12 Year Old Victoria Grant explains Canada (and U.S.) economy problem!

I do not typically put up video for my site as it does not typically fit with what I feel my mission is, but in this case I will make an exception.  My friend Ellen Brown, President and Chairman of the Public Banking Institute, and the author of Web Of Debt had this young girl as a keynote speaker at her recent Public Banking Conference in Philadelphia.

Every one should see this video.  Ellen’s latest article,Out of the Mouths of Babes, shows that Victoria’s message was framed so well that now even adults can understand it.  Maybe, this is why the video has gone viral, with over 1 million views and climbing. Victoria patiently explains to all of us, with clearly less cognition than she,  that when private banks create money out of thin air and lend it to people or to the central government at interest it makes little sense.

This 12 year old explained to all in the room that it made much more sense for the government to create the money directly and not have the banks in the middle charging for the privilege of creating our money for us and then lending it back to us. You see she correctly explains that in Canada, and also in the U.S., the banks create the money out of thin air and then loan it to the government with interest and then all of us have to pay the interest.  She also realizes that the government could create the money directly and not pay the banks interest for the phoney creation process.  Why is it this 12 year old gets clearly what most adults do not?  I have been having this discussion with people for years.

I encourage all to watch this video and then talk to your kids.  Clearly they are a heck of a lot smarter than we are.

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The State of Whose Union?

The President Reads the State of the Union Address

I have tried to resist responding to the State of the Union Address last night.  I really have tried!  But, you guessed it, I can’t.  I was so astounded by much of the rhetoric that passed through the President’s lips as unassailable facts I still can’t believe much of it.

As I am want to do, let’s review some real facts for a few minutes….

The President said the State of the Union was getting stronger

Well this really depends on what you choose as your measures and of course how hard you decide to spin them.  Here are some key statistics that were not highlighted in the speech.

Some of the pundits, immediately after the president’s speech, were very quick to remind everyone that President Obama inherited this bad situation.  That’s true, and so have every president since President Lyndon Johnson. in 1964.  The fact that they all have inherited it is not the relevant fact.  It is the fact that every one of them neither fixed it, nor improved it one iota.  In fact here is another little fact.  Everyone of them in some way or another actually contributed to making the situation worse-Republican and Democrat.  All they did was find ways to patch it, give more to those they thought deserved it (meaning would give votes to get it),  printed more money to pay for it, and hoped it didn’t all come apart before they got their golden parachute.  Well it has come apart now, hasn’t it.

“Fairness for all, Responsibility from all”
– President Obama 1/24/2012

Part of the problem I have with last night’s speech is the President stating he is going to make sure there is “fairness” for all.  It is not his wanting for people to have a fair shot that bothers me.  Everyone I know, if asked, would say they want fairness.  But fairness like many other things in life is a frangible and perspective driven concept.  It means different things to different people, and sometimes different things to the same people on different days depending on where they are and whether they are the beneficiary of the supposed fair treatment or not.

I just do not think anyone can give another fairness.  Often, the act of a group, or government, attempting to make something fair takes the form of redistribution or reallocation of something from one group or individual to another.  Look at the controversy surrounding Affirmative Action in Education and the implementation of quotas to make it fair. I am not challenging whether this was a good idea or not,  I am pointing out that in creating a quota to make it “fair” for one person or group, you simply are redirecting the opportunity from another person to this person.  If the person your took it from had nothing to do with the disparity in the first place then they now are being placed in disparity. Even in California, one of the strongholds of humanistic belief and liberal thought, some of our most liberal politicians have recently stated that we all need to get used to disparity.  That after 40 years of public life she now understands disparity must exist ; no mater the cost it cant be eliminated. It seldom works to try to make something fair by treating others unfairly—ask any six year old!

Frankly, if you look at other countries and other systems of government, America is just about as fair as anything could be given human nature in the first place.  I mean really, you think most of Africa is fair?  How about China?  Russia? Saudi Arabia?  Most other places are decidedly less fair than America.  So when people say we have some very deeply built-in unfairness, they usually are speaking in narrow terms.

