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Culture is the greatest asset and liability that a nation has.....with natural resources being a close second.  What do I mean by culture?  There are books and books written about it, so I will keep it simple and just describe culture as the living, evolving, and dynamic amalgamation of a people's beliefs, attitudes, and conventional wisdom, etc.  So, we can say that a nation's 'people' and its 'culture' are basically interchangeable under this definition.....people = culture.  And for those of us that have broken through the false neo-liberal economic mythology that the US dollar is a scarce commodity and that the Federal Govt operates just like a household or business, we would never place financial wealth on par with the REAL wealth of a nation....its people.  The US dollar is nothing more than an American invention and the Federal Govt is the only body that is Constitutionally allowed to create and maintain our national currency system.  As such, there is no technical limit to the amount of US dollars that the Govt can create and spend.....

This fact is proven quite simply by the 1900% increase in net financial wealth that the Govt has created and given to the non-Govt between 1979 and 2012.  The uninitiated will know this by the misleading nomenclature of "federal debt", which is simply the amount of global US dollars that have been deposited at the Federal Reserve bank into interest bearing securities accounts (just like a CD at your local bank).  Total Treasury Securities outstanding is an accounting record of the amount of new money the Federal Govt has created by deficit spending.  And that has risen 19X from $800 billion in 1979 to $15 Trillion in 2012.

Because the US dollar is a public utility that we cannot run out of, the only thing holding our nation back from increasing prosperity is our national culture......Follow me below the fold to read more about how our national culture is failing us right now.

As far as I can tell, there are three main pillars that support the phenomenon of the declining portion of our national income that goes to labor.  This manifests itself as the well-known fact about how, when adjusted for inflation, median wages have been essentially flat for over three decades.  

This is a huge problem since working folks have been forced to either increase incomes and spending (a stand-in for standard of living) through having two full time earners andor an increase in overall indebtedness (Since it was private sector debt that led to the 2nd Great Depression).
Whereas if the same distribution of wealth from the 1960's were in place today, the median income (for a family of four) would be just about double what it currently is (~$30,000).  So, what does this have to do with culture?  

The USA prioritizes risk-taking, market fundamentalism, individuality, and innovation in our economic culture, which predictably leads to the following three foundational pillars that have played the primary role in getting us into our current situation.

1.  Innovation through technological advances.....includes robotics, the internet, computer processing power, general mechanization, etc.....all leading to much higher production per worker, which is a good thing.  Its better to NOT have most of your citizens working in factories making widgets for 12 hours a day at low wages in order to be competitive globally for the production of low end products.  This used to be the US post WWII as most of the developed world was destroyed and the rest didn't have our far more advanced productive capacity. Today, this is the role of the third world.  Which leads us to our next pillar....

2.  Globalization......modern communications make it possible to transfer advanced production capacity to any place on Earth and get similarly skilled labor.  So multinational companies simply go to where the lowest possible price can be had based on the relative low living standards and market wages of the local population.

3.  Union membership decline.... While the above two pillars are pretty much unavoidable problems for developed economies, the union decline is nothing more than a political choice based on cultural values.  Our culture doesn't value unions and solidarity as much as other nations.  We value individuality and "freedom" more......of course corporate propaganda, right wing and even mainstream media propaganda, and even many democrats have spread the myth that those two values are mutually exclusive......only ideologues and the corporate agenda would have the narrow-minded view that solidarity and individuality can't coexist in the real world.....but I digress.  

All three of these pillars interact and effect each other to ultimately set the relative leverages of labor and capital.  The success of our economy after WWII until the late 1970's was defined as labor having much more leverage against capital and as such, they were able to take home a much higher percentage of our national production = income.  But as a nation's economy matures, and productive efficiency (technological advances and globalization) increases to the point that the private sector does not need to employ everyone domestically in order to satisfy the demand for goods and services.  

As you can see from the historical unemployment rate, the private sector is totally incapable of maintaining full employment all by itself.  The three periods of declining unemployment since the peak in 1980 were due mainly to financial bubbles and increasing private debt levels..... the S&L bubble of the 80's, the dot-com bubble of the 90's and the housing bubble of the 00's. Labor's leverage is always lower when unemployment is high and this is a problem that is only going to get worse as there is no stopping the march of technological innovation.

But there is hope, the US Federal Govt is monetarily sovereign with monopoly control over our national currency...the US dollar.  We can run deficits high enough (RE: create enough new money yearly) to employ every American that wants a job.  Full employment is a great way to increase labor's leverage.  We can afford for everyone who wants to get a post-high school education to be able to do so.  We can afford to employ as many scientists and researchers as we want, we can afford to employ as many construction workers to build as many roads, ports, high speed broadband lines,  and on and on as we want.  We can afford to not make health care a marginal cost of production for our US businesses, which hampers not only our global competitiveness but also our national health outcomes.   The only thing holding us back is our false neo-liberal economic belief that the US Govt is like a household or business and must "get money" in order to spend money.  Money is no object and the only thing holding us back from maximizing our most precious national asset, our people, is ironically.....our own people's culture.

