“Can’t afford” is a Steaming Pile of Dogs**t

The federal government really could fund a stimulus with brand new money. “No free lunch,” you say? You’re wrong — that’s not how currency works. Read on.

These days, many an average American Joe or Jane, and certainly most politicos, are crowing on about how we “can’t afford” another stimulus check. We “can’t afford” health care, or free public education, or quality child care, or wiping out student debt.

Bombs ? Drones ? Invasions ? B̶-̶2̶ ̶s̶t̶e̶a̶l̶t̶h̶ ̶b̶o̶m̶b̶e̶r̶s̶ never mind that, a replacement for the B-2 ? Plenty of money. But keeping struggling citizens sheltered inside their homes, helping families stay safe at Christmas during a global freaking pandemic? Can’t afford it.

How about this instead: yes we freaking can.

It’s called the Federal F**king Reserve Bank (emphasis mine). Adding money to the economy is a regular practice. As normal, as picayune, as your morning coffee.

Mommy, Where Do Dollars Come From?

During normal economic times, the Federal Reserve Bank can decide to add or reduce the amount of money circulating through the economy. How, exactly? It’s called an Open Market Operation.

Plenty of economic gobbeldygook there, but in simple terms: the Fed has the ability to create new assets. Think of it like when a small business decides to incorporate — as a part of the process, a business issues shares of stock to its officers. Where did those shares of stock come from?

For a new corporation, the value in these new shares of stock, comes from the operations of the business, the assets, the future prospects, the value of the business itself. Employees and officers of the company have created actual value, through hard work and shrewd negotiation. The business owns assets, has cash flowing in, has contracts guaranteeing future work, is innovating and developing new products and ways to compete in the marketplace — all these things are worth actual money. The act of issuing stock just divides that money into separate chunks to help clarify ownership.

For the Federal Reserve, the “business” backing these newly-created securities is the economy of our entire nation. Now yes, we’ve recently been enduring some bumps and hardships, but don’t forget, we are the biggest freaking economy on the planet. Our nation is rich in natural resources, our universities are world-renowned, our markets are liquid and profitable (said the socialist), and our citizenry is broadly multi-cultural, nurturing innovation, entertainment, optimism, and bold new ideas. We have a solid economic foundation from which to issue more money in an emergency.

Three-thousand three hundred Americans just died on December 10th.

Emergency, anyone?

”No Free Lunch” ? This is Bigger Than Your Freaking Lunchbox

Average Joe and Jane and Politico Pete talk a lot of mess about what we can and cannot afford, but here’s what’s real: The economics of a nation is not the economics of an individual.

It is completely freaking different. We can just print money.

What’s the catch, you say? Short answer: in our current situation, there isn’t one.

Longer answer:

1) You can’t add an infinite amount of money to the economy; there will eventually be consequences.

2) Adding too much money can lead to prices increasing. In scenarios other than our recent Armageddon, it often does lead to price increases or inflation. Inflation can become a big problem, and the worse it gets, the harder it is to control. Remind you of anything? However, a) we know a lot about dealing with inflation, b) it isn’t as much of a worry in our current conundrum, and c) there are plenty of ways to be innovative to better balance out these factors. Economic wonks who treat money supply + inflation like a binary continuum, an either/or prospect, are smoking from the same her-on pipe as those who preach “austerity” during a recession. It’s freaking pathetic… but that’s another article.

3) Even if it was an either/or scenario — money or inflation — which would you prefer right now? And again, I’m telling you, and we can go over the details in a future article — it isn’t an either/or scenario. It really depends more on what you spend the new money on, and who is trying to buy the same things at that time. And hopefully at some point, you don’t want more money anyhow, because you have enough s — t. (What a concept!)

4) The value of a business is not only its current balance sheet, but also its prospects for future growth. Since our currency is backed by the “business” of the US economy, then if we have stronger future prospects, our currency is worth more. Conversely, if families are evicted out on the street, or even just scrimping away at home, they are spending less, consumption is less, productivity is lower, our future prospects are reduced, and our money is worth less.

Remember in the 00's when we were supposed to be “patriotic” by going out and buying stuff? Exactly! And those were conservative economists saying that!

What I’m telling you is, the government can print money to have us buy food, pay rent, keep the economy going. Not forever, but to get us through this crisis ? Absolutely.

Individual States Don’t Have Money Trees

Now the Federal Reserve is the one to do this. There isn’t a California Dollar or a Michigan Looney or a Texas Peso or a Louisiana Franc. Individual states can’t arbitrarily add dollars to their bank accounts.

States can raise money by issuing bonds or taxes — but this is very different. First of all, you’re not adding new money, you’re just attracting existing money from someone else. Second, it’s much more expensive to issue bonds, from an interest rate perspective. Third, increasing taxes is fraught with complications. Fourth, in a recession, you want to lower taxes so your citizens spend more — consumer spending is what will help end the recession and get people working again.

States do not have a new-money faucet — and this is where the delicious cruelty of our current leadership really sets in. The federal goverment could give states more money by just printing money. But no, no … we can’t afford to do that. That would actually help people.

We Underestimate the Depth of our Political Decline

For a responsible government, this would all be obvious and simple:

• People are starving, dying, facing eviction and unemployment at historical levels.
• The central bank has the ability to print money. The government can give this money directly to citizens to pay their bills + buy necessities.
• Citizens paying bills + buying necessities will inject this new money immediately + directly into the economy.
• Increasing consumption, plus reducing transitional costs of eviction, emergencies and homelessness, will make the economy stronger, offsetting the negative effects of arbitrarily adding currency.
• It is the responsibility of a government to protect its citizens.

Why the hell don’t we do it then? Three reasons, I think:

1. Our current political class is in ruinous decline. The sole concern of far too many politicians is simply staying in power. There is a growing progressive movement, but it’s not yet strong enough to dislodge the establishment.
2. Minority rule in the Senate: California has 40 million citizens and 2 senators. The Dakotas have double the Senate representation but one twenty-sixth the population.
3. The electorate in general is just stupid when it comes to economics. We idolize money, yet know nothing about how it works at a fundamental level. Nobody knows to even ask the question, and when somebody does, the next idiot up spouts the “no free lunch” malarkey. Instruments of their own demise.

Yes, in our current scenario, the feds can just print money. Time to start telling them to do so.

~Zaphod~

December 2020