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Time for discussion on monetary policy

Posted: November 5, 2013 - 1:06pm  |  Updated: November 6, 2013 - 9:25am

For years I have attempted to generate honest discussion concerning our government’s monetary and fiscal policies. To no avail. People and politicians enjoy picking a side and digging in their heals. No objective discussion of tough questions and root cause of our faulty economic system. Deficit spending and borrowing cannot and will not last forever. Many believe we can balance the budget by taxing the hated 1percent. Even a 100 percent tax rate on the rich will not balance the budget.

The International Monetary Fund (IMF) was established in 1945 based on the flawed banking system implemented by the USA in 1913. Today there are 188 governments that are members of the IMF. Last month the IMF wrote a report called “Fiscal Monitor:Taxing Times.” Their evaluation concerning the ongoing global economic crisis is not optimistic. Forbes Magazine published an article concerning the one time tax section in the IMF report (The International Monetary Fund Lays The Groundwork For Global Wealth Confiscation, Forbes, October 15, 2013). Like all major media publications we are told there are only two avenues, austerity or tax increases. There are other roads we could take.

People I know do not believe they are wealthy. They have worked hard all their lives. They have wealth in property, retirement accounts and things that make them feel good. The IMF report explains the choices governments have under the current economic system. The IMF recognizes governments’ deficit spending will cause these governments to do drastic things to keep the system afloat. Confiscation of retirement accounts, home equity and other assets the working folks have accumulated.

There are other alternatives if people had an objective discussion about our faulty monetary and fiscal policies. I am not the smartest individual ever to wear shoe leather. But reflecting on history’s failed economic systems helps me recognize where we are today and what must be done. It is high time we have sensible discussions of unity and change the future for our children and grandchildren’s sake. Any takers?

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cormit
226
Points
cormit 11/06/13 - 11:32 am
2
0
Monetary policy

On borrowing money ....... the government always has and probably always will ...... it's a normal part of the economy.

On deficit spending ...... it varies over time, but must be compared to the Gross Domestic Product to get a perspective.

In 1943 .... the deficit was 30.3% of GDP. In 2009 the nations debt was 12.3% of GDP. It is now somewhere around 4% ..... and projected to be at around 3% by 2019.

http://www.npr.org/news/graphics/2009/feb/deficit/

That doesn't look like the sky is falling to me.

Also, I don't think anyone hates the one percent ...... we just expect them to pay their share. In 2011 Mitt Romney had an adjusted gross income of around $13.7 million. He paid around 14% in federal income taxes. I paid double that rate for a pittance of that earning ..... what's fair about that?

http://www.nytimes.com/2012/09/22/us/politics/under-pressure-romney-offe...

RaySouthwell
953
Points
RaySouthwell 11/06/13 - 12:28 pm
1
0
Cormit-Thank you for your constructive comments

Cormit
Borrowing money is because we are a debt based economic system. Why does government need to borrow money? To create an increase in the money supply. However, If we create bonds to sell for money why can't we just create interest free money? Currently the Federal Reserve Banks are buying about $40 billion in federal bonds/month. They create the money out of thin air and charge government interest for that created money. The Fed must do this because there are less buyers who want to purchase our bonds.

If we changed to a credit based economic system. Government could cut out the middle man and no interest will need to be paid, saving the nation $300-$500 billion in interest/year.

Manipulating the numbers. For years we have always calculated Debt to GDP ratios. I believe it was 107% last year. So now government comes out with a better formula. Yearly deficit to GDP ratio. Looks much better when we do that comparison. Here is the list of world's governments Debt/GDP

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Both the World bank and IMF use DEBT/GDP ratios.
http://en.wikipedia.org/wiki/Debt-to-GDP_ratio

amyw
26
Points
amyw 11/12/13 - 06:46 am
1
1
Objective Discussion

"For years I have attempted to generate honest discussion concerning our government’s monetary and fiscal policies. To no avail. People and politicians enjoy picking a side and digging in their heals. No objective discussion of tough questions and root cause of our faulty economic system."

The root cause is that people like you call it 'our' economic system - which is a lie. It it THE lie.

If you want HONEST discussion, call it THEIR faulty economic system - and stop calling it 'our' government. You're going along with their head games.

Micro-refinery for crude petroleum, with network of high-grade 3D object-modelers (or 3D printers) for Alaska-centric production. Skip all middlemen. Never ever say you didn't have an opportunity for objective discussion. Because now you do.

RaySouthwell
953
Points
RaySouthwell 11/12/13 - 09:51 am
1
0
Amyw

Ok, our economic system is a lie. It is still an economic system based on debt. I would prefer an economic system based on credit. You talk about micro-refinery. There still needs to be available money for such ventures. In our failed system, money is created by issuing debt.