It's our culture that allows the legalized bribery and corruption of campaign contributions, lobbying, and revolving door politics that perpetuates the myths of the perfection of markets and the scarcity of dollars.  Its our culture that allows six corporate media conglomerates to control 90%+ of our national media and discourse.  Its our culture that allows Conservatives to rail against the incompetence of Govt, only to get elected and prove that incompetence over and over again.  Its our culture that allows so many Democrats to become conservative-lite and push the entire national dialogue further and further to the right.  Its our culture that accepts the hardship of millions of our fellow citizens due to our economic reality.  Its our culture that hates unions and solidarity because....communism.  In other words, we get the Govt we deserve and until our national culture changes, things are only going to continue to get worse for more and more Americans.

Please join our group "Money and Public Purpose" here at Daily Kos as we are the only group that analyzes the economy through the prism of our post gold-standard fiat currency reality.

MMT = Reality
neweconomicperspectives.org
http://mythfighter.com/....

Originally posted to Auburn Parks on Wed May 22, 2013 at 07:15 AM PDT.

Also republished by Money and Public Purpose.

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Comment Preferences

  •  Tip Jar (15+ / 0-)

    "The Earth is my country and Science my religion" Christiaan Huygens

    by Auburn Parks on Wed May 22, 2013 at 07:15:40 AM PDT

  •  Thanks for highlighting these graphs. (3+ / 0-)
    Recommended by:
    Kevskos, achronon, psyched

    Money is a convenient measure. It tells us when things are out of whack. It is not, however, wise to blame for the dollars for the problems.
    IMHO, the problem is the culture of obedience, a legacy from the time when a certain segment of the population was expected to obey without question. Obedience is, like the other virtues, good when voluntarily accepted; bad when coerced.
    There's a simple phrase, widely accepted, which tells us that in the U.S. obedience is coerced. The phras is "no free lunch." It tells us that people who don't do what they are told, don't get to eat. Deprivation. That's the enforcement tool. It facilitates exploitation without the overt expenditure of force. What makes it possible, oddly enough, is private property. Making the use of resources exclusive makes it possible to coerce the behavior of those who have been shut out of their use.

    exclusive = to shut out

    We organize governments to deliver services and prevent abuse.

    by hannah on Wed May 22, 2013 at 07:47:23 AM PDT

    •  On the contrary, dollars are at the crux of the (1+ / 0-)
      Recommended by:
      psyched

      problem.  People are not making enough money through their wages to afford the increasing standard of living.  We have already switched to two-income households so we can't get that bump in income again.  The private sector has maxed out its debt load, so we can't expand aggregate demand through that route.  So we can either A) figure out how to increase the share of national income that goes to labor
      OR
      B) Use the Govt's ability as the issuer of the currency to sharply increase the deficit through some combo of tax cuts for the middle class or through higher Govt spending to create jobs directly.  Eliminating the payroll tax would essentially give a raise of $7500 or $800 per month to a  household who makes a combined $100,000 a year.  This would certainly increase aggregate demand.  Employing millions of more people through public works projects would also increase aggregate demand.  The key is to maintain full employment so that the leverage between labor and capital is not so skewed towards the top

      "The Earth is my country and Science my religion" Christiaan Huygens

      by Auburn Parks on Wed May 22, 2013 at 08:14:34 AM PDT

      [ Parent ]

      •  Yes, dollars are at the core. (2+ / 0-)
        Recommended by:
        achronon, psyched

        However, it's not quantity but velocity we should be concerned with. Federal taxes need to be at a rate that promotes rapid recycling of the currency, keeping it flowing, so to speak.
        Congress' efforts to ration for the purpose of generating a higher interest rate or dividend return for their cronies has had the effect of causing hoarding at all levels. This shows up on the graphs tracking the. Velocity of various kinds of money. The MMT people refer to the hoarding as "leakage" but I think hoarding is a better term. We do know that private corps are sitting on over two trillion in cash. That there is plenty of money around would also seem to be demonstrated by the stock market.
        Money is for spending. The current problem is that the money is not getting to people who know how to spend.
        Accumulation is a primitive behavior and, like all instincts, liable to becoming obsessive. Reason should modulate.

        We organize governments to deliver services and prevent abuse.

        by hannah on Wed May 22, 2013 at 09:13:47 AM PDT

        [ Parent ]

        •  When you say quantity isn't something to be (0+ / 0-)

          concerned with, are you saying that we should print more? And if so, how do we deal with inflation by having more circulating cash and less buying power?

