Comments: First Black President Clinton

Claim that it was always yours; if anyone disputes this, question their patriotism and/or their sexual orientation. Also, change the subject and answer the question you wanted to answer, not the one you were asked.

Posted by Murfyn at January 23, 2010 10:13 AM

Corporate ownership of our political process is colorblind. And now given the force of law by our benighted, etiolated Supreme Court.

What if the corporations owning the politicians are foreign-owned? Does that make our political class more variegated?

But, wanting to seem like a cool kid, let's frame the problem in terms of the color green (thanks, Kitco):

"One stark and sobering way to frame the crisis is this: if the United States government were to nationalize (in other words, steal) every penny of private wealth accumulated by America’s citizens since the nation’s founding 235 years ago, the government would remain totally bankrupt.

According to the Federal Reserve’s most recent report on wealth, America’s private net worth was $53.4 trillion as of September, 2009. But at the same time, America’s debt and unfunded liabilities totaled at least $120,000,000,000,000.00 ($120 trillion), or 225% of the citizens’ net worth. Even if the government expropriated every dollar of private wealth in the nation, it would still have a deficit of $66,600,000,000,000.00 ($66.6 trillion), equal to $214,286.00 for every man, woman and child in America and roughly 500% of GDP."

The only color I see in our future is red.

Posted by Oarwell at January 23, 2010 12:16 PM

Let no one else's work evade your eyes,
Why do you think the good lord made your eyes,
Don't shade your eyes,
Plagiarize, plagiarize, plagiarize.

With great affection, and credit, to Tom Lehrer. I wonder what's going on in his head these days?

Posted by catherine at January 23, 2010 02:36 PM

Have someone out you as being the real John Caruso, a second identity you created because you are such a prolific writer that one blog could not contain your output of witty, impassioned political writing. Sounds plausible, right?

To anyone who claims to know this other fellow as John Caruso, you gently acknowledge that it's a claim the poor man has been making for years now, and the less said about him the better, as it might interfere with his full recovery, for which you fervently hope.

Posted by Maud at January 23, 2010 03:23 PM

Nationalization is stealing? Great.

As long as America can militarily intimidate others, the debts won't come due. Like court Jews during the Renaissance, creditors who make themselves inconvenient may just just disappear.

When the bills do come due, our elites will be gone, and the rest of us will be left holding the bag.

If you see red in our near future, you're being too optimistic.

Posted by Save the Oocytes at January 23, 2010 04:24 PM

Save the eggos:

Sanguine or sanguinary? I keep my rose-colored lenses firmly noseward.

I know this hain't no financial blog, but people interested in a little serious nacht und nebel should churn on, check out, and chicken:

Posted by Orwell at January 23, 2010 04:34 PM

Well, you could start a whispering campaign about how you don't think Caruso is even a real name.

Caruso? John Caruso? Sounds like a fancy internets pseudonym to me. Harrumph.

But keep in mind he might retaliate by asking questions about what you did with the 't' in your name.

Posted by Jonathan Versen at January 23, 2010 08:31 PM


OK, I read Dougherty 's screed. Maybe he would be a bit more persuasive if he wasn't also shilling gold coins. 

Posted by Jonathan Versen at January 23, 2010 09:22 PM

just delete the byline from the previous post.

and then delete his entire blog by hacking into it hollywood stylee. mission accomplished, amigo!

Posted by almostinfamous at January 23, 2010 11:49 PM

Send me a check for 5 million.

Posted by Rob Payne at January 24, 2010 12:09 AM

Before you accept the deficit terrorist's narrative, please educate yourself. The future isn't red.

Do some reading. I've just picked a recent blog post from Bill Mitchell. Explore the entire site if you are intrigued:

This material from 2012 presidential candidate Warren Mosler is worth the effort of reading. Click the link to the document on this page:

The gist as it applies to previous comments in the thread:
China can be entirely repaid by debiting their treasury account at the Fed and crediting their cash account. That's it. Not so scary is it?

If you've ever wondered why mainstream economics is so blatantly contradictory with the real world, start reading these Modern Monetary Theory (MMT) economists.