Historically, if you look at our specific history in a vacuum, we’ve had periods where specific classes, specific races, and specific genders were treated unfairly.  This is very true and not something to be proud of in our newest age of enlightenment.  But once again, the facts are, that while we had these uncomfortable periods of our history, contemporaneously America was still head and shoulders above the rest of the world at the time.  We can always strive to do better , to be better people, to be better to each other, but no government can impose fairness nor can it replace the personal responsibility and character we should all instill in ourselves and our families.

Responsibilities from all

He used the term, “Responsibilities from all”.  The phraseology struck me oddly.  While I suppose it is grammatically correct to say that responsibility comes from somewhere or someone, I am not comfortable with this statement.  After thinking about it this morning, I realize this is because I believe responsibility should be innate in each of us.  That responsibility does not come “from” anywhere.  I feel that responsibility is part of our character and while it may flow from us it does not flow to us.  To try to illustrate this point, let me say that part of my responsibility, as I see it, is to help others.  In fact if I do help others I am being responsible.  I also feel that if I throw a baseball and it bounces and breaks your window, I should be responsible to fix the window. Fault in actions are in some way offset (not excused) by the exercise of responsibility for the fault by, or within, the individual.

I do not feel, however, that if you robbed a liquor store that it becomes my responsibility to pay for it. I assume most feel the same way.  But, I also feel that I am not responsible for any of the third party circumstances that you may have encountered in your life that led you to rob the liquor store.  I worry that the president believes that we are responsible for what others choose to do.  That somehow it is our responsibility to make sure they do not do something harmful or at least find themselves in circumstances that lead them to do something wrong.

In my life,  I have listened to many people justify their bad actions based on some set of circumstances that led them to do what they did.  I have heard things like; I was abused by my parents, my mother was an alcoholic, my tire blew out and because of my crack addiction I did not have enough money to get a cab so I could not get to work. Often, somewhere in each of these excuses became an attempt to transfer the responsibility to me or others because we somehow allowed the parental abuse, the mothers alcoholism, or the existence of crack cocaine– all of which if eliminated from this persons past would have somehow supposedly stopped the bad action in the first place so therefore–ipso facto– it is my fault, or your fault,  they did whatever they did.

I think these are some of the fundamental differences that divide us today.  I think the concept is attractive to take the position that everything that affects me is someone else’s fault or greed. Words like compassion and fair-share sound so good against the backdrop of greed, oppression, poverty and sacrifice.  But frankly, this is not what the fundamental issues we face are about.  It is now about our viability–national and economic.  We have destroyed our economy, and our viability, because we have systematically, over the past 100 years, made decisions for self gratification and personal appeasement of abstract goals that have affected our production, our cost effectiveness and our competitiveness in this new one-world economy.

We used to be the world leader in fisheries, agriculture, clothing, steel, oil, coal, automobiles, aircraft, raw production, basic manufacturing and many others.  But we have made decisions that have altered our ability to be in these industries at all or to be competitive in them.  Child labor laws killed the textile industry in New England, increasing labor costs and environmental laws killed coal, steel, oil and fisheries. Increasing labor costs, over production and now subsidies have effectively killed agriculture.  And overall for the rest the increasing costs in general, including labor costs, taxes, mandated benefits and shrinking labor pool (skilled and unskilled) have killed much of the rest.  Along the way, we have become a nation or middlemen, service providers, who purchase most of what we consume from other countries than we make ourselves.  Each year we bleed cash from our treasury to other nations workers.  Since 1972 this has exceeded $12 trillion.  That 12 trillion dollars more spent in buying stuff from other countries than we have sold to other countries.  This is one huge reason, but by no means the only reason, that we are circling the drain the way we are.