          •  Economists seem to agree that inflation (0+ / 0-)

            is too much money chasing too few goods and with the current rate of unemployment, too few goods is not a matter of capacity but of organization. That quantity of dollars is immaterial, except when they are made artificially scarce. I think of money as comparable to the oil in a car engine. If we drain out the oil, the gears will seize and the car won't run. Once it gets to that point, pouring in more oil or money won't correct the structural problem.
            Perhaps you don't consider a lubricant a tool. I do. Money is an aide memoire, a certified IOU, inherently worthless, like a certificate of marriage, unless someone wants to deprive someone of the benefits of having marital obligations socially recognized.
            Depriving people of the use of money is of the same order as depriving them of marriage certificates or, for that matter, reading and writing skills. Figments of the imagination are strange that way.

            We organize governments to deliver services and prevent abuse.

            by hannah on Wed May 22, 2013 at 01:28:46 PM PDT

            [ Parent ]

  •  Does this mean that taxes are not really (0+ / 0-)

    necessary since printing all the money we need isn't a real concern?

    Money is no object and the only thing holding us back from maximizing our most precious national asset, our people, is ironically.....our own people's culture.

    Never argue with an idiot. They will drag you down to their level and beat you with experience.

    by thestructureguy on Wed May 22, 2013 at 07:50:47 AM PDT

    •  Taxes are not necessary to fund Federal Govt (2+ / 0-)
      Recommended by:
      FG, psyched

      spending.  The only economic restraints on the the amount of money the Govt creates is A) Inflation and B) Exchange rates.

      If the Govt created and spent a dollar amount equivalent to 20% of GDP without taxing anything (20% of GDP deficit).  Then we would very quickly get back to full employment and economic capacity.  Its only after an economy is running at maximum capacity that general demand inflation can become a problem (The classic too much money chasing too few goods).  At this point, any spending that wasn't offset with an equivalent increase in production quantity or a reduction in demand from the private sector through taxation, would increase relative prices (RE:inflation).

      And of course, foreign exchange rates are something that can be effected as well.  As there are more US dollars in the world circulation relative to the demand for those dollars, the exchange rate "value" would go down.  But this is a complicated issue because, so many nations peg their currency to ours and keep their currency values relatively low so that they can employ their people by exporting to us, its hard to predict exactly what the global response would be.  Since, global trade is by definition a zero sum game.  Your exports are my imports etc.

      The point is that, Inflation and Exchange rates are the two things to concern ourselves with when it comes to deciding how much new money the Govt should create each year......the question is never "can we afford this or that"......its will this cause an undesirable increase in inflation or reduction in the global trading value of the US Dollar

      "The Earth is my country and Science my religion" Christiaan Huygens

      by Auburn Parks on Wed May 22, 2013 at 08:22:45 AM PDT

      [ Parent ]

      •  Taxes are necessary (0+ / 0-)

        to establish and maintain the value of the currency. See here. Apart from that they are also useful for containing inflation and for reducing inequality. I notice that at the bottom of the post New Economic Perspectives and Mythfighter are both cited as MMT. But Mythfighter doesn't reflect the MMT point of view either on taxes or on the Job Guarantee program, two essential elements of MMT even though it has many wonderful posts by Rodger Malcolm Mitchell.

        That said, it's great to have you blogging on MMT, Auburn. I've republished this post to The Money and Public Purpose blog and thank you for your contribution to our efforts. I hope you'll do many more.

  •  If you look behind anti-socialism you find (3+ / 0-)
    Recommended by:
    Azazello, a2nite, psyched

    fascism Hayek-style. It isn't just cultural persuasion by big money control of media, but also police power, as the history of unions shows. The decrease in union membership doesn't mean that workers who have internalized capitalist values don't want what unions offer, they also like social security despite any cultural programming to the contrary. The national culture was turned around in 100 days by FDR. That won't happen again because government was brought under strict capitalist control after Buckley v. Valeo.  

    •  Our culture unfortunately accepts the reality (2+ / 0-)
      Recommended by:
      psyched, Musial

      that you nicely describe.  People obviously don't care enough about the legalized bribery to do anything about it, just like people don't care enough about gun violence to do anything about that en masse.....there is no difference between the two dynamics, they are both about acceptance and that is based on our cultural norms

      "The Earth is my country and Science my religion" Christiaan Huygens

      by Auburn Parks on Wed May 22, 2013 at 08:54:05 AM PDT

      [ Parent ]

    •  I notice (1+ / 0-)
      Recommended by:
      Musial

      that a group of peaceful demonstrators at the DOJ were just deprived of their civil liberties through arrest when they protested the failure of the DOJ to enforce the laws against bank organizations and Executives. Not a single executive from any one of the big banks has spent a day in jail for the systematic control frauds they are implicated in. But the protesters exercising their first amendment rights found themselves subject to thuggish behavior in the process of being  jailed.

