Progessive Calendar 07.27.09
From: David Shove (
Date: Mon, 27 Jul 2009 15:15:38 -0700 (PDT)
            P R O G R E S S I V E   C A L E N D A R   07.27.09

1. Peace walk         7.27 6pm RiverFalls WI
2. Organic farm       7.27 6pm
3. Amnesty Intl       7.27 7pm
4. Processed people/f 7.27 7pm

5. Ralph Nader     - Obama's health care hypocrisy
6. Bill Maher      - Not everything in America has to make a profit
7. William Greider - How the Fed prints money out of thin air

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From: Nancy Holden <d.n.holden [at]>
Subject: Peace walk 7.27 6pm RiverFalls WI

River Falls Peace and Justice Walkers. We meet every Monday from 6-7 pm on
the UWRF campus at Cascade Ave. and 2nd Street, immediately across from
"Journey" House. We walk through the downtown of River Falls. Contact:
d.n.holden [at] Douglas H Holden 1004 Morgan Road River Falls,
Wisconsin 54022

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From: Erin Parrish <erin [at]>
Subject: Organic farm 7.27 6pm

July 27: Women's Environmental Institute Organic Farm School. "Our
Precious Pollinators" with Elaine Evans (Biologist, Author, Bee Expert)
-Xerces Society for Invertebrate Conservation Environmental, Justice
Education and Advocacy Collaboration Community Leader. 6 - 8 PM at Midtown
Global Market, Minneapolis. Register.

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From: Gabe Ormsby <gabeo [at]>
Subject: Amnesty Intl 7.27 7pm

Augustana Homes Seniors Group meets on Monday, July 27th, from 7:00 to
8:00 p.m. in the party room of the 1020 Building, 1020 E 17th Street,
Minneapolis. For more information contact Ardes Johnson at 612/378-1166 or
johns779 [at]

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From: Lydia Howell <lydiahowell [at]>
Subject: Processed people/film 7.27 7pm

Christine Frank wrote:
Written By Sabrina Nelson & Produced, Directed and Edited by Jeff Nelson

MONDAY, JULY 27, 7:00 PM

This documentary deals with the health effects of the processed foods we
eat, the drugs we take and the lifestyles we live as they relate to the
obesity, diabetes 2, heart disease and autoimmune epidemics now taking
their toll upon millions of Americans.  The film also explores the
financial ruin to which many are driven by medical debts due to the
outrageous costs of healthcare that is of questionable value.  In
addition, the filmmakers offer a healthy alternative to our processed way
of life.  The screenwriter, Sabrina Nelson, herself is the victim of an
autoimmune disease, and it is what prompted she and her partner to produce
the film.

The event is sponsored by the Climate Crisis Coalition of the Twin Cities
(3CTC).  It is free and open to the public.  The 3CTC Business Meeting
will take place at 6:00 PM following the Clean-Energy Vigil. All are
welcome.  For more information, EMAIL: christinefrank [at]
<mailto:christinefrank [at]> or PHONE: 612-879-8937.

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Date:   24 Jul 2009 23:51:16 -0000
From:   Ralph Nader <info [at]>
Subject: Obama's health care hypocrisy

About the only lesson Barack Obama has learned from the Hillary and Bill
health insurance debacle of 1993-1994 is to leave Michelle Obama out of
his current drive to get something - anything - through the Congress
labeled "reform".

Otherwise, he is making the same mistakes of blurring his proposal,
catering to right-wing Democrats and corporatist Republicans, who want an
even mushier "reform" scam, and cutting deals with the drug, hospital, and
health insurance industries.

His political opponents become bolder with each day as they see his party
base in Congress weakening, his polls dropping, and a confused public
being saturated with unrebutted propaganda by the insatiable profiteering,
subsidized health care giants.

Their campaign-money-greased minions on Capitol Hill and the corporatist
Think Tanks and columnists are seizing on President Obama's aversion to
conflict and repeated willingness to water down what he will fight for.

