A simple idea: common sense -

A few countries such as Kuwait and Taiwan, many US States, public pension funds all have real saving than can be used on a rainy day - it is a good idea.

We should create a reserve account that increases in good times - with tax or revenue sources that increase with growth that can be used in times of recession. If we had a large "rainy day fund" we could use it now for short term stimulus - with grants to states and local government - (more programs such as the unemployment insurance fund which could be increased and made wider and deeper as an automatic stabilizer) more money out there for short term activity. (teacher corps, cops, PWA, WPA, CCC, and other New Deal type programs with short term impact) The fund needs income sources that are highly sensitive to booms and reduce themselves in busts - such as capital gains, stamp taxes, asset sales, and other revenue types that would be reduced in poor times and increased in good. (such as VAT, sales tax on luxury goods - high income super-taxes, corporate taxes, et al) - not increase taxes now but only when times are good - something automatic - and independent - such as the federal reserve with actual and large reserves and investments -

The military could have larger contingency funds to pay for future wars. When in surplus the funds could be invested in revenue producing productive activity - buying foreign bonds would help the balance of payments, construction loans, and other safe and conservative non-inflationary investments.

Now a fund could be created by borrowing revenue bonds but then like Kiewit, Taiwan have a fund for the future, a “Rainy Day” operating reserve fund account with a clear source of repayment which then could go into surplus after recovery.

In short high deficits increase short term economic activity but have and equal and opposite effect on long term welfare. Just as debt can stimulate current consumption the hang over come later - it bets the future on the present - ( higher activity than otherwise - lower than otherwise - not absolute but relative - budgets, deficits, debt, is only one aspect of a national and global economy driven by technology, market psychology, and things as obscure as weather, elections, terrorism - etc.)

The British and most of the EU seem to believe that total national debt needs to be driven down to around 1/3 of GDP or less and less than 3% of annual GDP in deficits - no problem - but more and greater can be a bigger problem - i.e. of 10 trillion GDP a total debt at 4 trillion (about the USA public held debt) and 350 billion annual red in the books. Clearly running near the limits.

As Murray Rothbard noted, "…logic tells us that if savings go into government bonds, there will necessarily be less savings available for productive investment than there would have been, and interest rates will be higher than they would have been without the deficits [italics added]." And there we find the answer and the key qualifier, which is highlighted in italics.

The simplicity and brevity of this argument stands in sharp contrast to the muddled empirical inferences wrought by many economists today. It is irrefutably true. Savings are finite and a siphoning of these funds by government can only mean less is available for private use. Whether the actual interest rate is higher or lower during times of deficits is irrelevant; what really matters is what might have been without the deficits.

Investment vs. consumption:

As people and households we know the difference between investments and consumption. Most business knows the difference but World Com charges expenses as capital to fudge the books. In the public sector there are investments that have a return – a ROI a return on investments. Infrastructure (transportation, communications, institution building, education, public health, science and technology) make the economy more efficient and raise incomes and welfare. Consumption of military equipment, money used by beneficiates to consume, subsidies that are likely negative (making distortion in the effective allocation of resources) tax breaks that encourage less than optional investment decisions do not add to future welfare but do gather votes and political money. When we spend billions producing .70 cents cotton, or peanuts, or sugar when the world market is less than ½ that consumers have less real income in buying goods at higher prices so able to but less than otherwise.

Entitlements are income transfers. Workers pay FICA taxes (larger than they know because employer contributions are hidden) that goes into checks for beneficiary recipients. Workers can buy less while people getting checks can buy more. The economic effects have a small effect in discoursing work and saving increasing debt and consumption. The fundamentals of government economic policy should be to encourage work and saving. VAT or sales taxes encourage investment over consumption if saving are tax advantaged while consumer prices are higher.

The 19^th and 20^th century economic problem was the business cycle. Free market economies suffer from “irrational exuberance” based on greed during booms and virtuous cycles, and excessive fear during the following busts preventing investments and creating an evil cycle of lay off, disinvestment and hopelessness. We have more to fear than fear itself. “So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” http://historymatters.gmu.edu/d/5057/ read the whole speech.

Marx called this the “surplus product” not in the sense we are too rich but only that the market produces more than can be consumed by effective demand. By producing income and consumption by paying people to produce goods that do not enter the market or income transfer sucks up the surplus. War generates a lot of income but no goods on the market. Benefits create buyers that don’t produce anything. It is not clear that a global service economy has quite the same level of over production, boom and bust.

Real reserves would provide “pump priming” without the hangover of debt. A revenue and fiscal system based on investment and limiting the damage done by income transfers (from the productive to the retired and unproductive) would solve the business cycle issue. The Federal Reserve and treasury could increase demand in down times (beyond interest rate effects) by increasing investments (using reserves to build roads, schools, new technologies, utilities and labor intensive projects in parks, public works, low interest bonds to rebuild the electric grid, more efficient power plants etc.) In booms increasing consumption taxes and collecting on construction bonds, replace reserves and cool over heating.

By making payroll (and other income) taxes go mainly into transfers which are a form of insurance. Health insurance, retirement is saving, education saving, house buying, are subsided for the bottom half and paid for by the top half.

Solving the social security problem:

And the health insurance and taxing issues – a set of simple solutions to complex problems. If the population changes and there are fewer workers and more people drawing retirement and health benefits the percentage of GDP going to transfer payments will have to increase – there are fewer paying in and mort taking out. Transfer payments have to include some element of redistribution – some pay more than they put it and some get more than they contribute. There is no way out of these hard facts.

The issue is to increase freedom and choice, to run the system with efficiency and fairness, and to maintain a large majority support for social security – The SSA includes retirement, Medicare, Medicaid, disability, survivor protection, unemployment, welfare, with the idea of a social safety net first set up by Bismarck in the 1890’s to cut off the growing socialist, in American by the new deal, England after WWII with the NHS, and now in all modern nations.

There are five elements in a system for the 21^st century.

1.) The payroll deduction system

2.) Choice of extra tax advantaged saving, insurance, education, health plans

3.) Income and VAT taxes

4.) Redistribution – credits

5.) Individual plans and management systems

The federal pay stub shows all the deductions as do many state and private pay systems. The FICA shows only the employee contribution which is just a slide of hand to hide the true cost. The employer contribution is just as much part of the cost of labor as cash. Health and retirement plays do not reflect in taxable income or part of the total employment compensation package and is income in every sense.

Fairness in wages would require (over time) that everything going in and coming out is regularly reported.

1.) Then the employee or individual can add to parts of their plan – more and better retirement, savings, health, educational savings, etc. The more they pay the more they get. The choices are on a menu t the buyer not the employer.

2.) The state and federal government provide a basic set of benefits – retirement and health plans. Beyond these basics it subsidies add on a diminishing scale. Low income people are encouraged to have saving with incentives, credits, and subsidies.

The income tax is reduced and made very simple. People below the 50^th percentiles (median) do not pay income taxes but have earned income benefits to pay part of health care and private retirement accounts.