Consider this. Our Permanent Fund money is $40+ billion. This money is untouchable by the politicians. If this money was invested into a State bank we could issue credit to individuals and businesses in Alaska without ever touching the invested $40+ billion. That is how banks work. However they are private. Think of the productive capabilities of the people with this new found credit. Not a new idea. The State Bank of North Dakota has been doing this for 94 years. Here is a PBS video about the Bank of North Dakota. http://www.youtube.com/watch?v=L75oinBuY1g

amyw
26
Points
amyw 11/24/13 - 03:19 pm
1
1
Can't Without Money

Again with the 'our' economic system. You keep saying that - it's no wonder people believe it.

I don't need your schoolchild lessons on 'the way things work'. I have the internetz, too. Your preconceived idea of an 'objective discussion' involves finagling around with legislation, oil funds, taxes, banking policies, and numbers. And, as you have so generously pointed out, these methods have failed. Biliously.

Here's the bottom line. Alaska imports what it needs because it can't currently process fully its own resources. As a general statement, the more in-state processing redirects exports to local consumers, the more economic and political leverage in-state consumers have. Once this mechanism is in place, whomever holds the keys will exercise that leverage to realize whatever their vision for Alaska happens to be. And nobody's holding those keys yet.

You want your vision to matter? Fill in the gap that makes converting crude into fiat so crucial to the state budget. Convert petrochemicals and metals into building materials, electronics, parts, vehicles, tools, etc., via micro-refinery (or nano-refinery) micro/nano smelter, and 3D printer. Distribute directly to Alaskans. Cut out the middle man. All of a sudden all that precious revenue you old hacks keep crying about becomes measurably less important. If it's fantasy, then so are electric street lamps. This is going to happen. The only questions are whom and when.

I'm betting on the next ten years.

RaySouthwell
953
Points
RaySouthwell 11/24/13 - 09:26 pm
2
0
amyw

I apology for offending you intelligence. Perhaps it is not your intelligence but mine. As an “old Hack” I understand things based on my life experiences. My experience is that people produce things and services that others need and want. Some form of medium of exchange must be established. Those who control the medium of exchange control commerce. It is my thought, with a Bank of Alaska, Alaskans can control the current medium of exchange called dollars. Making more available to the people here for an increase in the medium of exchange thereby increasing the peoples’ productivity. Whether a simple farmer like me or a sophisticated techie like you we all prosper.

amyw
26
Points
amyw 11/25/13 - 08:08 am
1
1
Farming

It's not so much my intelligence that's offended as is my regard for avoiding wasted effort. A Bank of Alaska, like a local, miniaturized resource processing and distribution solution, is merely a tool to move people's minds in the right direction - which absolutely involves putting a spade into the ground to pull a turnip up. Owning a currency is a LOT easier when you ACTUALLY control the capital to back it up. Alaska doesn't have oil - Oil has Alaska, and the difference will strangle an effort to commandeer and standardize a medium of exchange.

With a. Food, b. Metals, c. Petroleum, d. Petrochemicals, Alaska can undercut almost every import (so we might have to order some boxed banana cream pie filling once in a while).

Setting up a supply/processing/distribution chain involving the pieces I described would cost less than $5 million, take up less than 10 acres, and require less than 400 dedicated personnel. BAM - Alaska's entire economy (previously hijacked by the $ and corporate soul-sucking) now miniaturized, privatized, and aimed directly at itself to receive the prime benefit.

You can complain all you want about the BLM, property taxes, bla bla bla - I'm showing you a crack in the door. Someone's going to get their foot in, and you'd better hope to God it's someone on your team.

RaySouthwell
953
Points
RaySouthwell 11/25/13 - 09:00 am
1
0
Microeconomoics-Macroeconomics

I think we are on the same page. I am talking macroeconomics and you are talking microeconomics. With the proper macroeconomic system your system may be developed. You stated

" Alaska's entire economy (previously hijacked by the $ and corporate soul-sucking) now miniaturized, privatized, and aimed directly at itself to receive the prime benefit."

Agreed. However I would change "$" to corporate bank.

Germany's economy is the most powerful in Europe. They use small local banks to help establish and improve local small and medium size businesses. Bank of Alaska would do the same and thereby help promote your idea for economic success.

amyw
26
Points
amyw 11/25/13 - 01:40 pm
1
1
Propriety

"With the proper macroeconomic system your system may be developed."

That's another way of describing the problem that needs solving - Alaska doesn't HAVE its own macroeconomy. It is a piece of a much larger macroeconomic puzzle, and it doesn't have to be.

Macroeconomics deal with an economy as a whole, whereas microeconomics deal with isolated markets. The currency market, while it fluidly and broadly influences other markets, is still only a market.

This plan would reformat three of Alaska's most critical markets (mining, oil, and logistics) simultaneously, and facilitate a gateway to garner more control over the mediums market. It could be done regardless of which currency is being using to effect the transactions. Pick one, or create a better one - I don't care. It still has to be based on SOME competitive edge, or your market nodes will defect to the greater perceived value. I.E., we're going to use the dollar because every oil company that exports is using it, and we don't have anything real to start an argument with them over it.