The loud and cruel baying pack comes in the form of William Kristol ("This
is not time to pull punches. Go for the kill."), Senator Jim DeMint (R-SC)
("If we're able to stop Obama on this, it will be his Waterloo. It will
break him."), and Charles Krauthammer yammering wildly about medical
malpractice and tort law. Krauthammer does not substantiate his claims or
mention the many victims of malpractice as he gleefully predicts
"Obamacare sinking."

All these critics have gold-plated health insurance, of course.

Hillary tried to appease the drug and hospital companies. Obama invites
them to the White House, where they presumably pledged to give up nearly
$300 billion dollars over ten years without any specifics about how this
complex assurance can be policed.

No matter, in return Obama and his aides agreed not to press Congress to
authorize the federal government to negotiate drug prices with the drug
industry. Don't worry: the taxpayers will pay the bill.

At a meeting on July 7 at the White House between drug company executives,
Obama's chief of staff, Rahm Emanuel, and Senate Finance Chairman Max
Baucus (D-MT), the industry, according to The New York Times, was promised
that the final legislative package would not allow the reimportation of
cheaper medicines from Canada or other countries even if they meet our
drug safety standards.

Since these industry meetings at the White House are private, no one knows
how many other concessions were made. What is known is that Barack Obama
knows better. A former supporter of single payer health insurance (often
described as full Medicare for all with free choice of physician and
hospital and the elimination of hundreds of billions of dollars of
corporate administrative costs and billing fraud), then-Illinois state
senator Barack Obama predicted, in 2003, that it would be enacted once
Congress and the White House were controlled by Democrats. Well, that is
now the situation, but, as President, he believes single payer is not

Single payer health insurance is supported by a majority of the American
people, majority of physicians and nurses, and nearly ninety members of
the House of Representatives. (See H.R. 676 and

A clear replacement of the private health insurance companies with federal
insurance, as Medicare for the elderly did in 1965, allows for clear
language. Twenty thousand people die in America each year because they
cannot afford health insurance, according to the Institute of Medicine.
Hundreds of thousands more suffer because they have no insurance to treat
their diseases or injuries.

Single payer means everyone is covered from birth, as is the case now in
every western nation. Imagine no lives lost or suffering due to no health

Fuzzy proposals, regularly altered and over-complicated due to the hordes
of avaricious corporate lobbyists, make politicians like Obama very
susceptible to lurid descriptions and lies by his vocal, well-insured
opponents. Finally, the Obama people are using "health insurance reform",
rather than the misnomer "health care reform" which opened them up to
charges that government would take over health care. All proposals,
including single payer, are based on private delivery of health care.

Now enters the well-insured libertarian Cato Institute with full-page ads
in the Washington Post and The New York Times charging Obama with pursuing
government-run health care. A picture of Uncle Sam pointing under the
headline "Your New Doctor." Nonsense. The well-insured people at Cato
should know better than to declare that this "government takeover" would
"reduce health care quality."

About 100,000 lives are lost from medical-hospital negligence per year,
according to the Harvard School of Public Health. This vast tragedy is
hardly going to get worse under universal government health insurance that
assembles data patterns to reduce waste, enhances quality, and
transparency. By contrast, the secretive big health insurers who make more
money the more they deny claims, ignore their loss prevention duties.

In 1950, when President Truman sent a universal health insurance bill to
Congress, the American Medical Association (AMA) launched what was then a
massive counterattack. The AMA claimed that government health insurance
would lead to rationing of health care, higher prices, diminished choices
and more bureaucracy. The AMA beat both Truman and the unions that were
backing the legislation, using the phrase "socialized medicine" to scare
the people.

Fifty-nine years later, "corporatized medicine" has produced all these
consequences, along with stripping away the medical profession's
independence. Today, the irony is that the corporate supremacists are
accusing reformers in Washington of what they themselves have produced
throughout the country. Rationing, higher prices, less choice, and mounds
of paperwork and corporate red tape. Plus, fifty million people without
any health insurance at all.