3.) If the top rate of Income Tax is 20% for the 99% percentile it is reduced by ½% by each group until the 50% goes to 0. By setting the tax as percentile it adjusts for inflation and by setting the top rate and the income required the math is quite simple.

4.) The rest of needed revenue has to be raised by a VAT – sales tax so the whole system floats for ever. The tax credits and benefits equalizes the issue of low income people paying VAT so the net effect is positive for low income and does require contribution from those better off.

5.) The management of the individual accounts would be by contracts – in social security the current system becomes a basic plan with subsidies for the poor especially for health insurance and tax advantages for the rich who pay more and get more. More can be added into a variety of retirement options and saving plans.

http://www.berkshirehathaway.com/2004ar/2004ar.pdf

A budget deficit in no way reduces the portion of the national pie that goes to Americans. As long as other countries and their citizens have no net ownership of the U.S. , 100% of our country’s output belongs to our citizens under any budget scenario, even one involving a huge deficit.

As a rich “family” awash in goods, Americans will argue through their legislators as to how government should redistribute the national output – that is who pays taxes and who receives governmental benefits. If “entitlement” promises from an earlier day have to be reexamined, “family members” will angrily debate among themselves as to who feels the pain. Maybe taxes will go up; maybe promises will be modified; maybe more internal debt will be issued. But when the fight is finished, all of the family’s huge pie remains available for its members, however it is divided. No slice must be sent abroad.

Large and persisting current account deficits produce an entirely different result. As time passes, and as claims against us grow, we own less and less of what we produce. In effect, the rest of the world enjoys an ever-growing royalty on American output. Here, we are like a family that consistently overspends its income. As time passes, the family finds that it is working more and more for the “finance company” and less for itself.

Should we continue to run current account deficits comparable to those now prevailing, the net ownership of the U.S. by other countries and their citizens a decade from now will amount to roughly $11 trillion. And, if foreign investors were to earn only 5% on that net holding, we would need to send a net of $.55 trillion of goods and services abroad every year merely to service the U.S. investments then held by foreigners. At that date, a decade out, our GDP would probably total about $18 trillion (assuming low inflation, which is far from a sure thing). Therefore, our U.S. “family” would then be delivering 3% of its annual output to the rest of the world simply as tribute for the overindulgences of the past. In this case, unlike that involving budget deficits, the sons would truly pay for the sins of their fathers.

This annual royalty paid the world – which would not disappear unless the U.S. massively underconsumed and began to run consistent and large trade surpluses – would undoubtedly produce significant political unrest in the U.S. Americans would still be living very well, indeed better than now because of the growth in our economy. But they would chafe at the idea of perpetually paying tribute to their creditors and owners abroad. A country that is now aspiring to an “Ownership Society” will not find happiness in – and I’ll use hyperbole here for emphasis – a “Sharecropper’s Society.” But that’s precisely where our trade policies, supported by Republicans and Democrats alike, are taking us.

Many prominent U.S. financial figures, both in and out of government, have stated that our current-account deficits cannot persist. For instance, the minutes of the Federal Reserve Open Market Committee of June 29-30, 2004 say: “The staff noted that outsized external deficits could not be sustained indefinitely.” But, despite the constant handwringing by luminaries, they offer no substantive suggestions to tame the burgeoning imbalance.

In the article I wrote for Fortune 16 months ago, I warned that “a gently declining dollar would not provide the answer.” And so far it hasn’t. Yet policymakers continue to hope for a “soft landing,” meanwhile counseling other countries to stimulate (read “inflate”) their economies and Americans to save more. In my view these admonitions miss the mark: There are deep-rooted structural problems that will cause America to continue to run a huge current-account deficit unless trade policies either change materially or the dollar declines by a degree that could prove unsettling to financial markets.

Proponents of the trade status quo are fond of quoting Adam Smith: “What is prudence in the conduct of every family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.”

I agree. Note, however, that Mr. Smith’s statement refers to trade of product for product, not of wealth for product as our country is doing to the tune of $.6 trillion annually. Moreover, I am sure that he would never have suggested that “prudence” consisted of his “family” selling off part of its farm every day

Strategic Money reserves: A real vision for the future

Financial Times Current projections over future years is 44.2 trillion debt in current dollars if current benefits are to be paid to the next generation (unfunded liabilities) - interest costs alone would be greater than current total budget of 2 trillion - clearly a banana republic - clearly forces high interest rates - but the scheme is to "starve the beast" forcing big cuts in benefits - see

http://www.google.com/search?hl=en&lr=&ie=UTF-8&oe=UTF-8&edition=us&q=%E2%80%9CRainy+Day%E2%80%9D+operating+reserve+fund+account&btnG=Google+Search

“Rainy Day” operating reserve fund account

http://www.mises.org/fullstory.asp?control=1146

As with many economic questions, this one can degenerate into a de facto political debate where economics is sought after only as vestments by which political opinions are given the aura of authority. In a fashion akin to religious wars, each side likes to claim that the science of economics is on its side. Those in favor of the Bush administration's fiscal policy are prone to dismiss or downplay the risk of deficits and there is not shortage of court economists willing to take up the charge.

http://www.mises.org/fullstory.asp?control=1146

The Republican Coalition:

It’s all going to come to grief because of big government spending and small government taxes – an active, expensive, imperial military adventure that requires long term commitment to nation building and multilateralism, all contradictions internal to the coalition. The Yin (tax cuts) and Yang (military industrial complex); thesis of liberty and leave alone free enterprise vs. antithesis of the economic reaction to counter circular Keynesian deficits running up big budget problems - the liberals have NOT gotten their act together – it is really hard to compete with something with nothing.

Let’s imagine a discussion at the Bohemian Grove Club (in the Russian River, Northern California, between business billionaires and big time political hitters) – the focus is a new Republican Majority (The southern strategy plus of new conservative party that began to dominate the Electoral College after 1968) by putting together the money, people, ideas, and organization to make a work program to achieve results. Business and military planning have advanced in the last decades – A clear process of setting missions, the long-term principles or controlling philosophy – the mission statement. Second, the operational goals that focus activity – working groups and task forces – that get the job done – with clear feedback, bench marks, information systems – logistics – tactics – i.e. modern management methods and communications (PR) and marketing brought to focus on long term victory and wreaking the competition. Hire and pay professionals to work over the long term to do the work. Makes sense to me!

Political Operations – Karl Rove – modernizing the party organization and working from local elections, state legislatures, state committees, national PAC’s to promote political technology at all levels. Newt Gingrich's GO-PAC was a model.

The money Machine

The idea and media factory

http://www.mediatransparency.org/movement.htm#Conservative%20Foundation%20Grants

http://www.mediatransparency.org/stories/powell.htm

There are central themes: Revolutionary and Federalist America.

The American Revolution can be considered one of the great acts of civic secular humanism of the Renaissance that formed the basis of republican (democratic) government. The more conservative peasants and parts of the ruling class reflected the origins of modern Tory politics as a clash between civic, Christian, and commercial values in thought since the eighteenth century.