Posted by Jeff65 at January 24, 2010 02:29 AM

thanks for the mosler link, Jeff65. Bill mitchell and a couple of folk around the blog 'naked capitalism' have me convinced of that view, though i am as much an economist as i am a gourmet chef...

Posted by almostinfamous at January 24, 2010 12:08 PM

that is a pretty good joke


Henry Kissinger (did anyone know that his peers in graduate school called him "ass kissinger"?) among many others has reported on the decline of national dominance and return to patterns that existed before the age of nations began a couple of centuries ago. Whether corporations are foreign owned or domesticallyowned--these are becoming more difficult and less relevant questions. Our elites are working in tandem with other elites. They go to the parties, same international schools, same vacation resorts, same of almost everything. They have much more in common with each other than ordinary citizens of anywhere. I've only glimpsed that elite, and not its apex, and even the bottom of that elite has more in common across countries within itself than with the rest of us. That elite is essentially an international corporate elite, adn the US military presently protects their joint interests. THe US military basically has a monopoly right now, and more and more it acts like it.

Because of the US military's monopology, things get dicey when our political leadership pursues a polarizing course that advances the interests of one factions but not all factions within that international elite. When the rising tide, or war in question, lifts only some boats, then the boats that don't get lifted--whether European or Japanese or Chinese--start to grumble and voice their displeasure. They might even act economically on it. I don't see how this situation can be sustainable over the long term, which might even prove to be a relatively short term. The system was in crisis before 9/11, and it will get there again, though obviously it may take a couple of decades.

As for the US's financial irresonsibility, I think the writings of michael hudson (who mistah charley pointed me too) are illuminating. As long as the international economy operates on a dollar denominated standard rather than gold or any other fixed measure of value, the US doesn't face having to pay back all this debt your refer to in the same way any other nation would. I don't understand the mechanism as well as I'd like, but it seems fairly stable. But I doubt stable enough, because change has always been a big part of the dynamic systems sometimes called history, and we seem to be changing more and more and faster and faster as history progresses. That doesn't seem like a formula for stability to me. When the present economic/political/military system crashes, all hell will probably break lose, if the past is any sort of prologue.

So let's hope we start getting lucky.

Posted by N E at January 24, 2010 03:48 PM

A list of Mosler's 7 Deadly Innocent Frauds:
1. The government must raise funds through taxing or borrowing in order to spend.
2. With government deficits we are leaving our debt burden to our children.
3. Government budget deficits take away savings.
4. Social Security is broken.
5. The trade deficit is an unsustainable imbalance that takes away jobs and output.
6. We need savings to provide the funds for investment.
7. Higher deficits today mean higher taxes tomorrow.

Posted by Jeff65 at January 24, 2010 06:25 PM

"China can be entirely repaid by debiting their treasury account at the Fed and crediting their cash account. That's it. Not so scary is it?"

Is this a joke? China holds 1 trillion in bonds, and expects to be paid, if not in USD, then in US ports and roads and factories and hard-earned Iraqi oil fields. How do you propose debiting their treasury account when it's already on the books as a debit? How does the Fed credit themselves debt it has already sold?

If it's a joke, I'm too tired tonight to get it. If you seriously propose this as a solution, sheesh. Maybe you should open a hedge fund.

Posted by Oarwell at January 24, 2010 10:03 PM


No, it's NOT a joke! I might have the accounting terms inverted, but it makes no difference. Don't accept the deficit terrorist's narrative. Read the Mosler book I linked.

China's cash account at the Fed can be electronically credited in exactly the same way as your checking account when you receive a federal income tax refund.

Think about it - the Chinese bought all of that trillion in bonds with cash denominated in USD. When China bought the treasuries the Fed did exactly the reverse, they credited the Treasury account and debited the cash account.

Yeah, I know, I know. Zimbabwe, blah, blah. That's what taxes are for - reducing private sector purchasing power to prevent inflation.

Seriously, read the stuff that I linked. It takes a bit for the fog of 40 years of economic brainwashing to lift, but now it's like someone switched on the light.

Posted by jeff65 at January 24, 2010 10:38 PM

Apologies for hijacking the comments section for John's great joke.

