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Banking on the Government

BY: Bob Ticer | Category: Politics | Submitted: 2014-06-17 22:25:35
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Article Summary: "This article argues that climate change is a worldwide problem and that all nations can benefit economically in combating it by means of a world wide banking system insured by the United Nations as its governance..."

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To offset a recession, John Maynard Keynes proposed government should provide assistance to the economy by investing in opportunity of the people for employment if it is not obtainable from the private sector of the economy. President Franklin D. Roosevelt agreed in proposing the New Deal. One of its most popular programs was the Civilian Conservation Corps (C.C.C. Camps) employing young men in improving the nation's infrastructure.

The C.C.C. was only temporary from 1933 to 1943, but it testifies as a splendid example of how government can improve the distribution of wealth among us.

Could government not also be a means of preventing the recession itself from occurring?

With regard to recessions, prosperity generally occurs during a time of modest inflation, which is promoted with the use of credit in increasing the flow of money. Since the value of the dollar decreases with the general increase in price of goods and services, there is more of a tendency to invest money in commodities. However, inflation can benefit the person in debt at the expense of the loaner. Deflation, on the other hand, tends to benefit the rich. As prices decrease, as by increase in population with less money per person, people with money become richer if the available amount of goods and services per person remains the same.

Deflation can also occur with a relative increase in goods and services per person, but if wages decrease, people in debt become more in debt. The risk of loaning becomes greater such that loans are more difficult to obtain. If the Federal Reserve lowers interest rates, banks are still reluctant to loan at lower rates that are apt to increase along with inflation and an economic recovery, which is therefore forestalled even more.

An alternative is for government to invest in its infrastructure instead of lowering the prime rate. With more people employed instead of drawing unemployment and food stamps, more production of economic wealth is created.

A counterargument is that either more taxation or inflation increases the cost of production. There is thus a tendency to import goods produced by cheaper labor abroad. However, there is no logical reason the value of the local dollar cannot be adjusted to the value of foreign currency with regard to the actual labor used for production. Exports and Imports are not a free market consequence; they are more of various ploys by different governments to take unfair advantage of local labor.

Generally, recessions are not local; they have a worldwide affect. A way out of a recession, or even to prevent one from occurring, would better be served by means of a general agreement among nations for a worldwide cause. Climate Change, for instance, is a global threat that all nations could rally against. In so doing, credit and debt would be the main tools for creating a more productive environment.

How does credit and debt create wealth?

Suppose a farmer mortgages the farm for needed capital to purchase seed and equipment for growing and harvesting crops. If successful, the community along with the farmer benefit from having food aplenty. If unsuccessful, as due to incompetence, then the bank forecloses on the loan and sells the property to someone hopefully more competent. If unsuccessful, as due to drought, food is obtained from somewhere else if the loan had been insured against the possibility of a national disaster.

Such insurance depends on the ability of the insurer to insure enough assets such that the loss of a few of them is covered by the general cost of insurance. If the insurer is secured by government, then big banks and big government have a positive role in maintaining the creation of wealth by means of credit and debt. If the insurer is the United Nations World Bank, then there is a financial means to promote a more prosperous environment for all of us to more equally share.

About Author / Additional Info:
Rice is nice but Bob Ticer is nicer. I have written a book on physics, A Mystic History In Light Of Physics, that explains gravity, the difference between light and matter, and so forth according to a unified field theory. That was a personal challenge. I'm now into politics and climate change.

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