Small government – roll back – not really conservative but reactionary desire to reduce, control, kill off, privatize the New Deal, Fair Deal, New Frontier, LIBERALISM was targeted as the enemy – Labor Unions, Health and Safety, environmental regulation, civil rights, entitlements, growth of federal vs. state power (local governments are more business friendly – run by real estate and commercial types) – the enemy is identifies as traditional intellectuals, professors, writers, Nader, peaceniks, hippies, activists, liberation movements, east coast media, the federal bureaucrats, - et all – so fund and organize a market for “conservative” intellectual enterprises – pay professors and Universities to support right wing activities, fund the think tanks and publications, and support the main branches of the movement: http://www.commondreams.org/headlines/030500-01.htm

Corporate business interests: Low taxes, less regulation, free for all enterprise, feeling under attack by creeping “socialism” and a source of money and manpower. The lobby industry in Washington of 10,000 high paid suits, lawyers, ex-politicians, could be mobilized to march to a new drummer, Tom Delay.

The Religious Right: Family issues – abortion – The Christian Coalition – tied to the old South and New White Male (lower middle class and working class) who resent social change – blacks, women, intellectuals, - media evangelicals –

The neo-conservatives: A branch of the Supper Patriots – Coors, Reagan’s 13 kitchen cabinet, America First with an aggressive military foreign policy that tacks into the industrial military complex as a justification for BIG government in defense. A mantra became the missile defense systems – tied to a Israeli defense policy – a religious moral intone was fighting “evil” and the historic missionary role of American means and methods around the world.

http://www.wiredbrain.net/politicaleconomics.htm

http://www.wiredbrain.net/reform.htm

An administration official said the study was designed as a thought-piece for internal discussion - one among many left every year on the cutting-room floor - and noted the budget's extensive discussion of projected, 75-year Social Security and Medicare shortfalls.

The study's analysis of future deficits dwarfs previous estimates of the financial challenge facing Washington. It is roughly equivalent to 10 times the publicly held national debt, four years of US economic output or more than 94 per cent of all US household assets. Alan Greenspan, Federal Reserve chairman, last week bemoaned what he called Washington's "deafening" silence about the future crunch.

http://news.bbc.co.uk/2/hi/business/2946552.stm

http://news.ft.com/home/us

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1051390392975&p=1012571727088

The Bush administration has shelved a report commissioned by the Treasury that shows the US currently faces a future of chronic federal budget deficits totaling at least $44,200bn (that's 44.2 trillion) in current US dollars.

The study asserts that sharp tax increases, massive spending cuts or a painful mix of both are unavoidable if the US is to meet benefit promises to future generations. It estimates that closing the gap would require the equivalent of an immediate and permanent 66 per cent across-the-board income tax increase.

The study was being circulated as an independent working paper among Washington think-tanks as President George W. Bush on Wednesday signed into law a 10-year, $350bn tax-cut package he welcomed as a victory for hard-working Americans and the economy.

The analysis was spearheaded by Kent Smetters, then-Treasury deputy assistant secretary for economic policy, and Jagdessh Gokhale, then a consultant to the Treasury. Mr. Gokhale, now an economist for the Cleveland Federal Reserve, said: "When we were conducting the study, my impression was that it was slated to appear [in the Budget]. At some point, the momentum builds and you think everything is a go, and then the decision came down that we weren't part of the prospective budget."

Mr. O'Neill, who was fired last December, refused to comment.

Future economic planning should include the most ancient idea of reserves, seven good years followed by seven lean years, means you put away reserves in good times for use when things get bad. We have reserves on a global basis with oil, when the market is down we salt away reserves to use in case of shortage, which stabilizes the price and prevent the great crash of the 1970's from getting that bad again and international blackmail.

http://www.wiredbrain.net/reserves.htm

The IMF and World Bank under American/EU/Japanese leadership needs to create trillions in money reserve in dollars, Euros and yen in private and public bonds and mutual funds. When times are good money is set aside to be used when things slow down. Global participation is necessary because individual countries can not give the global economy the shot in the arm necessary to get it moving again.

The issue is and will be over supply - if there is 30% more capacity to build cars than the world needs, there is no incentive to invest in new plant, but a big incentive to close factories and lay off workers which becomes part of a downward cycle. Low interest rates will encourage home construction and other interest sensitive investments, including auto purchases with loans, but the over capacity issue remains and today's sales will reduce future sales as people are encouraged to buy now rather than later.

Therefore public investments need to replace private when the economy stalls. One public expenditure that gets the most return on investment (ROI) is basic science and projects that stretch the technology creating new products and means of production. Then private firms must update or become obsolete - the motivation needs to be a really big step up - not from 486 chips to 586 but a real leap into new technologies, materials, engines, energy systems, medical sciences and production methods have a high ROI. Fuel cells, hydrogen systems, renewable energy (wind, water, wave, and others) - so a new auto to replace existing cars over the next 20 years would be the kind of leap forward that would generate investment, growth and prosperity. Simple projects like improvement in diesel engines, high speed and lite rail, light bulbs and appliances, cell phones, high speed internet access over the last mile, and 1001 other new ideas. These projects would have international peer review such as used in all good R&D so to avoid the real clunkers.

Global money for global projects - communications, transportation, materials, propulsion, information systems, would lay the foundation for the next period of growth. Simply passing out money (by tax cuts or employment programs) will not help enough - it will never be enough to soak up the surplus productive capacity in existing systems and deficits creates long term debts that drag economies down. The global economy is different from the 1930's which had limited labor intensive productive capacity so there was a hope of using up inventories and getting back into production growth. (Actually pump priming only worked with a war that really increased demand and the supply was used up in battle.). Now we are capital intensive economy and have more capacity than we need under most conditions for most products. Inventories are low because of "just in time" management and rapid response production so a increase in demand does not generate much new investment and growth. The same for the supply siders, lower taxes will not increase work and investments.

Programs like the next generation space vehicle and/or Mars program as an international crash program, with Russia, the European Space industry, NASA and Japan and China would increase demand without increasing supply - the same is true of working on new materials, propulsion systems which would produce new technologies for the next generation. Something like a trillion could be useful invested in basic research for space and terrestrial energy and transportation systems.

If the world had trillion in reserves they could be spent without running up the debt. Where would the reserves come from? What kind of tax revenue grows in good times and reduces in bad times? Profits, sales, payroll are all down so need a break not increases - but in good times they have a surplus that pushes the market into bubbles and irrational exuberance. Marginal taxes (surtaxes) on high profits, capital gains, high incomes, non-basic elective sales, brings in money in good times and sharply reduces when times are slow. Individual countries could agree on basic rates and deposit their surplus in international accounts - a global system to keep political fingers out of the cookie jar. Internet sales taxes could be another source of tax revenue since these sales are becoming internationalized. If one country taxes it creative motivation to do the transactions off shore.

