Our economy is anemic. Its lifeblood, its money supply (M2), is now less than $10T, of which investors are withholding almost $2T, waiting for consumers to find money. Without Obama’s stimulus and the auto bailout, available M2 would now be less than $7T and we would be in a serious depression - trapped in a downward deflationary spiral. Who would spend or invest a dollar today if it would buy more tomorrow?
By adding over $1T to M2, Obama avoided Hoover’s collapse and a 25?nemployment rate. He saved over 20 million jobs but we still need 20 million more. The economy is starving for a much larger addition to M2 and the only possible source is government spending on much-needed infrastructure. Everyone knows this but Congressional spending is restrained by aversion to large budget deficits and serious debt interest expense.
Due to a century-old Congressional scam, the Fed must finance deficits by selling bonds in the open market. This forces the Treasury to pay interest to private bond-holders. During the last century, trillions have been redistributed from middle class taxpayers to the rich. And almost everyone thinks that bond-holders are needed!
We can end this scam. To finance World War Two, the scam was suspended for the duration. Instead, the Fed pegged Treasury bonds at a very low interest rate and bought tons of them so that the Treasury could pay the war bills. After the war, everyone used their savings to spend us into 35 years of prosperity without harmful inflation.
A sovereign government issuing fiat currency can never become insolvent. We don’t need no stink’n bond-holders; they need us. The Fed can finance deficits by buying zero percent perpetual T-bills so that the Treasury can then pay our infrastructure bills as long as there are unemployed workers and machines ready to create wealth. This would bring full employment. This would also increase M2 by the amount of the deficit and guarantee prosperity. ((http://www.shadowstats.com/article/money-supply-m2).
And say “Goodbye” to interest payments!
The GDP/M2 (= $16T/$10T) ratio is now about 1.6. So, to avoid inflation, every new M2 dollar must create at least $1.60 of new GDP. SO, YES! WE CAN AVOID INFLATION because, according to the Congressional Budget Office, http://www.cbo.gov/sites/default/files/cbofiles/attachments/05-25-Impact_of_ARRA.pdf,
every new federal dollar that builds infrastructure creates, on average, over $1.60 of new GDP.
The Federal Reserve Act requires the Fed to “promote effectively the goals of MAXIMUM EMPLOYMENT, stable prices, and moderate long-term interest rates.” To reach these goals, the Fed must now buy zero percent perpetual Treasury bonds in such a quantity and on such a schedule that, WITHOUT CAUSING HARMFUL INFLATION, will maximize the employment of idle resources and will minimize the time required to create and maintain the world's most effective infrastructure, as follows:
the best institutions of scientific research (including NASA, NIH, etc.),
the best protection of the environment (including National Parks, flood control, etc.),
the strongest armed force,
the best systems of emergency response (FEMA, local fire departments, etc.),
the best systems of justice (local police departments, courts, prisons, etc.)
the best systems of transportation and communication (underground smart grids, maglev trains, etc.),
the best systems of FREE education from infancy to the highest university level, and
the best FREE medical care for everybody.
In the above program, the Fed finances only the deficit. Obviously, the program would be implemented cautiously, using spending and taxation to control employment and inflation. The chief restraint would be government’s ability to prioritize and manage available resources, including time, without causing harmful inflation or delays.
Yes, we can have full employment without harmful inflation or serious debt interest expense! And full employment means more sales of cars and homes and fewer foreclosures and higher stock prices and growing 401(k)s. Full employment trumps everything!