands. The cash that allows free transactions without tax burdens or state scrutiny won’t be around much longer. There will be many rationalizations for a cashless society in the years to come, but without fixing this broken financial system first, this will only ensure that despotism gains an even sturdier foothold. More…
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