Obama's Failed Trickle Up Economics

Urban legend has it that Albert Einstein once said that “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it” Whether or not he said it I don’t know but I like it :-)

Whether you listen to Dave Ramsey or any other financial success advisor, they will say the same things about compounding interest. You want to be getting, rather than paying interest. Of course the magic of compound interest is that it’s an exponential curve which at a given point in time seems to rapidly approach infinity.

So what if you are a country accruing exponentially growing debt over centuries? It turns out that while debt grows exponentially, economies grow in an s-curve, as debt ultimately begins to flatten all economic growth.

The final outcome of this is that ultimately a country, any countries debt can no longer be paid off or the currency must inflate exponentially.

It’s in the math.

Did you know that the Sumerians, Babylonians, and Israelites of the Bible not only understood this issue of debt and actually structured themselves for this? It was called a debt jubilee.

Did you know that a country with a fiat currency could be structured to handle this? After all if you print your own currency do you really need to issue bonds to pay for debt?

To learn more about this go to the work of economist Michael Hudson and also study more of the work of the Modern Monetary Realists.

THE ECONOMY OF CLOUDS

Clouds astonish me. The system of clouds is more brilliant than any conception of man by orders of magnitude. Yet it seems to me that our schooling in the “economy of clouds” provides a sort of license of arrogant assumption. Because we can explain it just a little it’s no big deal. But for those who really think through the “economy of clouds” they are a continual miracle.

Each day clouds gather over our oceans carrying billions of gallons of water in an “air flotilla” which travels continually across our world. This massive flotilla “ships” billions of gallons of water thousands of miles across millions of square miles of country where it is delivered to us so freely and easily we often complain about getting too much of it.

Since I live in desert country, places along the east and west coast of the United States truly amaze me because people don’t even have sprinkler system! They know that the clouds will always deliver what they need…free of charge and just in time.

But if you’ve ever been to the truly desolate deserts, these cloudless corners of our world are stark reminders of what our world would be like if clouds failed to “deliver”.

So this past month in my part of the world the clouds have failed to deliver. Each day has been another hundred degree day with the longest streak of hot winds I can remember. At night, driving home from work has felt as though my world was going apocalyptic. With hot, dry winds, and smoke of fire and ashes coming down in place of rain. As the sun has set, and the smoke of fire has risen, the collision of smoke and sunset has often changed the hue of the sun to an eery “blood red”. At times its been bad enough that I have wondered if the system of clouds had broken and the world was turning into Mars.

So this past Sunday, the weather report was the same as it’s been all month…except with possible thunderstorms next week which would truly make our fires worse. With no apparent end to fires and smoke and hot winds a group of people gathered and humbly recognized this gift of clouds which is so freely and continually given to us is a gift given to us by God. And so they fasted and prayed that He might remember our need for rain.

And now this morning which is Thursday our valley of smoke filled skies, hot winds, and sparse clouds received “shipment” of a massive floating flotilla of millions of gallons of water. The shipment had taken about 4 days to travel a thousand miles. Now today, water has rained down on us in an even, gentle shower all day long. It’s been a very long time since I can remember a summer downpour quite like this one.

And so I am reminded that these continual gifts of water and shade, we call clouds are from God. And in the “economy of clouds” these gifts come more readily when we at least occasionally humbly acknowledge the Kindness of the Giver of All.

WHAT HEALTH CARE REFORM SHOULD HAVE BEEN

I have learned that with every piece of legislation that is created, to understand how it evolved you must always look at which corporate interests were involved. For example, Medicare D which adds about 15 trillion to the unfunded liabilities ledger was obviously created for Big Pharma. And ObamaCare is really a subsidy to the health insurance industry rather than being real health care reform.

So the question is this. Suppose that We the People rather that corporations had the greater share of representation in our government. What would health care reform more likely have looked like? And for just a moment, suspend the question of should it even have been done.

So had health care reform really been done on behalf of the people rather than corporate interests, it would have been built around Health Savings Accounts. Corporations would have been given tax incentives to contribute to those accounts. Tax rebates would have been given for low income people to be able load their HSA accounts. Then, HSAs would have been paired with catastrophic insurance coverage. In this way doctors would mostly be paid in cash, eliminating 20% to 30% of their overhead costs. Individuals would have become more cost sensitive. And health care costs would have plummeted.

Rather than being thousands of pages in legislation, this would have been a fairly small piece of legislation

So why didn’t this happen?

Why do you think?

A DEBT JUBILEE IS A REQUIREMENT OF OUR DEBT SYSTEM

Every economist who has looked at the mathematics of compound interest has pointed out that in the end, debts cannot be paid.

Yup.

MONETARY DYNAMICS AND MODERN MONETARY REALISM

Just a brief post this morning but I have posted previously about our currency regulation system being a feedback control system. A most basic design factor for this type of system is that amplification is limited by the responsiveness of the feedback control loop. If the responsiveness is slow than amplification must be low or the system design is unstable. In terms of the study of currency regulation this would be termed Monetary Dynamics. In MMR and MMT I haven’t noticed this as a topic of study and yet I believe it is the most important topic. I think adding this as an important factor in MMR would make it an even more significant contributor to the currency conversation.