On Thursday, July 30, 2009, there will be a mass rally for a single payer
system in Washington, DC. It is time to put what most Americans want on
the table. (See for more information.)

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New Rule: Not Everything in America Has to Make a Profit
by Bill Maher
Friday, July 24, 2009
Huffington Post

How about this for a New Rule: Not everything in America has to make a
profit. It used to be that there were some services and institutions so
vital to our nation that they were exempt from market pressures. Some
things we just didn't do for money. The United States always defined
capitalism, but it didn't used to define us. But now it's becoming all
that we are.

Did you know, for example, that there was a time when being called a "war
profiteer" was a bad thing? But now our war zones are dominated by private
contractors and mercenaries who work for corporations. There are more
private contractors in Iraq than American troops, and we pay them generous
salaries to do jobs the troops used to do for themselves - like laundry.
War is not supposed to turn a profit, but our wars have become boondoggles
for weapons manufacturers and connected civilian contractors.

Prisons used to be a non-profit business, too. And for good reason - who
the hell wants to own a prison? By definition you're going to have trouble
with the tenants. But now prisons are big business. A company called the
Corrections Corporation of America is on the New York Stock Exchange,
which is convenient since that's where all the real crime is happening
anyway. The CCA and similar corporations actually lobby Congress for
stiffer sentencing laws so they can lock more people up and make more
money. That's why America has the world's largest prison population -
because actually rehabilitating people would have a negative impact on the
bottom line.

Television news is another area that used to be roped off from the profit
motive. When Walter Cronkite died last week, it was odd to see news anchor
after news anchor talking about how much better the news coverage was back
in Cronkite's day. I thought, "Gee, if only you were in a position to do
something about it."

But maybe they aren't. Because unlike in Cronkite's day, today's news has
to make a profit like all the other divisions in a media conglomerate.
That's why it wasn't surprising to see the CBS Evening News broadcast live
from the Staples Center for two nights this month, just in case Michael
Jackson came back to life and sold Iran nuclear weapons. In Uncle Walter's
time, the news division was a loss leader. Making money was the job of The
Beverly Hillbillies. And now that we have reporters moving to Alaska to
hang out with the Palin family, the news is The Beverly Hillbillies.

And finally, there's health care. It wasn't that long ago that when a kid
broke his leg playing stickball, his parents took him to the local
Catholic hospital, the nun put a thermometer in his mouth, the doctor
slapped some plaster on his ankle and you were done. The bill was $1.50,
plus you got to keep the thermometer.

But like everything else that's good and noble in life, some Wall Street
wizard decided that hospitals could be big business, so now they're run by
some bean counters in a corporate plaza in Charlotte. In the U.S. today,
three giant for-profit conglomerates own close to 600 hospitals and other
health care facilities. They're not hospitals anymore; they're Jiffy Lubes
with bedpans. America's largest hospital chain, HCA, was founded by the
family of Bill Frist, who perfectly represents the Republican attitude
toward health care: it's not a right, it's a racket. The more people who
get sick and need medicine, the higher their profit margins. Which is why
they're always pushing the Jell-O.

Because medicine is now for-profit we have things like "recision," where
insurance companies hire people to figure out ways to deny you coverage
when you get sick, even though you've been paying into your plan for

When did the profit motive become the only reason to do anything? When did
that become the new patriotism? Ask not what you could do for your
country, ask what's in it for Blue Cross/Blue Shield.

If conservatives get to call universal health care "socialized medicine,"
I get to call private health care "soulless vampires making money off
human pain." The problem with President Obama's health care plan isn't
socialism, it's capitalism.

And if medicine is for profit, and war, and the news, and the penal
system, my question is: what's wrong with firemen? Why don't they charge?
They must be commies. Oh my God! That explains the red trucks!