We have abandoned many industries because we felt there was just cause to do so.  Again, I am not saying any of these decisions were good or bad.  You need to make that call for yourself.  But, we have willingly walked away from most of the industries that led us to our short lived prosperity.  As we have embraced the “one-world economy,” we have killed our own production, rapidly and drastically increased our costs, and decided that we no longer can try to influence who goes to college (destined for middle management) and who works in the fields, the factories, and the plants.  In order to feel good, everyone has to go to college.  When we need labor, we relay with a wink, wink — nod-nod on immigration.  Since legal immigration is expensive and takes a long time we have a large illegal immigration problem–and we sit and wonder why!

As we have been indiscriminately printing money since 1974 we have lived in a fantasy land.  It is a wonderful place to be, don’t you see:

  • Everyone goes to college
  • Everyone can own a house
  • Everyone gets a car
  • Everything is fair
  • Everyone is a millionaire
  • Everyone has everything they want
  • No one needs to worry about getting sick
  • No one needs to save – in fact we need to borrow and spend more
  • Someone else will build it
  • Someone else will maintain it and clean it
  • Someone else will pay for it

In this fantasy land, the government will see to it that all the above just happens.  We don’t need to worry or pretty little heads just pay the taxes it will all be fair.

Shrinking Middle Class

The president has brought this up over and over recently.  Our president is a master at using language to infer that the middle class is suffering because of individual greed, because of Wall Street, because of corporations, because of millionaires and billionaires…. The truth of this is that the middle class are suffering because they have lost the value of what they earn disproportionately to everyone else–poor and rich. They are not poor enough to get in on the gravy train that is now the myriad government subsidies that over one-half of the population receive, nor are they rich enough to use investments to hedge the loss of value by playing the inflated earnings game that has been the finance,  investment, and real estate (FIRE) economy game for the past 40 years.  They have been screwed!  One reason the number of the middle class in the population is declining is we are raising the level of eligibility of programs for the poor. And along with that the cost of the additional program subsidies is coming from the middle-class and the rich in the form of taxes and higher costs, the rich just don;t feel it as much because they can invest enough of their money to offset the loss of value. Like the subsidies for industries and the poor, some portion of the new money ends up as liquidity in the stock market because the banks put it there! Can you say Quantitative Easing?

What was not mentioned by the president is equally telling

The Affordable Protection Act, his singularly biggest achievement — if you count it that way, was only mentioned in passing.  His own administration has had to admit that there are many things in the legislation that are either unfordable like CLASS, unworkable like the Medicare M.D. fix and the plan to have the IRS as the reporting agency, or potentially unconstitutional like the insurance mandate.

Medicaid, Medicare, and Social Security, like many other things are items that this president inherited.  Unlike most they are the biggest, and most insidious, causes of the loss of value to the middle-class and the destruction of our economy.  Once again, I am not making a value judgement on these programs or whether or not they should exist.  They simply have become what many feared at the time of their creation, much larger drains on our economy then was planned for.  Also, since most of the money that was created since 1974 has been needed to pay for these entitlements, along with the accumulating trade deficit, they are collectively the main reason that the money came into being and as such the main reason that the real value of the middle class has declined so drastically.

In the end, you have to ask yourself why the president spent so my time decrying the state of our economy, our industry and our people but then offered as a solution a panacea, of no pain, more money, more taxes, more subsidies, more for the poor, more from the rich, more subsidies for non-profitable industries no plan for increasing domestic primary production, and nothing about solutions for the real problems we face?  Well I guess it really is about re-elections not solutions.

In Closing

While the president may have appeared to be the brunt of my ire in this piece, it really is extended to all members of the full-time-professional-political class.  DNC or GOP the rhetoric and practice of opponent vilification and liberal application of what amounts to noting but wall paper paste needs to stop. Real solutions need to be proposed and vetted in this election process.  As a Mugwump, if a candidate does not start to tell me how they are going to fix the real issue and elucidate exactly what the pain points will be for everyone, then I am not voting for them regardless of the party.

If there ends up being no one; then I may not vote for anyone.  If that happens then it probably won’t matter because it will be too late.