Louis Proyect: The Unrepentant Marxist

Boom Bust Boom » Screen Shot 2016-03-11 at 3.43.58 PM

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  1. The capitalist economy is unstable because of excessive credit use during the boom cycle. We increase the risk of a financial crisis occurring by using monetary policies that emulate the way the “gold standard” affects an economy. We must change the guiding policies to what would work better with fiat money. Not only how we stimulate an capitalist economy, but how we guide an capitalist economy during the boom cycle.

    This article explains why the economy is improving so slowly. Bank credit (money creation) is the bases of why the 2% Appreciation/Inflation Taxation Policy (more info. wp.me/p42WQA-7c ) should be used to control excessive credit use in the private sector before the Federal Reserve rises or lowers interest rates excessively.
    The point is, if more direct lending to Main St., increases GDP, and the appreciation of assets and rises in CPI, then reducing direct bank lending, with the tax code, to Main St will help prevent bubbles, and financial crisis. By using the tax code rather than changes in interest rates, it will be less disruptive to the economy by allowing normal production and consumption to continue there-by maintaining employment.

    Read this article by Prof. Richard A. Werner, then the other one explains how the Policy will work.



    To improve the economy, Main St. needs affordable housing so household formation can be accelerated, and the 2% Appreciation/Inflation Taxation Policy to stabilize interest rates, and the economy.

    The primary single home market, under current policies, is not providing affordable housing for the middle class, and the working poor, Many families are still being crushed by underwater mortgages, and increasing rents.

    The Fed has the ability to do a better job of performing it’s mandates of employment and price stability. It could use the excess interest income it returns to the US Treasury each year to slowly buy down all underwater mortgages, as homeowners continue to make their monthly payments over a ten year period or less.

    It might take Congressional action to allow the Fed to pay down the underwater mortgages, but it would be very beneficial for the economy. This action by the Fed would stimulate the economy by increasing consumer confidence, and disposable income. Congress should agree that underwater principal reduction would help the Fed with it’s mandates. The money being used is not tax revenue from taxpayers. It is interest income collected by the Fed.

    There would be no lose of revenue to the US Treasury. The improving economy would replace the money the Fed would not be returning to the US Treasury.

    Inflating the housing bubble was the wrong way to heal the economy after the financial crisis of 2008. Housing has become so unaffordable, in some markets, that if interest were normalized, it will bust the housing market. http://www.wp.me/p42WQA-7c

    Fanni and Fredi could also help stimulate the housing market, and the economy by agreeing to purchase the Asending Interest Rate Mortgage. The AIR mortgage will slowly normalize mortgage rates, and maintain the value of debt (money). http://www.wp.me/p42WQA-1Y

    If wide spread principal reduction of underwater mortgages had been used, coupled with the low interest rates that the Fed created, the Great Recession would not have been so bad on Main St. People would have been able to remain in their homes, and the unemployment rate would not have gone as high.

    If the 2% Apprection/Inflation Taxation Policy had been in the income tax code, the housing bubble and the other bubbles in the period from 2000 to 2008 may not have occurred.

    Add Responsibility and Opportunity to the Pledge of Allegiance Sign the petition, I just started, to empower our children to know, and seek an economy, and society they will want and deserve!!

    Comment by economysflaw — March 12, 2016 @ 2:24 pm

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