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Daily Digest 11/14 - The Economic End Game Explained, Denmark Shoots For 100% Renewable Energy

Chris Martenson - November 14, 2014 - 07:13
  • What’s Driving U.S. Companies: Fundamentals, or Financial Engineering?
  • Marc Faber on Gold, the US Dollar, China and the Swiss Gold Referendum
  • Ted Butler To Silver Miners: COMEX Is Responsible For Low Silver Prices
  • The Economic End Game Explained
  • Saving As Investment Fallacy?
  • A Tricky Transition from Fossil Fuel: Denmark aims for 100% renewable energy
  • Scientists Improve Efficiency Of Organic Solar Cells
  • Bio-drone simply melts away when it crashes

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Categories: Economics

Off the Cuff: 2015 Will See A Return To Global Recession

Chris Martenson - November 13, 2014 - 18:14

In this week's Off the Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Bankers Behaving Badly
    • Fraud should be expected when there's no punishment for it
  • Rudderless Leadership
    • It's no wonder voters are 'throwing the bums out'
  • The Japan Time-Bomb
    • Guaranteed to blow up the global economy. But when?
  • 2015: The Year Of Return To Global Recession
    • Charles and Chris make the call

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Categories: Economics

Winter Storms & Extreme Cold Preparedness

Chris Martenson - November 13, 2014 - 12:09

With the latest round of Polar Vortex weather and extreme cold hitting many parts of the country, it is a good idea to refresh you knowledge of Winter preparedness and review your supplies and preps before you need to use them.

Here are a number of tips and lists to help you become more prepared for winter:

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Categories: Economics

Daily Digest 11/13 - The Desperate Hustle As A Way Of Life, The Dollar's Role In The Commodity Cycle

Chris Martenson - November 13, 2014 - 07:45
  • The Desperate Hustle As A Way Of Life
  • Former Goldman Banker Reveals The Path To The Next Depression And Stock Market Collapse
  • It Will Take 6.25 Billion “Man Years” To Pay Off Federal Government Liabilities: “A Mathematical Impossibility”
  • How Much Does CPI Understate Inflation?
  • The Dollar’s Crucial Role in the Commodity Cycle
  • U.S. Companies Now Stashing $2 Trillion Overseas
  • House, Senate to vote on Keystone XL pipeline
  • And Then There’s The Things You Couldn’t Even Make Up
  • Solarpunk: a new movement sees the future in a positive light
  • IEA Says Oil Supplies May Not Keep Up With Demand
  • Why Is Beijing Downplaying the Supposedly Huge Climate Change Deal?

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Categories: Economics

How the U.S. Government Could End the Student Debt Crisis Today

Photo by Shutterstock.

Last month, Lower Saxony became the final state in Germany to abolish tuition for all students at public universities. Meanwhile, in the United States, student loan debt has passed the $1 trillion mark. The burden is now becoming increasingly heavy for middle-class and wealthy students, but especially for those from lower-income backgrounds. This injustice has spurred many organizations, like the Occupy Wall Street offshoot Strike Debt, to do what they can to pay off student debt on their own.

The student-debt status quo taxes borrowers while doing less and less to subsidize social mobility.

Borrowers could use the support of their government, but U.S. policymakers don’t seem to see student debt through the same moral lens as officials in many other countries do. Can you imagine Secretary of Education Arne Duncan, for example, arguing that “Tuition fees are socially unjust,” as German member of Parliament Dorothee Stapelfeldt told The Times of London? Or even, as she went on to say, that, “[fees] particularly discourage young people who do not have a traditional academic family background from taking up studies”?

Instead, higher education is peddled as the ticket to economic security by the federal government, commercial lenders, and universities—no matter the cost. Policies that would reduce the fear of unemployment, like the Job Guarantee programs supported by President Franklin Delano Roosevelt and demanded by Martin Luther King Jr., might make it more feasible for young people to opt out of college. Yet policymakers in the United States seem unwilling to consider such options.

Thus, as sociologist Tressie McMillan Cottom has argued, many young Americans, especially people of color, are desperate for higher education. Yet day by day, the student-debt status quo taxes borrowers while doing less and less to subsidize social mobility.

But the worst part is that it doesn’t have to be this way. To put it bluntly, there is no fiscal reason why the U.S. student debt crisis should exist.

At a basic level, the U.S. federal government doesn’t need to scrimp and save to fully fund higher education. It can just spend money rather than lend it, without incurring any significant negative economic consequences. Although I’d love to reduce spending on, say, prisons, the federal government doesn’t even need to take money out of other programs in order to alleviate student debt.