(C) 2009 Huffington Post Bill Maher, host of HBO's Real Time with Bill
Maher airs live tonight at 10pm

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A Dark Hole of Democracy: How the Fed Prints Money
Out of Thin Air
By William Greider
July 17, 2009

Pelosi: "We wake up one morning and AIG was receiving $80 billion from the
Fed. So of course we're saying, 'Where is this money coming from?"

The financial crisis has propelled the Federal Reserve into an
excruciating political dilemma. The Fed is at the zenith of its influence,
using its extraordinary powers to rescue the economy. Yet the extreme
irregularity of its behavior is producing a legitimacy crisis for the
central bank. The remote technocrats at the Fed who decide money and
credit policy for the nation are deliberately opaque and little understood
by most Americans. For the first time in generations, they are now
threatened with popular rebellion.

During the past year, the Fed has flooded the streets with money -
distributing trillions of dollars to banks, financial markets and
commercial interests - in an attempt to revive the credit system and get
the economy growing again. As a result, the awesome authority of this
cloistered institution is visible to many ordinary Americans for the first
time. People and politicians are shocked and confused, and also angered,
by what they see. They are beginning to ask some hard questions for which
Federal Reserve governors do not have satisfactory answers.

Where did the central bank get all the money it is handing out? Basically,
the Fed printed it, out of thin air. That is what central banks do. Who
told the Fed governors they could do this? Nobody, really - not Congress
or the president. The Federal Reserve Board, alone among government
agencies, does not submit its budgets to Congress for authorization and
appropriation. It raises its own money, sets its own priorities.

Representative Wright Patman, the Texas populist who was a scourge of
central bankers, once described the Federal Reserve as "a pretty queer
duck." Congress created the Fed in 1913 with the presumption that it would
be "independent" from the rest of government, aloof from regular politics
and deliberately shielded from the hot breath of voters or the grasping
appetites of private interests - with one powerful exception: the

The Fed was designed as a unique hybrid in which government would share
its powers with the private banking industry. Bankers collaborate closely
on Fed policy. Banks are the "shareholders" who ostensibly own the twelve
regional Federal Reserve banks. Bankers sit on the boards of directors,
proposing interest-rate changes for Fed governors in Washington to decide.
Bankers also have a special advisory council that meets privately with
governors to critique monetary policy and management of the economy.
Sometimes, the Fed pretends to be a private organization. Other times, it
admits to being part of the government.

The antiquated quality of this institution is reflected in the map of the
Fed's twelve regional banks. Five of them are located in the Midwest
(better known today as the industrial Rust Belt). Missouri has two Federal
Reserve banks (St. Louis and Kansas City), while the entire West Coast has
only one (located in San Francisco, not Los Angeles or Seattle). Virginia
has one; Florida does not. Among its functions, the Federal Reserve
directly regulates the largest banks, but it also looks out for their
well-being - providing regular liquidity loans for those caught short and
bailing out endangered banks it deems "too big to fail." Critics look
askance at these peculiar arrangements and see "conspiracy." But it's not
really secret. This duck was created by an act of Congress. The Fed's
favoritism toward bankers is embedded in its DNA.

This awkward reality explains the dilemma facing the Fed. It cannot stand
too much visibility, nor can it easily explain or justify its peculiar
status. The Federal Reserve is the black hole of our democracy - the
crucial contradiction that keeps the people and their representatives from
having any voice in these most important public policies. That's why the
central bankers have always operated in secrecy, avoiding public
controversy and inevitable accusations of special deal-making. The
current crisis has blown the central bank's cover. Many in Congress are
alarmed, demanding greater transparency. More than 250 House members are
seeking an independent audit of Fed accounts. House Speaker Nancy Pelosi
observed that the Fed seems to be poaching on Congressional functions -
handing out public money without the bother of public decision-making.