There are also international transactions that escape minimum taxes that could come under the control of an international body. Global financial markets need global regulation and a small transaction tax would provide the base for more orderly markets.

Since we are in a down cycle the first efforts would have to be financed by debt but with a clear income stream to repay the debts and run up surplus when things get better. The cost of actual hardware and development of new products then could be shifted off reserve funds into ordinary expenditures.

Originally conceived as a response to the oil crises of the 1970s, the Strategic Petroleum Reserve has become a major part of the United States' strategic arsenal. According to the Department of Energy, the 599-million barrel reserve constitutes the nation's "first line of defense" against disruptions in energy supplies.

http://www.mafhoum.com/press4/resr133.htm

Message Boards

Search this site powered by FreeFind

http://search.freefind.com/find.html?id=6148074&pageid=r&mode=ALL&query=wiredbrain+pflaump

which are not limited in content therefore is nonlinear and not fixed in time or space - Synergy Group can signin to 100's of web sites using "wiredbrain" password "synergy" pflaumppflaumppflaumppflaump@cfl.rr.come group members.

Synergy Logo for default.htm our current working page - today's comments on the synergy Journal

www.multicrawl.com for synergy site: use wiredbrain and "any topic"

Example:

The Wonders of the mind

Key word "infrastructure" http://www.wiredbrain.net/information.htm

What will happen tomorrow that effects your life today ????

Platform:

There are just two issues, economic and physical security.

Economic security is developing 21^st century counter business cycle policies –

Physical security comes from multilateral international organization – moving from interdependence to integrations. In any community no one can have everything they want – they have to go along to get along. Global warming is not a treaty but a process of working on global problems in a global biological system. The same is true of anti-terrorist, political and economic development, health, food, and weapons of mass destruction, international law and criminal justice, and dozens of other problems of planet earth. Collective activity does not mean doing nothing because of working with others but using real pressures to get things done.

The budget: Of the 2.2 trillion US federal budgets -

The Defense budget (400+ billion about 19 %) and all the other civil programs (about the same 20% But are vets a civil or military cost? Retirement a program cost?) So minorities of programs are subject to spending bills, which means less than 40% of the budget is subject to horse-trading. Most of the budget is not.

Every program - highways, water projects, Universities would like to have demarcated revenues and "trust" fund protection from having to fight for its priority vs. every other program each cycle.

But this is no way to settle what really matters and what could we do with less - The question in economics is what can be cut - not just what we need more of but what are we going to have less of. Otherwise its not a real choice and we are playing expensive games until the money really runs out by cutting taxes. The conservatives are right that there is a strong propensity to spend other people’s money. Starving the government of revenue is one crude way of controlling government costs. There are others.

I suggest a balanced budget of the 1/3 (800 billion) left in discretionary spending as was the idea of the budget reform act and fiscal discipline of set offs required - if you want more money for X you have to take it from Y. That reserves and trust fund be taken off the operational budget and managed as trust funds would make this process better.

Social Security at almost 500 billion (22%) Medicare 250 Medicaid 150 (400 of the 700 billion public costs of health (The other 300 billion is state and local) about 50% of the 1.4 trillion total health budget) and Interest costs at 200 billion (10%) which is equal to half of all civilian activity of the government (if we had less debt we could have more and better infrastructure, health, education, and welfare) -

So only a budget summit really considers the whole budget and tax policy. The budget committee has limited oversight over 60 % of the budget and next to none over revenue policy. So no one is looking at the whole picture.

A radical proposal is to move trust funds (about two thirds of the budget) off the current operations budget and have real reserves and real trust funds which not only are self financing but can build a surplus to pay future liabilities. These funds could be invested in real assets and earn real returns such as states do with their reserves and pension funds.

Social security taxes would pay for social security and invest the surplus. Medicare the same, set asides would pay for other entitlements which would have limits not open checkbooks. There would be a welfare, food stamp, agricultural support, highway, airport, water, disaster and other project funds held as real funds such as unemployment tried to do. This was largely true 30 years ago but the consolidated budget was used to cover the real costs of WAR by hiding it in a much larger overall budget and used payroll taxes to cover general expenditures while calling it reform.

Interest would be paid from reserve funds and alternative revenues so that the operational budget could be balanced - a different kind of balanced budget proposal. Payment of the 6 trillion debt would be assured and no new debt would be added by the general budget. The 35 % of the budget that support military and civil affairs could be balanced. If there were need for new debt it would come from a independent funds and a new agency with ways of paying it back.

The counter cycle pump priming and "taking away the punch bowl" would come from the reserve accounts - be quicker and more automatic rather than making up new programs or benefits on an ad hoc basis.

In short trillions of dollars in reserve accounts would have surplus income in good times to pay off debt and deficits in poor times BUT would maintain ways of recovering debt with real income from good times and real investments, revenue bonds, reserves would be the future force for balance, long term growth and stability in the economy over economic cycles.

The problem with John Maynard Keynes' theory of employment and money was the inability of political parties, legislatures, and leaders to quickly respond to conditions and do the right thing. Running up debt is a lot more fun than paying it down. Calling any popular program a recovery program or pushing tax cuts as stimulus shows how stupid this all can become. An independent board (or the federal reserve) should have saving from trust funds. It can use reserves to stimulate or restrain just like it uses interest rates.

Tax reform depends on expanding the base (including VAT or national sales tax on internet and interstate sales) - reducing loopholes and lowing the rates while being responsible and prudent. Only within this context can medical services reform be complete - a research based medicine based on capitalization fees rather than fee for service - private plans pay for services that actually make people better out of a fixed budget (per capita cost) Medical providers get salaries rather than run small businesses. Without health care delivery reform no federal budget is safe - the same for social security - moving the numbers will not change hard facts and choices on the ground.

http://www.whitehouse.gov/omb/budget/fy2003/cguide.pdf

http://w3.access.gpo.gov/usbudget/fy2002/pdf/guide.pdf

http://www.thisnation.com/budget-facts.html

http://w3.access.gpo.gov/usbudget/fy2001/guide02.html#Spending

http://www.cbo.gov/showdoc.cfm?index=1821&sequence=0

Government comes from the Greek meaning kubernan or steering the ship of state - Latin gubernâre - the helmsman - when the wind or currents push the boat off course - he corrects by moving the rudder in the other direction.

The idea which is the most powerful political, social and economic idea of our times is efficient government.

In good times the state build reserves that lower the excessive energy in the system - higher taxes, interests rates, budget surplus -

China is heading toward an economic crisis like the one faced by Southeast Asian nations in the late 1990s because the level of investment there threatens to create a vast surplus capacity, a prominent economist warned on Monday.

In poor times the state lowers taxes, interests rates, and runs deficits while it "invests" in real assets that increase productivity - infrastructure, education, health, transportation, communications, thereby increasing wealth and prosperity more than state welfare can.