      Everything is upside down in the United States today. The Republicans want to impeach the President for what at worst are misjudgments rather than high crimes and misdemeanors, while neither they nor the Ds will introduce bills of impeachment for his failure to uphold the laws and the constitution. Until we turn things right side up again, and develop zero tolerance for executive violations of law and the constitution we will be prisoners of the soft fascism of globalizing plutocracy.

  •  We can't change our culture (2+ / 0-)
    Recommended by:
    achronon, psyched

    until we begin to talk to one another, face-to-face. As it stands now we are atomized, each in his own cave watching the box. This allows our "culture" to be dictated from above. It is also the reason campaign spending is effective. Most political spending goes for TeeVee advertizing. What if nobody watched ?
    Turn it off, talk to your neighbor.

    The free market is not the solution, the free market is the problem.

    by Azazello on Wed May 22, 2013 at 10:03:34 AM PDT

    •  It's not just a factor in American culture, (2+ / 0-)
      Recommended by:
      Azazello, psyched

      it's universal.

      Atomization, alienation, individualization, and all the rest are a phenomenon of post-modern life and are becoming stronger and more intrusive every day.

      Don't just talk to your neighbor. Talk to everybody you meet, anytime and anywhere you meet them.

      None are so hopelessly enslaved as those who falsely believe they are free. -Johann Wolfgang von Goethe

      by achronon on Wed May 22, 2013 at 11:10:04 AM PDT

      [ Parent ]

  •  I do that.. I talk to conservative, liberal but (0+ / 0-)

    the minute wedge issues come up or taxes I get really angry and frustrated because it is like talking to brick walls.
    I disagree respectfully that other countries are experiencing these culture shocks.  I do not think so.   Other countries or at least supposingly civilized ones deal with things like gun violence and law breaking... They don't hide behind an interest group shivering or saying things like " Oh we can't arrest them.. They are too big".
    I am sorry I just don't think other cultures have declined at the rate ours has.

    We the People have to make a difference and the Change.....Just do it ! Be part of helping us build a veteran community online. United Veterans of America

    by Vetwife on Wed May 22, 2013 at 12:25:45 PM PDT

  •  Interesting diary, but I have a question (0+ / 0-)

    If money is no object, why not eliminate personal and corporate taxes, and the government can print what it needs?  This is rhetorical, yes, but the diary forces me to ask.

    For this you went to college?

    by Not A Bot on Mon May 27, 2013 at 08:14:07 PM PDT

    •  taxes serve three purposes for the federal Govt (0+ / 0-)

      in our current monetary arrangements:
      1.  To establish and maintain a baseline value for the currency as the US dollar will always be in demand because it is the only form of payment that the Govt accepts for extinguishing its imposed tax liability
      2.  To reduce the aggregate demand or purchasing power of the private sector in order to control inflation.  For example, lets say the Govt continues to create and spend an amount of money that is equivalent to 20% of GDP.  Right now we have tax receipts equaling roughly 16% of GDP, so the Govt is adding 4% of GDP worth of new money or financial assets (depending on your POV).  We can clearly see that this amount of new money is not inflationary given our current economic conditions of high unemployment and thus a large output gap.  So in our example, if the Govt maintains its 20% of GDP spending but eliminates all taxes so that the Govt is adding 20% of GDP in new money to the economy for one year.  What would happen?  Well, the first thing that would happen is that aggregate demand or purchasing power would skyrocket.  This increased demand for goods and services would force businesses to hire people to fill the orders etc.  Once we reached full employment and full productive capacity as an economy, most of the additional new money would go towards increasing or bidding up prices (RE:inflation)  This is why the size of the deficit should be determined by only one simple rule of thumb.....
      If unemployment is too high, the deficit is too small
      AND
      If inflation is stable, the deficit is NOT too large.  

      As a point of reference, during 2008 an 2009 the average deficit was around 10% of GDP and we had deflation.....not inflation.  So as we can see, inflation is totally dependent on the economic circumstances and not inherently on whether or not the Govt is creating new money.
      3.  Taxes serve to restrain things that we deem socially bad.  Taxes on cigs, financial transactions, carbon, cadillac health insurance plans, income over a certain amount, inheritance, etc, etc, etc...

      You will notice that none of these things has anything to do with providing the Govt the money it needs to spend its own currency.  

      To put it another way.... For whatever size of govt you have (spending as a % of GDP) there is a level of taxes and deficit that will result in full employment AND low, stable inflation.  For the US, thats probably around 10% per year partly because of our necessarily large trade deficit (if you want to be the world's reserve currency, you need to send your currency out into the world in exchange for goods and services)....but we don't know because we continue to act like we are living under the gold standard...that ended on August 15, 1971!

      "The Earth is my country and Science my religion" Christiaan Huygens

      by Auburn Parks on Mon May 27, 2013 at 08:38:05 PM PDT

      [ Parent ]

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