Think about it - if every Alaskan consumes 3 gallons of crude every day (.2 above the national average), and that crude NEVER left the state, the number of players you have to pursue to accept your credit-based medium (i.e., the number of programmed macroeconomic nodes that require re-programming or re-education) in order to keep things running smoothly is radically lowered. Suddenly it doesn't matter what Oil Company X, Y, and Z use for bones - they're cut out of the picture. Localize, localize, localize.

If 5,000 stakeholders contributed $1,000 apiece, you could forge an economic weapon in the form of an Alaskan-based umbrella corporation that could undercut everyone else screaming for a debt-based economy. Throw your bank in there with it - the point is local control over ALL local markets. 500,000 stakeholders contributing $10 apiece would require more legwork and more management, but you would hold the entire state's interest, and eventually have the means to reformat the state government itself - because (to use a little farm-speak) they're the ones ushering the foxes into the henhouse.

RaySouthwell
953
Points
RaySouthwell 11/26/13 - 09:06 am
2
0
Dollars

There are many currencies of the world. It is a market where people can make money. However there is one currency the world accepts, US dollars. You keep talking about dollars in your system. Dollars needed to develop it. Dollars or credit is the center of the worlds economy for now. The current medium of exchange is dollars, the worlds Reserve Currency. Without this medium of exchange, production and services would plummet. Increasing this medium and use it in production of local goods and services the economy would expand. Economics is the social science of production, distribution and consumption of goods and services. Alaska has an untouched resource of dollars. If we used them Alaskans prosperity would expand.

Banks create credit with the dollars deposited. Never using the dollars. With a public Bank of Alaska, our dollars would be used to create credit for the expansion of local goods and services. Thus accomplishing you goal more easily.

Whomever controls the money supply controls everything.

RaySouthwell
953
Points
RaySouthwell 11/27/13 - 08:22 pm
1
0
Amyw

I need your help to better understand micro-refinery. I agree the oil industry controls Alaska's natural resources. Much like the banking industry controls our monetary resources. I hope you will consider how these two issue can be brought together for the advancement of all Alaskans.

I purchased 5 gallons of kerosene from Walmart. Looking on the can I see it was produced in Tennessee. Seems to me there should be a great savings on the purchase price and the environment if we produced it here in Alaska.

Please give me some links to better understand micro-refinery.

Norseman
3357
Points
Norseman 11/28/13 - 10:25 am
2
0
best thread in ages....

I really appreciate the education I have been given just reading this entire thread. It really has woken me up to how to "fix" our major problems here in AK.
I can grasp what amy and ray are putting out there and believe it would work. It is the first time in a long time that I have felt motivated to look into doing something to move our state forward.
Having a "vibrant and full of ideas" thread is refreshing.
Again, I appreciate the education this thread has given me and now my mind is beginning to comprehend the possibilities that do exist for our state.

beaverlooper
2931
Points
beaverlooper 11/28/13 - 11:47 am
0
0
please

"It is still an economic system based on debt. I would prefer an economic system based on credit."
Please explain to me how you can have credit without having debt as it's companion.

RaySouthwell
953
Points
RaySouthwell 11/28/13 - 05:10 pm
0
0
Great question

Great question beaverlooper. Thank You for asking. A little background first. When a currency is established there must be a way to expand the supply at certain times within a nation. The gold standard failed as a monetary system because it is a finite commodity. During economic upheaval people pulled gold out of the system. With the decreasing money supply economies crash.

Fiat currencies were established to keep the money supply at a level that keeps the economy going. It is believed the China/Mongolian Empire under Kubla Khan was the first to use fiat currency. The nation prospered until the fiat currency went to expand the empire through wars.

England used the first European fiat currencies called the Tally Stick long ago. Government created the Tally stick (money) and spent it into the economy and the tally stick was collected for taxes. Interest free money. Lincoln and Kennedy did the same with the “Greenback” and the “United States Note” respectively.

Today there are two ways to expand the fiat currency used by the world (US dollars). The best way is to have government create them out of thin air and turn those dollars into something of value, an asset. The way we use the expansion of fiat currency today is by debt. Government creates bonds (debt) and sells them. The central bank is purchasing about $40 billion per month. The banks can then create 10 times the amount they purchase (Fractional Reserve Banking) to expand credit based on the bond debt sold by the USA. It could work better if those dollars were used for building things of value. Unfortunately the banks are taking this created money and turning into gambling ventures and asset bubbles. Those ventures have expanded to $693 Trillion on the world stage and caused the collapse in 2007-08. And the stock market is at record highs today.

If Alaska took our dollars and placed it into a public Bank of Alaska, we could turn those dollars into credit to be spent into the economy. Prosperity would expand.

Economics Professor Richard Werner explains “where money comes from.” (6 minute video)
http://www.youtube.com/watch?v=r7qOuY9ZJ8w&feature=related

Please raise more questions if I am not making myself clear on answering your question.

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