A feedback device on a machine or an engine that is used to provide automatic control, as of money supply, budget and fiscal pressure, or economic temperature. Taxes on profits and capital gains are such a feedback, high in good times low in poor times, unemployment insurance, so are VAT and other sales taxes - such system have to work quickly or the ship is over steared - the correction is too late and slow -

http://news.google.com/news?hl=en&q=%22economic+crisis%22+&btnG=Search+News

If you add 2 % to the GNP (200 Billion) it has a multiplier as the extra moves through the markets. If that is 2 X = 400 billion = 125 Billion in expenditures and 75 in tax cuts generates 400 billion more GDP and at 20 % 40 billion in revenue to the Federal government so the net cost is 160 billion. The investment tax credit and reduction in capital gains are know to work with a high multiplier. I still think you can spend from a "reserve account" or a future account bonds the school and other activities to be repaid in better times.

http://story.news.yahoo.com/news?tmpl=story&ncid=536&e=3&cid=536&u=/ap/20021015/ap_on_el_pr/democrats_economy

Economic Policy:

The economy needs attention and stimulus. There needs to be a policy summit such as Republicans and Democrats have done in the past 20 years. The issues are taxes, expenditures, and short term and long-term growth. It all has to be on the table.

For a new idea, I believe in having real public federal reserves – public savings or rainy day funds. If we had a few trillion in saving – actual money invested (in the market, in revenue bonds, in private bonds and even in venture capital schemes) it could be used now to keep growth going with revenue bonds rather than debt. It would be a good time to buy stocks, support the market somewhere near the lows. The trillions in phony social security “trust funds” could be off budget and really act like a real trust fund or lock box (such as states and local governments have investment and retirement accounts) really invested (to earn more than 2% and more than inflation) and if parked in treasuries they are really paid interests from current accounts; it would keep social security and Medicare from being raided.

To sustain a take off from a weak recovery or avoid more bad times there needs a certain momentum in growth of around 4 to 6 % growth for a few quarters and we don’t have it or anything near it – but if we could spend from a big reserve fund based on revenue bonds and guaranties to support current pump priming which could be paid back later in good time so as not to effect the long term deficit. Such a fund could build schools; all kinds of infrastructure which makes the economy more efficient, support state and local government projects like the WPA, PWA etc. create jobs and consumer demand as well as private investments but bonded to be paid back in better times.

Programs that encourage private saving have the same effect; if we saved more we would be more like the ants and less like the grasshoppers when the winter comes. Actually the grasshoppers are taking out home equity loans to pay off credit cards to keep up their consumption well into the winter, and trading in cars for new ones with 0% interest payments but by January when it gets really cold it may no longer work. Bankruptcies and defaults are increasing; private employment is down, the real estate bubble may not hold with fewer buyers and less money around. Everyone including corporations are up to their eye balls in debt.

Other suggestion in order of importance: (NOW or yesterday)

Health and Taxes:

The political rhetoric and practical programs don’t meet up. The big goals of universal health care must involve tax reform. The two are connected in ways that cannot be separated and both face a demographic crisis of retirement income. Neither the health delivery system nor the social security system can be fixed without fundamental tax reform based on a VAT.

Be brave – it can be done – first some simple principles:

FIRST: Health care has to be a market (not state provided) and public benefits should not replace private insurance shifting private programs to public programs. Politicians should not be setting benefits or fees for reason that are all too obvious.

The issue is the quality of the market. Let the market get the delivery system right – not by regulation but by being more efficient. The market doesn’t work now because people don’t know what is paid and what they get. The consumer is the doctor while the patient is the material to be worked on but have few or no choices. Disclosure is critical to free markets. There is up to 40% waste in the system – paperwork and over treatment so really efficient providers should really be able to compete. The market can work – the model used is the public employee benefit plans. Everyone cannot have everything – there is no Santa Claus.

SECOND: The package of benefits – insurance, health care, unemployment, disability, savings, retirement should be provided as a regular report to the individual or family with the payments from wages, employers, and public accounts along with expenditures on or into savings accounts, (IRA, 401K) paying for health insurance, and payments into social security. The consumer needs to know what is paid and what is received. That people don’t know what they pay, what is an employment benefit, and how expensive the whole package is – makes them poor consumers. The person needs to select what policy they want (not the government or the company).

Third – the responsibility of the state for low-income people is limited to basic packages – people who have more pay more and get more. Grow up that’s the way it is, has been and always will be. It is the only way markets work.

OK if we accept market principles and individual informed choice and differences based on interest and ability to pay.

Now the federal program have to pay subsidies to low income people – and get taxes from high-income people – it is called income transfer but only for basic safety nets. Now how to put together a package were there are lots more winners and few losers. Here is where the VAT comes in –

With a VAT (about 15% federal plus 5% state) is a hard sell - but if the top income tax could be 25% or so, corporate taxes 10% low capital gains, (very good economics is to limit the amount of unnecessary messing with markets by tax policy or regulation) most people end up not paying income taxes at all (no loopholes) and the budget in balance. (The idea of real reserves to use in bad times and add to in good times has made sense since ancient Egypt) BUT sales taxes are regressive so the benefit subsidy pays back low-income people for sales taxes they must pay and justifies basic health care services for all (And low income tax credits) GET it!

http://www.wiredbrain.net/

Unemployment extensions

Investment tax credits (with a very short time frame)

Capital Gains cut 50 % to 10 % (for future gains only to encourage investments)

Temp. Tax sharing with states (to offset Medicare cost) and keep them from cutting programs and making things worse

Temp. Cancel or postpone Tax cuts for the top 3 to 5 % (postpone) to help balance the budget in the long run and keep interests rates down

Terrorist insurance

Bankruptcy reform

Pension Reform (improve saving with credits and subsidies) a real not a phony program but one that will increase saving among average people (not another rich mans tax dodge)

Minimum wages to at least the 20-year average in stable dollars

Broadband infrastructure plans and regulatory support to encourage invention and expansion

The energy bill with incentives for new technologies – fuel cells, etc.

Another Social Security Medicare Commission

Other Tax adjustment – limit off shore tax benefits, expense options, one time rebates of payroll taxes to low income non-tax income payers

Another medical services delivery commission

Un-funded liabilities:

The United States has mostly throughout its history imported capital and technical expertise. J. P. Morgan, Brown and Harriman (Bush) the Rockefellers Chase and City Corp. and others were specialist in helping foreign investors in the American Market – from Railroad, U.S. Steel, Edison GE, and other symbols of American Enterprise. American are great consumers and prefer consumption to savings – others prefer savings because of their history of financial problems and want long term save investments. The IMF was set up to protect international investors and encourage a increase in American Capital working abroad.

U.S. treasuries are such an safe investment and unpin all the other markets as a global reserve. As long as our fiscal and monetary policies are reasonable and sound our excess consumption of imported goods is balanced by imports of capital at about a billion dollars a day.

Our debt owed to the public (not including internal accounts where the treasury owes social security trillions) is less than 35% of GDP and better than most countries. The Federal Reserve has a record of not printing money (increasing the money supply) to balance the books with inflation. BUT..