"Many of us were, if not surprised, taken aback, when the Fed had $80
billion to invest in AIG just out of the blue," Pelosi said. "All of a
sudden, we wake up one morning and AIG was receiving $80 billion from the
Fed. So of course we're saying, Where is this money coming from? 'Oh, we
have it. And not only that, we have more.'" So who needs Congress? Pelosi
sounded guileless, but she knows very well where the Fed gets its money.
She was slyly tweaking the central bankers on their vulnerability.

Fed chair Ben Bernanke responded with the usual aloofness. An audit, he
insisted, would amount to "a takeover of monetary policy by the Congress."
He did not appear to recognize how arrogant that sounded. Congress created
the Fed, but it must not look too deeply into the Fed's private business.
The mystique intimidates many politicians. The Fed's power depends
crucially upon the people not knowing exactly what it does.

Basically, what the central bank is trying to do with its aggressive
distribution of trillions is avoid repeating the great mistake the Fed
made after the 1929 stock market crash. The central bankers responded
hesitantly then and allowed the money supply to collapse, which led to the
ultimate catastrophe of full-blown monetary deflation and created the
Great Depression. Bernanke has not yet won this struggle against falling
prices and production - deflationary symptoms remain visible around the
world - but he has not lost either. He might get more public sympathy if
Fed officials explained this dilemma in plain English. Instead, they are
shielding people from understanding the full dimensions of our

President Obama inadvertently made the political problem worse for the Fed
in June, when he proposed to make the central bank the supercop to guard
against "systemic risk" and decide the terms for regulating the largest
commercial banks and some heavyweight industrial corporations engaged in
finance. The House Financial Services Committee intends to draft the
legislation quickly, but many members want to learn more first. Obama's
proposal gives the central bank even greater power, including broad power
to pick winners and losers in the private economy and behind closed doors.
Yet Obama did not propose any changes in the Fed's privileged status.
Instead, he asked Fed governors to consider the matter. But perhaps it is
the Federal Reserve that needs to be reformed.

A few months back, I ran into a retired Fed official who had been a good
source twenty years ago when I was writing my book about the central bank,
Secrets of the Temple: How the Federal Reserve Runs the Country

"He is a Fed loyalist and did not leak damaging secrets. But he helped me
understand how the supposedly nonpolitical Fed does its politics, behind
the veil of disinterested expertise. When we met recently, he said the
central bank is already making preparations to celebrate its approaching
centennial. Some of us, I responded, have a different idea for 2013.

"We think that would be a good time to dismantle the temple," I playfully
told my old friend. "Democratize the Fed. Or tear it down. Create
something new in its place that's accountable to the public."

The Fed man did not react well to my teasing. He got a stricken look. His
voice tightened. Please, he pleaded, do not go down that road. The Fed has
made mistakes, he agreed, but the country needs its central bank. His
nervous reaction told me this venerable institution is feeling insecure
about its future.

 Six reasons why granting the Fed even more power is a really bad idea:

1. It would reward failure. Like the largest banks that have been bailed
out, the Fed was a co-author of the destruction. During the past
twenty-five years, it failed to protect the country against reckless
banking and finance adventures. It also failed in its most basic function
- moderating the expansion of credit to keep it in balance with economic
growth. The Fed instead allowed, even encouraged, the explosion of debt
and inflation of financial assets that have now collapsed. The central
bank was derelict in enforcing regulations and led cheers for dismantling
them. Above all, the Fed did not see this disaster coming, or so it
claims. It certainly did nothing to warn people.

2. Cumulatively, Fed policy was a central force in destabilizing the US
economy. Its extreme swings in monetary policy, combined with utter
disregard for timely regulatory enforcement, steadily shifted economic
rewards away from the real economy of production, work and wages and
toward the financial realm, where profits and incomes were wildly inflated
by false valuations. Abandoning its role as neutral arbitrator, the Fed
tilted in favor of capital over labor. The institution was remolded to
conform with the right-wing market doctrine of chairman Alan Greenspan,
and it was blinded to reality by his ideology (see my Nation article "The
One-Eyed Chairman," September 19, 2005).

