Pelosi and Trump Walk into a Bar….

Due to my disabilities, I am not much of a writer so I only present here a train of thoughts…..

Nancy Pelosi dismissed the possibility of pursuing impeachment of President Trump.  Trump accepted it apparently with relief.

Trump is as close as it gets to one man army inside hostile territory.  The people associated with him have been prosecuted just to put the fear of establishment (Deep State) in him.   Trump at least in image evolves from disruptor into establishment figure (vaguely).

The Crisis of Middle-class

In the Housing Bubble (2001-2007) Middle-class households existing homeowners benefited from excessive credit creation as their houses appreciated in value.  The next generation though would have to work twice as hard to get into a house of their own.  Another illustration of harm done by excessive credit creation.

Relatively wealthy Middle-class supports through its consumption the wealth of the elite rich. Otherwise, their assets bring less income.  Even in poor countries, the value of assets is linked to the purchasing power of the Middle-class in consuming countries, directly by demand on products these assets produce or through the creation of capital to possibly acquire them.

The impact of the wealth of the Middle -class has been eroded by excessive credit creation, replacing its wealth with debt founded consumption.  Middle -class is in the process of reaching the point of exhaustion of its debt taking capacity in face of rising costs of assets and living.

The next generation sees that the opportunities to accrue wealth have been diminished for them just like in the case of the post Housing Bubble (2001-2007) homeownership.  This touches on healthcare, education, homeownership and job prospects.


The Trends Are ..Not Your Friends

The industrial revolution started with the primacy of manufacturing prowess by states with corresponding importance and growth in its financial branch.  In the XX century, the financial branch takes over and replaces manufacturing as the greatest source of wealth.  The current allocation of credit is based on the capitalist premise of rewarding efficiency and profit creation (the idea of competition between individuals), yet at the same time is corrupted and displaced by excessive credit creation and regulating competition by the state (mostly to protect larger players).  The idea of an economy with “rational” (arbitrary) credit allocation takes root as the utopian idea of Socialism, leaving to the individual toothbrush and bedroom, his shoes are already the property of the state.

Socialism, the Live Preserver of the Millenials and post Millenials.

The squeezed next generations in face of crisis look to transform the system, wrongly called capitalism as it had gradually died over the XX century, into the utopian vision post-capitalist society.  They rally around promises of infinite credit creation (Modern Monetary Theory), Climate Change (formally knowns as Global Warming) calling for “rational” credit allocation, and Socialism (social utopia) as embodied in percepts of Cultural Marxism (namely destruction of Middle-class based on consumption and private property).

Naming names:

Bernie Sanders:  Socialist Utopia, the XX century type, with the roots in Thomas Moore’s “rational response” to the irrational world shaped by human nature and history, in Utopia.

Alexandria Ocasio-Cortez: Millenial response to the crisis due to the corruption of capitalism caused by excessive credit creation. Uneducated and irrational.


Let’s see what the currently sitting system does.  Federal Reserve creates money out of nothing, among others to control interest rates by buying treasuries.  Then the money goes into the banking system which by its virtue of giving loans to people and businesses (debt/credit) multiplies the money in the economy.  The control of interest rates by the Federal Reserve makes for lower interest rates with time to facilitate refinancing by businesses and people. This innocuous statement hides the deadly sin of creating businesses which can only survive if the interest rates are even lower.   Interest rates determine which businesses are viable economic enterprises as they have to compete for capital with deposits and other forms of investments (the essence of financial markets (free markets)).  The low-interest rates and excessive credit creation allow for the existence of unviable economic enterprises, which is called malinvestment as these will fail once interest rates go up.  Unimpeded interest rate lowering and credit creation lead to an increasing gap between GDP and Total Credit/Debt of the entire economy.  See link Total Debt to GDP USA