We have a huge un-funded liability in Social Security and Medicare that will start coming due in a decade. If as is most likely the case the political system cannot cope with the need to reduce benefits, raise taxes or inflate the currency the long term is not so hot. They will promote private savings – IRA’s pension plans etc. but that is a system of lifeboats that cannot take on all the passengers.

Therefore, long-term rates remain higher than they need be, and this cloud hangs over the future. There are solutions but none of them pleasant – so the issue gets postponed and put on the back burner. We need to raise the retirement age to fit current demographic, we need to put the money to work in real reserves (http://www.wiredbrain.net/reserves.htm) , we need to make all payroll benefits transparent and if you pay more you get more – health insurance, retirement, educational savings, disability, unemployment, et al with the plans being private but a floor of public finance, and lower expectations that state pension can provide to the general public (more of a welfare than insurance scheme) -

States are suffering from a real "double whammy" in the current economic slowdown, which has reduced revenues sharply (especially in the many states that depend mainly on retail-sensitive sales tax collections), while boosting demands on state programs aimed at helping people who are unemployed or living in or near poverty -- particularly the Medicaid program, the top expenditure category in nearly every state. A majority of states, moreover, have constitutional or statutory prohibitions on deficit spending, so shortfalls much be closed quickly. The new responsibilities states are already beginning to face for homeland security and increased law enforcement generally will not help the fiscal picture at all.

When faced with unfavorable circumstances such as the budget crisis, it is wise to change the subject. The “new” supply side argument is that the public sector needs to be involved in the capital markets as well as labor markets. The consumer, thus far, has been spending, even if it is on the old never-never. The problem is in capital investments. Tax credits, lowing the capital gains tax will help but the state has to get directly involved as it did in the 1930’s with labor markets now in capital markets. The NRA or Federal Reserves Administration should be out there helping the capital markets just like the WPA and PWA helped the labor markets.

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Little else rules indeed the world. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” Lord Maynard Keyes, the British economist, who at the time he wrote was of course focused on unemployment. In a book only slightly less difficult than the "General Theory of Revivify" or Quantum Mechanics, he suggested an expanded role of government to use proposed new high level of sponsored programs of labor-intensive projects involving deficit spending to relieve unemployment.

The economic crisis of the time being a result of insufficient consumer spending but now the economic crisis is a capital crisis not an employment issue. He therefore, advocated deficit spending by governments to stimulate economic activity he may well now suggest a wide program of public investment to deal with a capital psychological crisis. There is no lack of capital as there was no lack of labor. The problem is fear and uncertainty. The answer is hype and hope to capital markets to unleash the “animal spirits” of investors.

As he said, “The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.”

The issue today is capital, investor’s animal spirits, their willing to venture into the unknown with great amounts of money. The new supply side is venture capital and new technologies, not tax rates, or pump priming in the traditional sense.

Since we are capital intensive economy the federal participation needs focus on capital markets. The engine of growth is new technology and governments can invest and stimulate new industries. Defense modernization involving war fighting electronic systems, space, communications, energy, transportation, health, education, all offer grand vistas of hope and hype. What is needed is to change the subject from limitations, scarce resources, and small futures to grand vistas and renewed hopes. SO change the subject:

Real tax reform with consumption taxes – since consumption is not the problem taxes should shift from investment, savings and income to consumption –and reform allows for real simplification and reform.

A real national reserve accounts and trust funds – encouraging investments in alternative energy, power distribution, air travel facilities, space based defense systems, (smaller and more bite than tail) CD’s, mortgage backed securities, index funds, venture capital at the universities and national laboratories, medical applications, promoting new ideas and ventures.

I have it!

The answer to how the budget surplus would not be a drag but an economic stimulus. The creation of the NRA – (not the National Recovery Administration) but the National RESERVES administration – and the entire surplus would be transferred to this agency to use as the best economics establish according to current and projected conditions.

Mortgage backed bonds – lower rates and increase construction and work

State and local bonds – for public works – more jobs (includes airport construction)

Bank Certificates of deposit – lower borrowing costs by increasing bank reserves

Index Funds – support stock prices and encourage private investments

Corporate Bonds – lowers rates and increases capital spending

Utility Bonds – energy supply and distribution

Foreign bonds – to help the balance of payments

Thereby, the surplus would stimulate economic growth rather than be a drag. In better times the NRA would reduce public debt and interest payments while actually hold income-producing securities. In the long run this will allow the state to met its obligations, reduce taxes, and main stability.

Even the 150 billion from next year would be a big start. The NRA would be housed in the Federal Reserve, have a long term overlapping boards, report to the trust fund managers (social security, civil service, military pensions, highway and airport trust funds, et al ) they would hire conservative fund managers, and have a executive board of the Federal Reserve, the Treasury, and public members that report to congress and the President.

If the national government had a few trillion in Reserves then in hard times it could pump prime without increasing the debt. It could fund projects on a pay back basis when things are better. A simple but powerful idea is the most useful long term policy for modern government. The management of economics would be much better is the state had real saving and reserves to use as a rainy day fund.

Center - Left or Center Right ?

Reflections on the British election. Where does the labor, new labor, social democrats, conservatives, nationalist, and hard right groups play out on the Anglo American European global political scene.

There is a striking themes that is transatlantic and also applied to the much of European politics over the last 50 years and getting stronger. It must be the global economy, stupid ! Politics follows class economics - how people earn a living, occupational realities - education is so important because of the global economy and the role played by firms and nations. As the society changes so does the political culture - now on a global scale.

1930’s Class conflict - does Capitalism work ? Social Democrats think it needs fixing

The core ideology of the Republican Party is to reduce taxes on the very rich who make their core constituency and source of money plus the southern strategy (IRA, religious right social issues), this is true in Florida, Virginia and Texas. The core of the Democratic party is to provide benefits to lower income masses using the resources of the rich for their core of labor, minorities, suburban middle class constituency. Everything else is smoke and mirrors and special interests buying privileges from both parties and elected officials selling special privileges for cash in order to buy enough mass media and sell themselves using modern marking methods.

The real third way is fiscal responsibility - a well run government that promotes growth and helps both rich and the less rich. The best welfare is full employment and education. Both the rich and less rich should be smarter. Any gains that the rich make from the tax cuts they lose in the markets and loss growth, any benefits the poor get from the government are less than they would get from a expanding economy and full employment.

Nation publicly held debt should be less than 30 % of GNP, real reserves should be 10 % (http://www.wiredbrain.net/reserves.htm) and the federal government should support with revenue bonds the states rainy day funds, unemployment and Medicare reserves, as well as short term pump priming of local projects, roads, school construction, water, environmental projects etc. The 40 billion the feds have added to the economy is balanced by the 40 billion taken out by states and local governments.

http://www.neweconomyindex.org/states/strategies.html

Since recessions follow booms as winter follows summer maybe we should expect down turns and make plans. This is called counter cycle activity - the most natural approach is to have reserves, saving which can be called into play when needed - such as some states, countries, firms and individual have a rainy day funds because it will rain. Now it is harder to fix the roof when it is raining but it still needs to be fixed.