3. The Fed cannot possibly examine "systemic risk" objectively because it
helped to create the very structural flaws that led to breakdown. The Fed
served as midwife to Citigroup, the failed conglomerate now on government
life support. Greenspan unilaterally authorized this new financial/banking
combine in the 1990s - even before Congress had repealed the Glass-
Steagall Act, which prohibited such mergers. Now the Fed keeps Citigroup
alive with a $300 billion loan guarantee. The central bank, in other
words, is deeply invested in protecting the banking behemoths that it
promoted, if only to cover its own mistakes.

4. The Fed can't be trusted to defend the public in its private
deal-making with bank executives. The numerous revelations of collusion
have shocked the public, and more scandals are certain if Congress
conducts a thorough investigation. When Treasury Secretary Timothy
Geithner was president of the New York Fed, he supervised the demise of
Bear Stearns with a sweet deal for JPMorgan Chase, which took over the
failed brokerage - $30 billion to cover any losses. Geithner was
negotiating with Morgan Chase CEO and New York Fed board member Jamie
Dimon. Goldman Sachs CEO Lloyd Blankfein got similar solicitude when the
Fed bailed out insurance giant AIG, a Goldman counterparty: a side-door
payout of $13 billion. The new president at the New York Fed, William
Dudley, is another Goldman man.

5. Instead of disowning the notorious policy of "too big to fail," the Fed
will be bound to embrace the doctrine more explicitly as "systemic risk"
regulator. A new superclass of forty or fifty financial giants will emerge
as the born-again "money trust" that citizens railed against 100 years
ago. But this time, it will be armed with a permanent line of credit from
Washington. The Fed, having restored and consolidated the battered Wall
Street club, will doubtless also shield a few of the largest
industrial-financial corporations, like General Electric (whose CEO also
sits on the New York Fed board). Whatever officials may claim, financial-
market investors will understand that these mammoth institutions are
insured against failure. Everyone else gets to experience capitalism in
the raw.

6. This road leads to the corporate state - a fusion of private and
public power, a privileged club that dominates everything else from the
top down. This will likely foster even greater concentration of financial
power, since any large company left out of the protected class will want
to join by growing larger and acquiring the banking elements needed to
qualify. Most enterprises in banking and commerce will compete with the
big boys at greater disadvantage, vulnerable to predatory power plays the
Fed has implicitly blessed.

Whatever good intentions the central bank enunciates, it will be deeply
conflicted in its actions, always pulled in opposite directions. If the
Fed tries to curb the growth of the megabanks or prohibit their reckless
practices, it will be accused of damaging profitability and thus
threatening the stability of the system. If it allows overconfident
bankers to wander again into dangerous territory, it will be blamed for
creating the mess and stuck with cleaning it up. Obama's reform might
prevail in the short run. The biggest banks, after all, will be lobbying
alongside him in favor of the Fed, and Congress may not have the backbone
to resist. The Fed, however, is sure to remain in the cross hairs. Too
many different interests will be damaged - thousands of smaller banks,
all the companies left out of the club, organized labor, consumers and
other sectors, not to mention libertarian conservatives like Texas
Representative Ron Paul. They will recognize that the "money trust" once
again has its boot on their neck, and that this time the government
arranged it.

The obstacles to democratizing the Fed are obviously formidable. Tampering
with the temple is politically taboo. But this crisis has demonstrated
that the present arrangement no longer works for the public interest. The
society of 1913 no longer exists, nor does the New Deal economic order
that carried us to twentieth-century prosperity. The country thus has a
rare opportunity to reconstitute the Federal Reserve as a normal
government agency, shorn of the bankers' preferential trappings and the
fallacious claim to "independent" status as well as the claustrophobic
demand for secrecy.

