Guest Commentary – An Age of Easy Money: Investing in paper instead of people and infrastructure

Free money for banks, free money for politicos

By Michael Monasky | Guest Contributor |

The preamble to the U.S. Constitution briefly enumerates the expectations of the people. Modern expectations of government that promote the general welfare include building and maintaining infrastructure and investment in industry, ensuring workers are trained and diverted by their employers into developing technologies and productive industries and applying a just and equitable tax system.

Free money for banks

Instead, the government has failed to do much of the above. With 14 years of very cheap money, businesses since the Great Recession have repurchased and artificially inflated the value of equities and deeply invested in financial bonds prone to depreciation due to increasing interest rates. There are huge supply gaps throughout the workforce (e.g., a shortage of some 400,000 nurses.)

The government applies regressive taxation to the bottom 90 percent while providing a heavily discounted or outright tax-free ride for uber-rich individuals and corporations.

Free money for local politicos

Locally, Measure E is a regressive one percent retail tax that, by definition, hurts the poorest people.  Government officials here seek to apply Measure E funds to spend an additional $2 million annually on potholes although it already has the money for multiple millions per year in studies for building a zoo and tax subsidies to developers like the taxpayer-subsidized Pappas Costco project.

Like most US suburbs, Elk Grove administers a Ponzi scheme that spends taxes from future development on current commitments to building and maintaining parks, roads, and other infrastructure.

Wasteful school bureaucracy

Like most U.S. counterparts, the Elk Grove Unified School District commits excessive and unnecessary funds to middle management between the superintendent and local principals. This robs local schools of essential resources for educational opportunities like the arts (or even school custodians), which are crucial to making our kids whole.

Wasteful bureaucracy is epidemic and replicated in other states, too. The State of Ohio is considering Senate Bill 1, a 2,215-page proposal to rename the education department to the Department of Education and Workforce.

Gaps in the workforce aren’t happening due to deficiencies in K-12 education but in the transformation of the industrial sectors, which don’t have the vision or will to set aside assets and resources to train the existing workforce. Instead, the business sector makes money eliminating jobs, laying off employees, engaging automated practices, and artificially padding the value of their equities by re-purchasing them.

Investing in infrastructure requires investment in improving labor skill sets, a practice business approaches with reluctance. Business will buy an improved machine long before spending time and resources improving the lot of their workers. Additionally, the college degree requirement for many jobs is increasingly being recognized as an expensive scam.

Bureaucracy and make-work jobs in the public and private sectors

There’s a lot to be said about bullshit jobs characterized by anthropologist David Graeber; job positions that are unnecessary, superfluous, and invariably create even more bullshit jobs.

Both the government and private sector are rife with such placements. Graeber’s attraction to anarchic forms of democratic self-government was motivated by his discovery that as much as half of the tasks performed by employees are simply useless make-work engagements.

New Deal economist John Maynard Keynes famously predicted a 15-hour work week for the workforce by 2030; three hours a day, five days a week; or seven or eight hours per day for two days, then five days off.

Keynes declared that, because future human beings will be able to meet their needs with far less effort, the love of money and the accumulation of capital will become a “…disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.”

Keynes also suggested a new morality: “For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.” That is, humankind will have to control planetary populations, to study war no more, to follow the scientific method, and to fix the rate of accumulation to the margin between our production and our consumption to the shared benefit, common good, and general welfare of everyone.

It’s like “living life in peace” from the lyrics of Imagine, by John Lennon.

An Age of Easy Money

PBS’ Frontline has just broadcast its latest program, Age of Easy Money, an explanation of how the US Federal Reserve has been abandoned by Congress to manage the adverse effects of the Treasury’s massive bailouts of 2008 due to Wall Street’s sub-prime mortgage scandal.

The solution applied by the Fed was novel and repeated expensively: Quantitative Easing cost taxpayers multiple trillions of printed dollars. The money was distributed to the failed banks who invested it in equities to boost their paper value.

It was needed by and should have been given to the people who were evicted, with about 10 million Americans displaced from multiple millions of homes.

It should be noted that the Great Recession was really caused by inflated home prices and wildly fluctuating adjustable-rate mortgages sold to otherwise ineligible households.

Subsequently, inflation became a reality after the economy cooled due to the shutdown of commerce during the global Covid SARS-2 pandemic. The paper value of the equities purchased by the banks has plummeted in large part because the Federal Reserve has imposed controls on the money supply (read: putting the brakes on the money supply by increasing interest rates for loans…and killing job formation.) The free-and-easy chickens have come home to roost.

Now it’s unregulated shadow banks (e.g., Silicon Valley and Signature Banks) that are threatening collapse to our economy.  After the 2008 financial apocalypse, Sen. Chris Dodd of Connecticut and Rep. Barney Frank of Massachusetts drafted the legislation to rein in Wall Street speculation.

The Dodd-Frank bill was supposed to re-apply government regulations to monitor the dalliances of commercial and investment banks that used to be kept separate by the depression-era Glass-Steagall Act, which was repealed when Bill Clinton signed the bank-deregulating Gramm-Leach-Bliley Act in 1999.

Dodd is now a lobbyist at the white shoe law firm of Arnold & Porter, specializing in financial services. Barney Frank is now on the board of the recently raided and shuttered Signature Bank; he lobbied Congress to allow the bank to evade the scrutiny of regulators. The corporate fox was guarding the free-and-easy hen house.

Barbaric healthcare systems

With this fiscal template, it’s easy to be a corporation in America. On the other hand, it’s brutal being a person, a child, a father, or a mother.

In just three years (2018-2021) U.S. maternal mortality rates have doubled overall, with black mothers at more than twice that rate. These are the worst health outcomes in the developed world.  Yet our healthcare is the most expensive, more than double the cost of most all other countries.

Military spending

The U.S. spends more on its military than the next ten nations on the planet.  Wall Street lobbyists, the source of most political campaign contributions, serve to distract representatives’ attention away from Main Street.

Continuing bank failures ensconced in a culture of fiscal wastefulness

The current bank failures are like a street-side shell game where distractions rule. It is as though public institutions expect an obeisant body politic to just go with the flow.

Wasteful spending in our schools, health centers and hospitals, military organizations, banks and other financial institutions is permissible because that’s the cost of doing business. This is a free country that worships free markets, while eschewing any regulating activity that is perceived to be an incursion upon personal (read: corporate) freedom.

A growing consensus unites us against greed and catastrophe

Meanwhile, there is a growing consensus between the political left and right that bureaucracy needs to be replaced with self-governance. Americans have a real job to do and must work diligently toward the goal of maintaining a vibrant and humane democracy.

Otherwise, greed and its catastrophic sequelae will prevail.