Have you not always wondered why the "bond market vigilantes" (includes China) never stopped the TARP or the Iraq war expenditures? The answer is because they can't. Yet this excuse is trotted out every time as why we can't afford any social spending. Convenient isn't it!

The USD is non-redeemable since 1971. This makes the analogy of government spending as similar to household spending completely incorrect.

Posted by Jeff65 at January 24, 2010 11:14 PM

Jeff, think the idea through. If the Fed says to China, "all your bonds is ours, ha ha," the next day the US bond market would collapse. No outside country of capital firm would buy US treasuries at the next auction. It would be complete auction fail.

So what, you say? The Fed would then have to monetize all treasury issuance, because step A basically was the Fed declaring the United States bankrupt. Now, we both know the US IS bankrupt, but they play this game: China (or Japan or Lloyds or whoever) buys USD-denominated treasury bonds, and the Fed can pretend that their worthless paper certificates have some "real world" value. Ie, they kick the can down the road.

But if no one else wants to buy their worthless paper certificates, their IOU agreements called bonds (T bills, notes, whatever), then the FED has to buy them. But that signals to the whole world that our game is up, last drink has been called, and the USD is worth less than toilet paper.

That is not a "40 year economic delusion." That is reality. The opposite thinking is the delusion.

Do you think Venezuela will sell us oil, or coffee, or coke, or bupkes if the USD is worthless? Right now, the IOUs called bonds are backed by the "full faith and confidence" of the US government. But the day the Fed has to buy 100% of its own issuance that lie is revealed.

No one will accept the USD to redeem debts.

If you really think that doesn't have real world consequences, I don't know what to tell you.

Everyone has their own pet economists, but yours seems to be smoking a uniquely powerful variety of weed.

Not that there's anything wrong with that.

The only way out is the "knock the chessboard over" strategy. Which probably would involve nuking the debt holders, as you hinted at up above.

Posted by Or or well at January 25, 2010 01:02 PM

Or or well:
"If the Fed says to China, "all your bonds is ours, ha ha," the next day the US bond market would collapse."

Nowhere did I suggest a default on bonds. I'm suggesting we pay them back at maturity as promised in the same way as you get your tax refund - through an electronic entry in a computer. In fact, this is exactly how bondholders are paid.

Here is the key that you are missing: the USG does not need to finance its spending by taxation. Quoting Winterspeak:
"Everyone agrees, more or less, that the Federal Government has the power to print money. That's what fiat money means by definition. Since the Federal Government can print it's own money, in whatever quantity it chooses, have you ever wondered why it taxes at all? In fact, if you chose to mail in your 2009 taxes in crisp Federal Reserve Notes, the Government would take that paper money and shred it.

The Federal Government does not need taxes in order to spend. At the Federal level, because the Fed is a currency issuer, the sole purpose of taxes is to extinguish money, reduce aggregate supply, and therefore limit inflation to a tolerable level."

USG debt can be viewed as a claim against future tax revenue, but since the federal government doesn't need tax revenue it doesn't need to issue debt. The issuance of USG bonds are simply an interest bearing alternative to holding cash - like a savings account.

The USG creates money. Again quoting Winterspeak:
"The Government creates money and transfers it to the private sector by spending. The private sector transfers the money amongst itself (spending, investment) and puts the rest in the bank. If the private sector wants to put more money in the bank, that money can either come at the expense of transactions, or it can come from the Government simply running a larger deficit, and thus creating additional money for the private sector. So long as the private sector uses this money to save, it's creation is not inflationary and will not show up in the CPI. Inflation is caused by too many dollars chasing too few goods, and dollars under the mattress are not chasing anything."

The rules changed when Nixon pulled the plug on Bretton Woods. Unfortunately few seem to have noticed and presume that the constraints of a redeemable currency still apply.

Posted by Jeff65 at January 25, 2010 04:21 PM

oarwell and jeff65

The players to this high-stakes poker game probably understand it much better than you assume. Of course, that doesn't mean either player is infallible, let alone that the players won't get their game theory wrong, but there are implications to each move in the game that go beyond changes in market prices and exchange rates. China holds all those dollar-denominated bonds and has to be careful not to precipitate its own economic destruction, because if China loses its export sector it has a problem. And if it weakens the dollar it loses some of the value of its holdings. And if the US cuts off its energy imports either from Central Asia or from the Gulf it has an even bigger problem. Talk about economic theory all you want, but there is more going on.