Progressives in the early twentieth century, drawn from the growing ranks
of managerial professionals, believed "good government" required
technocratic experts who would be shielded from the unruly populace and
especially from radical voices of organized labor, populism, socialism and
other upstart movements. The pretensions of "scientific" decision-making
by remote governing elites - both the mysterious wisdom of central
bankers and the inventive wizardry of financial titans - failed
spectacularly in our current catastrophe. The Fed was never independent in
any real sense. Its power depended on taking care of its one true
constituency in banking and finance.

A reconstituted central bank might keep the famous name and presidentially
appointed governors, confirmed by Congress, but it would forfeit the
mystique and submit to the usual standards of transparency and public
scrutiny. The institution would be directed to concentrate on the Fed's
one great purpose - making monetary policy and controlling credit
expansion to produce balanced economic growth and stable money. Most
regulatory functions would be located elsewhere, in a new enforcement
agency that would oversee regulated commercial banks as well as the
"shadow banking" of hedge funds, private equity firms and others.

The Fed would thus be relieved of its conflicted objectives. Bank
examiners would be free of the insider pressures that inevitably emanate
from the Fed's cozy relations with major banks. All of the private-public
ambiguities concocted in 1913 would be swept away, including bank
ownership of the twelve Federal Reserve banks, which could be reorganized
as branch offices with a focus on regional economies.

Altering the central bank would also give Congress an opening to reclaim
its primacy in this most important matter. That sounds farfetched to
modern sensibilities, and traditionalists will scream that it is a recipe
for inflationary disaster. But this is what the Constitution prescribes:
"The Congress shall have the power to coin money [and] regulate the value
thereof." It does not grant the president or the treasury secretary this
power. Nor does it envision a secretive central bank that interacts
murkily with the executive branch.

Given Congress's weakened condition and its weak grasp of the complexities
of monetary policy, these changes cannot take place overnight. But the
gradual realignment of power can start with Congress and an internal
reorganization aimed at building its expertise and educating members on
how to develop a critical perspective. Congress has already created models
for how to do this. The Congressional Budget Office is a respected
authority on fiscal policy, reliably nonpartisan. Congress needs to create
something similar for monetary policy.

Instead of consigning monetary policy to backwater subcommittees, each
chamber should create a major new committee to supervise money and credit,
limited in size to members willing to concentrate on becoming responsible
stewards for the long run. The monetary committees, working in tandem with
the Fed's board of governors, would occasionally recommend (and sometimes
command) new policy directions at the federal agency and also review its

Setting monetary policy is a very different process from enacting laws.
The Fed operates through a continuum of decisions and rolling adjustments
spread over months, even years. Congress would have to learn how to
respond to deeper economic conditions that may not become clear until
after the next election. The education could help the institution mature.

Congress also needs a "council of public elders" - a rotating board of
outside advisers drawn from diverse interests and empowered to speak their
minds in public. They could second-guess the makers of monetary policy but
also Congress. These might include retired pols, labor leaders, academics
and state governors - preferably people whose thinking is no longer
defined by party politics or personal ambitions. The public could nominate
representatives too. No financial wizards need apply.

A revived Congress armed with this kind of experience would be better
equipped to enact substantive law rather than simply turning problems over
to regulatory agencies with hollow laws that are merely hortatory
suggestions. Reordering the financial system and the economy will require
hard rules - classic laws of "Thou shalt" and "Thou shalt not" that
command different behavior from certain private interests and prohibit
what has proved reckless and destructive. If "too big to fail" is the
problem, don't leave it to private negotiations between banks and the
Federal Reserve. Restore anti-monopoly laws and make big banks get
smaller. If the financial system's risky innovations are too complicated
for bank examiners to understand, then those innovations should probably
be illegal.

Many in Congress will be afraid to take on the temple and reluctant to
violate the taboo surrounding the Fed. It will probably require popular
rebellion to make this happen, and that requires citizens who see through
the temple's secrets. But the present crisis has not only exposed the
Fed's worst failures and structural flaws; it has also introduced citizens
to the vast potential of monetary policy to serve the common good. If Ben
Bernanke can create trillions of dollars at will and spread them around
the financial system, could government do the same thing to finance
important public projects the people want and need? Daring as it sounds,
the answer is, Yes, we can.