Since states and local government (utilities, communications and other firms) make the problem worse by cutting back during recessions - the federal reserves should help hold up their expenditures up - http://www.wiredbrain.net/salestax.htm thereby demand, income and reelection.

Since increasing federal debt raises interests rates and creates long term problems for social security - a off budget debt and payback scheme will help better than traditional deficits - the states and local governments pay back the loans with a federal sales tax on the internet - states and local governments give up their claims and a flat national rate is added to interstate sales - In good times the money is used to build up reserves (actual investments in CD's, state and local bonds, foreign bonds, index funds, as well as treasuries) in down turns it is used to prime the old pump. The same could be done with SS trust funds, highway TRUST funds, water and waste management, airports, utilities, communications, pipelines, grids, et al) The NRA (National Reserves Administration) could have trillions ready to pump into a sagging economy without increasing long term debt and actually could be making money on investments.

If you want more of something you support it, if you want less you tax it. We tax work, income and investments - we support debt with equity loan credits. We should support work, savings and investments and tax consumption and be neutral on debt. Sales taxes are regressive so they have to include redistribution programs. If everyone over the middle (median) income paid taxes at .5 of each percentage over the middle 50 % - from 1% to a high of 25 % - the 75th percentile would pay 12.5 % then each income could be adjusted for sales taxes with credits. To encourage savings and retirement those below 50% would get supports those over 50 % get credits - the same for health insurance, and other payroll protections, unemployment, disability, and old age insurance.

If the person in the middle (50 percentile) pays 15 % in payroll taxes - then those over would pay more and those under would pay less. The benefits for the poor would be supported from sales taxes - the richer would get credits on their income tax for having more saving, better retirement, and health care - as they do now with IRA and other tax free saving and health insurance, the poor would have matching funds - save two dollar we match it with one - scaled by percentile income group - those at the bottom get 100% benefit - those in the middle none. (benefits reduce 2 X each percentile) - at 25th percentile benefits are down 50 % - get it?

This IRA would help the retirement and health care crisis with private accounts, insurance and savings - Real reserve funds will keep us out of recessions, promote growth, government revenues and save the nation. Any questions?

National Reserves Administration:

A set of programs of agricultural and business supports, inflation, price stabilization, and public works funded by revenue bonds; numerous trust fund management organizations, e.g., the NATIONAL RESERVES ADMINISTRATION, would have three parts.

These programs would produce long term stability, prosperity, national welfare, social justice, sound currency, and justice.

REVENUES:

Income tax rates are set on a scale ( rather than a tax table with jumps ) - starting at the top rate ( for example 1/3 or 33 % ) and goes down to 0 % at about 40th percentile of median income from last year. Each percentile’s rate is reduced by .5 % ( .05 ) off the top rate so at 80 percentile is the top rate reduced by 20 ( 100 - 80 ) x .05 = 10 from 33 % = 23 % tax rate, 50th percentile is 50 x .05 = 25 % off 33 % or 8 % tax rate, and 40th at 0. Under 25th percentile there is an income tax credit. ( to adjusted for payroll taxes )

The rates are set to produce the revenue needed to balance the budget by law.

Income is gross adjusted income for population groups, marred, child credits, etc. Pretax funds are not counted -

IRA, Pension, health, and other preferred savings are managed by the NRA - in real trust funds.

RESERVES:

Social security, Medicare, Military and civil service retirement funds, highway, airport, water and sewer, soil conservation, supper fund, and other trust funds are managed by the NRA as real reserves. Households get all-in-one statement and can add to various accounts on a pretax basis. Low income households get a subsidy to add to their savings ( IRA’s, pensions, health insurance, educational and other supported savings ).

The 14 % paid into Social Security would show as a pensions savings - be invested by the NRA in bonds, ( US and foreign ) and other investment grade private bonds, index funds, certificates of deposits, London Inter-Bank loans in the Euro and Euro dollar markets. Individuals can add to this or other IRA, pension and retirement funds on a pre-tax basis. This is a lot more practical than pure personal privatization.

The Civil Service system of choice of health plans could be used on a limited basis - people who pay more get more - every gets a minimum -

THIRD -

The national sales tax ( VAT ) - to balance income and revenue a national sales tax could support income transfers and make pensions work.

Advantages:

Fiscal management - saving in good times - expenditures ( based on revenue bond ) in poor time that does not add to long term national debt.

Sates tax get revenue for the large ( 10 % of GNP ) now untaxed as parts of the under ground economy. ( not just street markets, drugs, crime, but a lot of cash services ).

They also act as a support for exports since exports do not pay sales or VAT. ( up to 18 % in Europe )

The purchase of foreign bonds by NRA would help the balance of payments and the trade gap.

Taxes and Reserves:

There is a tax creep - or bracket creep as incomes jump into higher brackets.

The solution is not a flat tax but an index tax set to median income from the prior year.

One of a set of points on a scale arrived at by dividing a group into parts by order of magnitude. For example, a score higher than 97 percent of those incomes is said to be in the 97th percentile.

So the adjusted gross income group ( less credits ) at 75 % of all ( single, married, etc ) would be 55 % of the top rate of 33 % or 18 % - people under 45 % ( median income) about $ 30,000 pay no income taxes. Under 20 % get earned income tax credits - negative tax or income support. Instead of a tax table there is a tax scale or chart.

The rates could be set to produce the necessary revenue.

The use of Reserves:

Some countries do have reserves - real saving - Taiwan -

The oil states - We have trust funds that are not real ( no funds, no trust ) pay as you go systems - Civil Service and military retirement - Highway and Airport funds, social security, Medicare, water and sewers, soil conservation, Supper fund and we could use a school construction, general public works etc. Trillions of dollars cold be in these funds.

We have semi-public agencies such as TVA, Federal reserve, etc. Now we create an agency called "

The Federal Reserve Trust Fund management Agency " FRTF - managed by a board of the federal reserve, treasury, and public members selected for long overlapping terms.

The FRTF would hold the separate funds and work with their managers as clients - and earn real income on the money. When growth rates are over 1 % they build reserves and just hold them for income and pay out costs and use them for their statutory purposes.

When growth drops more than - 1 % additional costs could be made.

Investments would be in U.S. Bonds - ( paid real interests ) foreign bonds ( help balance of payments ) , Certificates of deposit, ( increases saving and lower interest rates ) index funds, as do state and local public retirement funds.

In poor times the FRTF could support public works by buying revenue bonds for highways, airports, schools, water works, to increase income, expenditures, employment, investments, without creating long term debt and currency problems as does direct government borrowing.

They would get the money back in better times because these projects have revenue streams or special fees or taxes.