The Total Global Debt to Global GDP is not at 327%.  Before 1980 this was 120%.  It doesn’t matter how we got here, what matters where we go from here on.  For the USA if the annual credit growth falls to the vicinity of 2% of all the outstanding credit then the USA catches the disease of recession.  If the discrepancy between debt and GDP (the proxy for ability to at least service the debt) blows up then either we enter a series of borrower defaults followed by deflationary depression (like The Great Depression II) or the Central Banks would create large amounts of currency to fill the gap.  The first is politically painful but short in duration with great losses to almost everybody, but at least after the storm, you have the new economy not burdened by excessive credit/debt and capitalism can build wealth up for all again. Let me mention here that the banking system would become a victim of its own making.  The second option entails basically keeping the system alive and bringing it into logical conclusion by creating so much currency that old debt is inflated away with nobody defaulting on their obligations, but ultimately bringing new currency after the previous was destroyed in hyperinflation, so-called reset.  Inflation of that sort already exists in the system as old debts are inflated though slowly (we need hyperinflation for clean slate).  Yet, it is at a scale not significant to bring this about in short time frame. The concomitant here is the erosion of wealth of Middle-class as their earnings do not go up as quickly.  The GDP numbers go up as the country suffers a decline in real wealth as expressed in the buying power of the Middle-class.  The elite’s assets are meantime inflated by the new money due to excess credit creation.  In both of these scenarios, the banking system is either completely wiped out (Great Depression II) or cut severely in size and importance (Hyperinflation).

Let’s visualize something first….

USA Debt-Credit and GDP graph

In 1954 the Total Debt of the USA was 170% of its GDP, by 2009 it was almost 400%.  For the banking system to come unscathed either the debt has to come down to GDP – repaying by reaping benefits of higher growth – not possible as of yet due to departure from self-regulating capitalism going too far!  Or the GDP go higher to catch up with Debt/Credit.

If the GDP growth is greater than Debt/Credit growth then GDP can catch up to Debt/Credit over time.  Yet this is impossible since the malinvestment lowered the return on investment in the economy. Among others by creating businesses like Amazon bringing nearly no profit and destroying the margins of the competition (this was all done with cheap capital and promises of monopoly).

The only option is to drive the GDP higher by monetary means.

GDP=Quantity of Money * Velocity of Money=Consuption+Investment+Government Spending+Exports.

Enter Here The Modern Monetary Theory!

So by inspecting the identity for the GDP it is obvious that one can increase the quantity of money without increasing debt and with the same velocity to raise the GDP.  For now, the velocity is low due to the heavy burden of debt.  In the real world of complex economic reality, not that thought in Universities, this immediately causes inflation so Modern Monetary Theory advocate price controls, like they have done any good in the most recent example of Venezuela.  Rose by any other name…

Wait, there is more..The second identity has two components dear to the hearts of MMT creators;  Consumption and Government Spending.  The first to be “lowered” and “streamlined”, second to be managed in order to “rationally” distribute resources into sectors needing, accordingly to great washed masses of bureaucrats, “investment”.   The narrative for both is to be provided by global warming a.k.a. Climate Change.  What it means is that some sectors of the economy are to be eliminated or reduced so our economy has to be just simplified to be manageable within bureaucrat’s mind.   The other means to heavily invest in industries with a negative return on investment like reusable energy boondoggle since “capital” is to be created at will.

It is said that the economy is the science of scarcity, and this scarcity makes the markets which in turn make the prices.  MMT does away with the corrupted vestiges of capitalism and brings this corruption to a logical conclusion.   Excessive credit creation is made into outright money printing, inflation due the former is dressed with price controls to destroy any rationality of production, and the latter to be supplanted by a command economy.

USSR thanks to simplifying its economy build a splendid war economy but after 70 years this one also died.  Nameless are millions of its victims.

Is it possible for Pelosi and Trump to unite their efforts in order to battle the socialists in USA?





One thought on “Pelosi and Trump Walk into a Bar….

  1. Well done. My experience is people from the eastern block countries, always vociferously oppose socialism in the U.S. They have been there and experienced it.

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