The central bank's most mysterious power - to create money with a few
computer keystrokes - is dauntingly complicated, and the mechanics are
not widely understood. But the essential thing to understand is that this
power relies on democratic consent - the people's trust, their
willingness to accept the currency and use it in exchange. This is not
entirely voluntary, since the government also requires people to pay their
taxes in dollars, not euros or yen. But citizens conferred the power on
government through their elected representatives. Newly created money is
often called the "pure credit" of the nation. In principle, it exists for
the benefit of all.

In this emergency, Bernanke essentially used the Fed's money-creation
power in a way that resembles the "greenbacks" Abraham Lincoln printed to
fight the Civil War. Lincoln was faced with rising costs and shrinking
revenues (because the Confederate states had left the Union). The
president authorized issuance of a novel national currency - the
"greenback" - that had no backing in gold reserves and therefore outraged
orthodox thinking. But the greenbacks worked. The expanded money supply
helped pay for war mobilization and kept the economy booming. In a sense,
Lincoln won the war by relying on the "full faith and credit" of the
people, much as Bernanke is printing money freely to fight off financial
collapse and deflation.

If Congress chooses to take charge of its constitutional duty, it could
similarly use greenback currency created by the Federal Reserve as a
legitimate channel for financing important public projects - like sorely
needed improvements to the nation's infrastructure. Obviously, this has to
be done carefully and responsibly, limited to normal expansion of the
money supply and used only for projects that truly benefit the entire
nation (lest it lead to inflation). But here is an example of how it would

President Obama has announced the goal of building a high-speed rail
system. Ours is the only advanced industrial society that doesn't have one
(ride the modern trains in France or Japan to see what our society is
missing). Trouble is, Obama has only budgeted a pittance ($8 billion) for
this project. Spain, by comparison, has committed more than $100 billion
to its fifteen-year railroad-building project. Given the vast shortcomings
in US infrastructure, the country will never catch up with the backlog
through the regular financing of taxing and borrowing.

Instead, Congress should create a stand-alone development fund for
long-term capital investment projects (this would require the long-sought
reform of the federal budget, which makes no distinction between current
operating spending and long-term investment). The Fed would continue to
create money only as needed by the economy; but instead of injecting this
money into the banking system, a portion of it would go directly to the
capital investment fund, earmarked by Congress for specific projects of
great urgency. The idea of direct financing for infrastructure has been
proposed periodically for many years by groups from right and left.
Transportation Secretary Ray LaHood co-sponsored legislation along these
lines a decade ago when he was a Republican Congressman from Illinois.

This approach speaks to the contradiction House Speaker Pelosi pointed out
when she asked why the Fed has limitless money to spend however it sees
fit. Instead of borrowing the money to pay for the new rail system, the
government financing would draw on the public's money-creation process -
just as Lincoln did and Bernanke is now doing.

The bankers would howl, for good reason. They profit enormously from the
present system and share in the money-creation process. When the Fed
injects more reserves into the banking system, it automatically multiplies
the banks' capacity to create money by increasing their lending (and
banks, in turn, collect interest on their new loans). The direct-financing
approach would not halt the banking industry's role in allocating new
credit, since the newly created money would still wind up in the banks as
deposits. But the government would now decide how to allocate new credit
to preferred public projects rather than let private banks make all the
decisions for us.

The reform of monetary policy, in other words, has promising possibilities
for revitalizing democracy. Congress is a human institution and therefore
fallible. Mistakes will be made, for sure. But we might ask ourselves, If
Congress were empowered to manage monetary policy, could it do any worse
than those experts who brought us to ruin?


   - David Shove             shove001 [at]
   rhymes with clove         Progressive Calendar
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