You may find this argument hard to believe. The way most politicians and journalists talk about the national debt and deficit spending makes free higher education sound impossible. But there’s another way of looking at the problem, a vision advocated by a growing movement of economists, lawyers, students, and financial practitioners who deal with the institutional nuts and bolts of the economy on a day-to-day basis.

Uncle Sam can’t go broke

When progressives advocate for more federal spending on education, the rejoinder is often something like: “OK, but how are you going to pay for it?” Progressives then either fall silent or perform fiscal gymnastics.

But we shouldn’t bow to those discussion terms.

Uncle Sam isn't broke. In fact, the U.S. federal government can't go broke.

First things first: Uncle Sam isn’t broke. In fact, the U.S. federal government can’t go broke. Up until August 1971, the amount of dollars in the world was pegged to the amount of gold in federal vaults. But it hasn’t been that way since we left the gold standard four decades ago. When Congress spends, the Treasury simply asks the Federal Reserve to add or remove money from bank accounts with keystrokes. The dollars don’t come from anywhere else. Unlike a business or a household, the federal government spends money into existence.

From this perspective, the U.S. ceased to be capable of “going broke.” Many economists known as “deficit owls ” have argued for decades that the U.S. federal government doesn’t need tax revenues or bond payments in order to spend money on education or anything else. Rather, the true limits to federal spending are the availability of real resources and the stability of prices. Noted hippies like Alan GreenspanBen Bernanke, and economists at the St. Louis Federal Reserve have all publicly stated as much.

The fiscal framework of the U.S. government is thus different from that of, say, Detroit—which cannot print its own dollars—or Greece, which now uses euros and can no longer print drachmas. As Warren Buffet stated in 2011, “We’ve got the right to print our own money. That’s the key.”

So why do politicians and others keep insisting that the U.S. government can’t afford to spend money on education? The notion reflects a confused picture of how our economy actually works.

When people think of federal spending, they often imagine that the government collects money from taxpayers and foreign investors (i.e., China), and then redistributes it for various purposes.

But this picture doesn’t reflect how things are really done. The federal government instead spends money into the real economy and drains it via taxes and bonds.

Imagine the economy as a sink full of dishes, with the federal government in control of a tap. In order for us to do the dishes, we need enough water but not so much that our sink overflows. To keep the sink from overflowing, we can open a drain, which removes water from the sink. This is the main macroeconomic function of federal taxes: to drain money from the economy and thus prevent inflation.

Infographic by Jim McGowan.

Education spending, lending, and inflation

Despite what politicians often say, pumping more money into the economy by running a deficit does not necessarily cause inflation—that is, a general, continuous rise in prices across the economy.

Rather, enduring effects on prices depend upon many factors, including where money goes and what kind of demand it stimulates. Notably, in modern U.S. history, inflation has typically arisen from actions taken by parties other than the U.S. government. For example, inflation during the 1970s can be chiefly attributed to OPEC spiking oil prices, which exacerbated commodity speculation and caused wages and prices to spiral in other sectors. Federal spending was not the culprit.

Inflation can occasionally result from “too much money chasing too few goods.” But as any credible economic forecaster will tell you, this is not a salient concern for the U.S. economy right now.

In any case, worries about inflation aren’t particularly relevant to a change in funding for higher education. It’s important to remember that the government is already pumping new money into the higher education sector; it just does it in the form of loans instead of spending.

Just as importantly, private banks are also creating new “money” every day via student loans, with few people ringing the inflation alarm. As the Bank of England recently detailed, private banks in the modern era do not lend pre-existing funds, but instead create credit “out of thin air” as they lend. When you receive a loan, the bank places funds in your account, simultaneously expanding both the asset and liability sides of its own balance sheet. Again, the dollars don’t come from anywhere—they’re new.

There’s no good reason for students’ pockets to be shallow when the government’s are deep.

The point is, if you’re not worried about lending causing inflation right now, you shouldn’t be worried about robust government spending causing inflation either.

So if there’s no economic harm from public funding for higher education, why do young people like 24-year-old Nathan Hornes have college degrees, tens of thousands of dollars in debt, but no full-time job?

As Stephanie Kelton, chair of the economics department at the University of Missouri, Kansas City, recently argued in a seminar on student debt, the problem is “austerity memes” and related myths about inflation. Instead of funding education like a public good, the government is going in the wrong direction, spending almost 10 percent less on total federal aid now than it did in 2010.

Who should owe whom?

If money should be owed for higher education at all, perhaps the federal government should owe us. After all, Article I, Section 8 of the Constitution entrusts the federal government with a monopoly to create, spend, and regulate money for the “general welfare of the United States.” And in the era of modern money, there’s no good economic reason for students’ pockets to be so shallow when the government’s are so deep.