__________________________________________________

http://www.wiredbrain.net/post.htm current comments

http://www.wiredbrain.net/traditions.htm more current

http://www.wiredbrain.net/answer.htm Educational Reform

http://www.wiredbrain.net/initiative.htm part of reform

http://www.wiredbrain.net/salestax.htm tax reform

Http://www.wiredbrain.net/issues.htm older comments

http://www.wiredbrain.net/symbian.htm technology communications

http://www.wiredbrain.net/soliton.htm the next wave

http://www.wiredbrain.net/photonics.htm after the next wave

http://www.wiredbrain.net/nano.htm computer technology

http://www.wiredbrain.net/nexum.htm post PC devices

http://www.wiredbrain.net/broadband.htm wireless and beyond

What can be done ?

Since there are two firmly held and conflicting theories on Macro Economic policy hard vs. soft money and finance, what can be done that is most likely to create long term prosperity ?

There is a third way:

Fiscal hard money ( gold standard ) conservative ( balanced budgets ) but low inflation and lower interest rates because of less public demand on credit - by using Public Trust Funds to increase saving, investments, and productivity and pump prime when needed.

This could give the treasuary and federal reserve a whole new set of tools. If there were large reserves they could be used to get things moving or to slow things down.

While states and local government have pension funds, and a few even have rainy day funds, the big federal programs are only paper and run on a pay as you go system.

The social security trust fund is not a fund, or are there no real saving put aside for Civil Service Retirements, Military Pensions, Highway and Airport Trust funds, Super fund, etc.

Theses are all under-funded liabilities.

The example of funds managed by semi-private national corporations for housing finance and student loans suggests that either a independent agency or the federal reserve could manage the billions to trillions in such funds independent of political passions.

This would go a long way to fix the demographic crisis and be a public privatization of pension funds.

Of the real money, most would be in treasuries drawing real interest as a charge on the budget ( which is not the current case ), CD’s that increase bank deposits, interest baring credits on the International inter-bank and Euro dollar markets, all which since it increases the supply of credit and saving so lowers the cost of money world wide so more investments become possible. It is a soft money - but without the inflationary side effects of big governmental programs or debts. A small amount maybe in the stock markets - buy when they are low and sell to cut off excessive speculation only using mutual and index funds not individual stocks, a very profitable strategy.

In hard times Governments could increase their borrowings from themselves by using these reserves to finance through the purchase of revenue bonds, public works ( airports, communications, school construction, power plants, water works, etc.) which would be paid back into the trusts in better times.

The size of the funds could make a real multi-trillion dollar difference and not create long term national debts. By definition, poor times means firms are cutting back - there is less demand for capital - so the movement of money from reserves to active projects is all to the good. It will not tighten the money supply or raise interest rates. In good times the building of reserves - and the constraint on expenditures by payment of hard money as interest, will constrain inflation and firm up the currency.

The country would end up with better roads, bridges, water works, power systems, schools, and other infrastructures.

The agency could refinance state and local bonds to create more impact. Many of these projects have a income stream that assures payments.

The old worn out arguments:

The gold standard: One set of ideas are the hard money types.

The Reform ideas that are common in the IMF, Conservative traditional doctrine, monetary theorist, and many other economists is that monetary and fiscal should be tight - hard time require "belt tightening" , cut public expenditures, taxes, and even if interest rates go up. This will shake out excess capacity, get rid of low productivity firms, cut inflation, strengthen weak currencies, and while painful is the medicine that works. This reduces supply with the blind faith that Says law will produce demand at lower prices - but supply side ideas add that low taxes and hard money motivate investment, work and saving so will be productive in the long run.

The problem is that it doesn’t work very well, takes a long time and is not popular.

The silver standard:

The other liberal approach which is associated with Keynes ( who said that in the long run we are all dead ) is to "pump prime" by increases in public works, create deficits, loosen money supply, to lower interest rates and increase demand. Supply will take care of itself if people have money to buy.

The problem is debt and inflation, weak currencies, and big government.

A trillion here, a trillion there and before you know it you are talking about real money:

The great crash of 1929 was caused in part by ill-rational exuberance and margin calls. People bought rising stocks on loans from banks and brokers. When the stocks fell they had to sell to cover their margins which pushed the market down - into a downward cycle which lasted a decade. Margins at brokers were raised as a result.

BUT people can get cash from credit cards, home equity loans, and deposit the money in on-line brokers who have very little in way of responsibility to check the reasonableness of investors ( old style brokers actually warned people of risky strategies ) so they are in the tank as many speculative stocks are close to having nothing of value.

They can’t buy cars and new toys on the never-never and their houses are even in question if there are equity loans. That is why the change in bankruptcy and real fear in financial circles.

The total assets held by U.S. Citizens are about 45 trillion dollars ( 6 times GDP ) - they just lost ( paper gains become paper losses ) at least 3 trillion - or only 6 % BUT millions of firms and households were in a serious negative net worth position before the loss - i.e. their debts are far greater than real assets - and what is left is mostly in real estate which is not liquid or certain.

Their tax deferred saving could be called forcing the market down even further. A small decline in Real estate should be expected and so forth and so on in a downward cycle.

Meanwhile we have a wimp for President and he is scared, uncertain, and weak. Just what the Republicans if not the republic deserved. Tax cuts are small comfort and useless in the face of an large asset based decline.

The currency has to be revalued downward to deal with the real value of assets - ( just like in other places and times, FDR dropped the gold standard )

The credit markets need to be shored up with public funds ( open market purchase of treasurers that lower interest rates and increase money supply ) and loosen reserve requirements - so credit does freeze up as banks and others suffer a wave of bad debt. In Japan and Europe Banks hold stocks as assets. When the value goes down they can become insolvent. A bad loan has a multiplier of 2 or 3 because the bank has made more loans on the belief that the first loan is an asset - this multiplier may be much bigger with the use of secondary and third level instruments that re-capitalize debt. You can see a financial pyramid here.

The IMF tells everyone else facing asset loss to do just the reverse - when real estate tanked in Japan, when markets collapsed in Asia, they were told to stabilize the devalued currency, tighten fiscal policy ( balance the budget ) and wash out bad debt as quickly as possible. This makes things worse in the short run - maybe better in the long run. No one knows who is right - and the US is different because it is the center stone of the whole world wide arching economy. If the key stone cracks the whole thing falls of it’s own weight.

Time for nerve and certainly - and who do we have holding the key to wealth or disaster - ? Not my job man THANK GOD !

There is no one who understands global markets like Rubin does - I hope they can figure it out.

Knee Jerk Reactions:

http://www.wiredbrain.net/public-policy.htm

Political Analysis of many social and physical infrastructure problems require actions that are not politically possible because policy is fixed inside a box. Solutions out-of-the-box are rarely tried. A school shooting and people talk the same dribble.

The Stock Market Game

The new tech search
on hot companies

suggestions: FIRST:

The list of companies in tele-communications
http://telecom.tbi.net/network1.htm

Wiredbrain Future new news and private research service by GlobalVillages provides research on and the future ???
Don't be blind to what others are doing and what they know about what you are up to AT FROM:
Example: