Grace Ross: Call In The Loans—No Government Shutdown
Tuesday, October 01, 2013
I’ve been asked by friends of mine “…so what happens if the federal government shuts down for a little while?” The answer is that the federal government is a many trillion pound gorilla and the impacts of it shutting down – like the movement of any trillion pound gorilla takes a while to be felt.
They certainly will be felt and it’s not something you really want to be threatened with as a society. As per usual, it’s the folks on the ground who get hurt the most. The regular work of government stops so folks who work for the government end up losing pay. That is a lot of people who do not provide emergency services and that is not a trivial impact on our economy.
Those of us who depend on national parks instead of expensive trips to Europe. Or live in neighborhoods where toxics are dumped and we need protection from Environmental Protection Agency staff. Or need a call answered to get the money we already paid into unemployment or Social Security. It’s all of these types of necessities that will be unavailable! Or accessing the kind of mortgages the FHA underwrites or loans small businesses need (not like the financial industry that can still get whatever loans they want from the Federal Reserve... )
But what is more outrageous is that we do not even need to face a government shutdown.
If the very wealthy interests that killed the world economy were just not allowed to continue to get the equivalent of government graft money we would not even be in this mess.
Right on the heels of this threatened government shutdown is the self-imposed “fiscal cliff” of the U.S. debt ceiling.
Understand, I agree, we do not want to be in as much debt as we are in as a nation. But remember the vast majority of the present debt is the literally trillions of dollars of loans – based on the good faith and credit of us, the American taxpayer – that has been lent to the biggest financial institutions.
It has been lent through the Federal Reserve’s “open window” as they call it. The “open window” used to only lend to the big bank paying members of the Federal Reserve but that got broadened to include pretty much the entire financial industry; with the financial crash they broadened access to the “window” as part of the payout that went to AIG.
AIG, of course, was an international insurer who had insured all sort of crazy ‘derivatives’ and ‘default credit swaps’, etc., that the biggest banks had been engaged in. All their legalized betting on massive corporate deals, which was called “insurance” for these various financial instruments went down with the market going down. Of course, the market went down because they had been betting on mortgages given out for inflated amounts of money far beyond what people could really afford in the investment, money-driven drunken state of the entire financial industry throughout the early 2000s.
The debt ceiling itself is mostly a figment of the imagination of Congress; they voted it into existence. If they use it as a way of undermining the economy for regular people whose spending is the primary driver of our entire economy, that is circularly inefficient, economically destructive, and quite honestly just plain short-sighted.
If, instead, the debt ceiling got used to call back in all those loans to the financial industry where we actually face the real financial problems of our society and the underlying egregious spending by our federal government to those who need it the least, I’m all for that! Remember the financial industry leaders are back to minting money again on the backs of the American taxpayer and their top executives are living a lifestyle beyond most of our wildest dreams – often making in the matter of a few hours what most us make in an entire year.
I haven’t seen figures for six months now, but this spring Nobel prize economist Saez had pointed out that out of all of the new money that supposed to have been generated since the market crash, 121% of it had gone to the top 1%. That means that more than all of the new money that was created in the U.S. since the crash has gone to the top 1%. But it was more than 100%, it was 121% which means the rest of us are still losing ground financially.
The debt ceiling was a somewhat arbitrary measuring stick that Congress created for itself as a wakeup call if they went on a spending spree. It was a warning sign to check if they have been fiscally irresponsible.
It is not an actual physical limitation to spending; it is a theoretical benchmark that we should be paying attention to.
I’m all for paying attention to it, but we do not have to stop dead in our tracks economically as a country. Congress created it and they can decide if it makes sense after a realistic assessment to change it.
More importantly, right now government borrowing is very cheap. The Federal Reserve also gave that very cheap borrowing rate to banks and that is why every financial industry interest that can pretend to be a bank and their uncle have signed up for government graft to make essentially free money off of this low cost borrowing capacity.
I am not sure why the folks who were fiscally irresponsible at a rate that the rest of us couldn’t even conceive of are the ones who are getting to benefit from this cheap borrowing interest rate! The federal reserve have basically lent money on back of the rest of us, on our good faith and credit as the working people of the U.S.
Instead, the majority of the rest of us would like our government to be borrowing to the extent needed to rebuild our infrastructure or protect our environment or make sure that people have health coverage so that they can led healthy and productive lives. Or even, God forbid, to make sure that the next generation gets decent schooling.
If we just call in the debts that we have allowed to the biggest financial institutions, or even these ongoing supposed war efforts around the world, we would not even need to worry about a government shutdown or the debt ceiling – we can afford Obamacare and anything else we want.
How about a real wakeup call to the reality that the rest of us are tired of funding the biggest financial players and irresponsible players in our not only national but international financial system.
That would be awesome and I do not need a debt ceiling or a government shutdown to put out that call. We have all wanted it for a while. And the time to do it was yesterday.
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