When the federal government lists a deficit, that indicates a surplus for American citizens, as well as foreign businesses that sell us goods. In other words, the government’s red ink is the public’s black ink. Despite what organizations with wholesome and appealing names like Fix the Debt, The Can Kicks Back, and Up To Us, might claim, the “national debt” is not a burden for young people. Indeed, advocating for smaller federal deficits hurts student debtors. Even in the future, it offers them no tangible benefits.

As the Nobel-winning economist Paul Samuelson once acknowledged, the “superstition” that the budget must be balanced at all times is part of an “old fashioned religion,” meant to hush people who might otherwise demand the government create more money. Young people should beware of anyone who tells them that their chief worry for the future is the government’s debt, rather than their own.

Raúl Carrillo wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas and practical actions. Raúl is a student at Columbia Law and a graduate of Harvard College. He is a co-organizer for The Modern Money Network (MMN), an interdisciplinary educational initiative for understanding money, finance, law, and the economy. Follow him at @ramencents.

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Categories: Economics

How to Run a Business in the Gift Economy

Shareable Magazine - November 12, 2014 - 08:42

Maybe this is you: you've been working for a while on your own, making a little bit of money, maybe a lot of money. But something doesn't feel right. When you bill people for your time and expenses, something feels off. You hate that part. There are always the nagging thoughts, “Was it enough? Was it too much?” Maybe you've become friends with your client in the process of working with them and now sending an invoice feels uncomfortable to you. It nags at you. You feel apologetic about it. You think that the invoice monetizes a relationship that has become more than just about money.

Categories: Economics

14 Household Uses for Coconut Oil

Chris Martenson - November 12, 2014 - 08:41

A number of great reasons to have coconut oil on hand and uses for coconut oil around the house.

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Categories: Economics

Daily Digest 11/12 - Russia Braces For Long Economic War With The West, ACA FAQs

Chris Martenson - November 12, 2014 - 07:48
  • New ban on traffic cameras creates budget woes for cash-strapped Cleveland suburb
  • Slowing Chinese economy prompts rise in bad loans
  • Japan sentiment tumbles, bolstering calls for sales tax hike delay
  • Rates released as insurance shopping season begins
  • A Checklist for Obamacare Open Enrollment
  • Choices, costs rise in Missouri for insurance site
  • Affordable Care Act Enrollment FAQs
  • Russia braces for long economic war with the West
  • Fears of German recession as moment of truth looms
  • Bank of England to cut forecasts, hold fire on rates until second-quarter 2015 – Reuters Poll
  • Russian central bank buys up domestic gold output as sanctions bite
  • China wins, U.S. loses at APEC

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Categories: Economics

The New Peers: a Q&A with Shelby Clark

Shareable Magazine - November 12, 2014 - 07:34

Today, sharing economy nonprofit Peers launched a new website designed to make working in the sharing economy easier. Among the features on the new site are tools to discover and connect with work opportunities, reviews of sharing economy platforms from other independent contractors, information about earning potential, and a community forum.

Shareable checked in with Shelby Clark, the new executive director of Peers, to learn more about the vision for the site, the challenges sharing economy workers face, and what’s next for the organization.

Categories: Economics

The Consequences of a Strengthening US Dollar

Chris Martenson - November 12, 2014 - 07:21

In early September, I made the case for a rising U.S. dollar. Since then the dollar has continued its advance, and is now breaking out of a downtrend stretching back to 2005—and by some accounts, to 1985.

So what does this mean for the global economy?

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Categories: Economics

Why The Strengthening Dollar Is A Sign Of The Next Global Crisis

Chris Martenson - November 12, 2014 - 07:21
Executive Summary
  • Understanding the two different ways money flows into the US dollar
  • How currency crises elsewhere can send the dollar skyrocketing
  • Why yen, yuan and euro printing are not the same as dollar printing
  • How these accelerating money flows are creating the next global crisis

If you have not yet read The Consequences of a Strengthening US Dollar available free to all readers, please click here to read it first.

In Part 1, we surveyed the key dynamic that is playing out across the globe: the problems revealed by the Global Financial Meltdown of 2008-2009 were not addressed; they were in effect shifted into the foreign exchange (FX) market. Now the risk bubble is in the FX market.

The complexity of the feedbacks into the FX market is nothing short of mind-boggling, and rather than attempt a comprehensive survey, I’m highlighting the dynamics that hold the greatest risks of triggering instability, not just in finance but in geopolitics, trade and commodities.