The US is flooding the world with dollar-denominated debt that insures that everyone has a huge stake in keeping the dollar-denominated economy running. (Chips are redeemable only at the Treasury window). But the US is also still far and away the world's greatest military power. The Chinese can't presume, as they might have a decade ago, that the US military is a paper tiger. The unwillingness of the US public and its elected representatives to commit to long-term wars with casualties can't be questioned right now, and the Chinese have to believe that we're as capable of causing trouble in their western provinces and Tibet as we were in the 50s.

Of course, this would have big effects on us too, as would the Chinese flexing their economic muscle in the bond and currency markets. I ain't no Paul Krugman or Dean Baker or Michael Hudson, but I can see the general outline.

The problem is, this kind of system doesn't look or feel stable, and even stable systems don't last forever. So we better start improving our powers of cooperation as a species or our future is going to be even uglier than our past. Too bad seeing two years down the road is incredible farsight among us homo sapiens sapiens.

Posted by N E at January 26, 2010 08:28 AM

By the way, for history lovers, Warren Harding was the first President to be accused of being black, by a Virginia member of the KKK (then mainstream) who went so far as to write a book.

Furthering these suspicions, Harding later gave a speech in Alabama that pissed off all those racist blue dog Dems in the South too by not being racist enough for the time. Back in those days, the GOP was usually at the forefont of efforts to end segratation in the South. For them, that was good politics then. I seem to recall that President Clinton could give good speeches against racism when it helped him politically, otherwise not so much.

Harding pardoned Debs too, which to my irritation my man Wilson hadn't been man enough to do. Harding could get away with that probably because it made Wilson look bad, not that the crazy wingnut right still didn't got batshit about it. Clinton certainly seem to make some harmless gestures to the left to elevate his public image and diminish someone elses, and that skill did drive the wingnuts crazy.

Best of all, Warren Harding was also quite a ladies man and a fine poker player and golfer. He was even accused of having had a child out of wedlock. And he was surrounded by crooks! Plus, Henry Cabot Lodge couldn't stand him because he wasn't enough of a superhawk.

Could there have been a first black President Clinton before there was a President Clinton?

Posted by N E at January 26, 2010 08:49 AM

N E,

You mention Michael Hudson. He is a Chartalist. Call it Chartalism, the State Theory of Money, or Modern Monetary Theory - they all have a similar basic premise: the State creates money BEFORE collecting it in taxes.

This isn't a crack pot idea, but is instead a fully formed branch of economic theory:

If you can get your head around it, it makes sense and often predicts what is observed. That is more than one can say for neo-classical economics.

Posted by Jeff65 at January 26, 2010 04:37 PM


I have found Michael Hudson very illuminating during my brief acquaintence with his works. I'll read up on chartalism. I once studied economics, but I couldn't differentiate neo-classical economics from neo-liberal economics to save my life.

What I can see is that something changed in the world economy in the early 70s that none of the economic theory I was once taught adequately explains. Hudson at least seems to be barking up the right tree. I think it's unproductive to talk about economics per the models without recognizing how they depart from the empirical world and what significant parts of the empirical world aren't accounted for at all. Milton Friedman once wrote a great essay about positive economics positing that the reasonableness of assumptions is meaningless--what is meaningful is whether the model works to accurately describe reality. Unfortunately, he proved himself to be full of it, along with most other economists, because he he then proceeded to not do much empirical testing of the models with crazy assumptions that he had defended on the ground that only predictiveness matters.

Posted by N E at January 26, 2010 06:30 PM

Yes, yes, yes, Keynsianism, Friedmanism, Chartalism, blah-blah-blahism, whatever. The real question is, who would Sally Hemmings vote for?

Posted by Carl at January 26, 2010 07:58 PM

blah-blah-blahism. I love it

Posted by N E at January 27, 2010 10:50 AM