Two Kinds of Dollar Flows

Let’s start by differentiating between the two kinds of money flows into the dollar:

  1. Money converted from periphery currencies into dollars to pay back loans denominated in dollars
  2. Money flowing out of periphery economies and into dollar-denominated assets such as stocks, bonds, real estate and dollar-denominated bank accounts.

Broadly speaking, both of these capital flows are “risk-off,” but they have different effects.

In the first case, money borrowed on the cheap in dollars and invested in high-yield periphery bonds earned a tidy profit as the dollar weakened. The trader picked up a double profit: the arbitrage on the interest rates (borrow at .25% and earn 4+%) and the FX profit from the rise of the periphery currency and the decline of the dollar.

This currency-arbitrage profit reverses when the dollar starts rising, and it quickly wipes out the entire interest-rate profit as it leaps higher.

The carry trade is “risk-on” because money is being borrowed to speculate in interest-rate arbitrage. Deleveraging this trade is “risk-off” because the only way to stem the potential losses as the dollar strengthens is to...

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Categories: Economics

DIY Cookie Tin Chicken Water Heater

Chris Martenson - November 11, 2014 - 11:59

A great tutorial on how to build a simple DIY water heater to keep your chicken waterer flowing and not freezing up.

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Categories: Economics

Daily Digest 11/11 - Classifying The Internet As A Utility, Living Tiny

Chris Martenson - November 11, 2014 - 08:32
  • Protect Yourself From Future Housing Crises By Living Tiny
  • Obama says FCC should reclassify internet as a utility
  • Silver to S&P Ratio: What It Tells Us
  • Russia, China Sign Second Mega-Gas Deal: Beijing Becomes Largest Buyer Of Russian Gas
  • Gold US$5,000: Is it Possible? And when?
  • Latest Electric Car Innovation Could Recharge Batteries In Minutes
  • After the Deepwater Horizon Oil Spill
  • Zealot of US climate change sceptics Jim Inhofe to determine environmental policy

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Categories: Economics

Community Supported Everything Incubates Social Change in Portland

Shareable Magazine - November 11, 2014 - 07:40

When people are faced with a dire community challenge, they often turn to their neighbors to create a solution. There’s something powerful about starting where you are, with what you have, with the support of those around you.

Categories: Economics

The Power of Asset-Based Approaches

Shareable Magazine - November 11, 2014 - 06:56

Photo credit: blowing.bubbles / Foter / CC BY-NC-SA. Article cross-posted from

From the moment you were born, you have been accumulating an incredible array of assets. No matter who you are – your passions, knowledge, skills and access to resources are truly vast.

Categories: Economics

Europe's Next Energy Crisis Is Now Assured

Chris Martenson - November 10, 2014 - 20:25

Today, Russia inked a second blockbuster deal with China that will starve Europe for natural gas in just a few short years. It's now increasingly clear that 2018 will mark the beginning of the end for any hopes Europe had of returning to robust economic growth.

It was by far the biggest news of the day. While it did make headlines, you might have missed it because not much was made of the affair beyond the announcement.  The story came and went as if Russia has oodles of natural gas (NG) to send to China.

It doesn't. And the supplies it has now contracted to send to China will be pulled from supplies that currently go to Europe.

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Categories: Economics

Daily Digest 11/10 - 2015 Recession Likely, The Rise Of Invisible Unemployment

Chris Martenson - November 10, 2014 - 09:21
  • Predictors of ’29 Crash See 65% Chance of 2015 Recession
  • Catalans vote in symbolic referendum on independence in defiance of Madrid
  • The Rise Of Invisible Unemployment
  • It’s all over: Bitcoin miner maker HashFast to auction remaining assets
  • "If You Like Your Internet"... Obama Calls For Regulation To Keep "Internet Open"
  • New particle accelerator technology gets high speeds in short distances
  • Global Debt Growth Kept Oil Prices High And Delayed The Bakken “Red Queen”
  • Climate Tools Seek to Bend Nature’s Path

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Categories: Economics

8 Inspiring Documentaries Exploring the Sharing Movement

Shareable Magazine - November 10, 2014 - 08:06

Shapes of Exchange in the Solidarity Economy is just one of many short films you can view as part of Solidarity NYC's Portraits of the Solidarity Economy video series.

Categories: Economics

Interviewed: David de Ugarte on Peer-to-peer Production

Shareable Magazine - November 10, 2014 - 07:01

This is a version of the interview cross-posted from OuiShare. Written by Albert Cañigueral. Translated by Steve Herrick.

Categories: Economics

How to Use the Media for Social Change

Shareable Magazine - November 10, 2014 - 06:59

By Shayna Samuels and Glenn Turner, co-founders of Ripple Strategies, a PR & Cause Marketing Agency based in Boulder, Colorado.

Categories: Economics