America faces an uncertain future due to decades of misguided policies which have bankrupted most of the population and the economy. Fortunately, solutions to these problems are available and can be readily implemented if the political will can be found to do so. America is not just another country that has operated by the policies which have generally guided other countries. If it did, America would never have become the enormously successful nation it is today. Returning to the policies which made this country great is the only way to ensure the survival of the American way of life and liberty for future generations.
The actions needed are manifold but interrelated. These are mainly the reimplementation of former policies which have been recklessly discarded over the last few decades in the name of ‘de-regulation’ and ‘globalization’. Unless we reverse these changes few people will recognize the country that America will inevitably become.
These solutions fall into four broad, but related, categories: The money supply, finance, national investment, and national sovereignty.
These changes include:
Reinstate the Bretton Woods international settlement system. This system was used to settle trade imbalances on a periodic basis, using gold reserves as the commodity for settlement. Since this was abandoned in 1971 the US has accrued a trade debt of ~$7Trillion. This means a trade balance must be ensured. A trade imbalance is, by definition, a transient condition, as trade ultimately is an exchange of a domestic group of goods and services for a group of foreign goods and services. What is done today isn’t trade per se, but multi-currency purchase and sale agreements. These purchases and sales can lead to a situation where trade is out of balance and one side ends up with more goods and services and the other with more foreign currency. This imbalance used to be settled using the Bretton Woods agreement by shifting gold to the foreign cash holding nation from the good and services purchasing nation. The deficit is eliminated by selling the gold to the holder of the excess cash which returns the cash to the issuing nation. In essence the gold is traded for the goods and services as if the currency was never part of the transaction. This works fine for small, random deficits that go in both directions. Over the longer term, one-sided trade deficits lead to one nation perpetually having excess foreign currency and the other nation perpetually transferring gold to the first to settle. This situation is untenable as the first nation will eventually run out of gold. This is exactly the situation in which the US found itself in 1971 when the US withdrew from the gold standard and Bretton Woods. Withdrawing from the system didn’t solve the problem, rather it merely deferred the day of reckoning to the future, which is rapidly approaching. The problem wasn’t the gold standard or Bretton Woods. The problem was perpetual trade imbalances. Therefore, a mechanism to ensure balanced average trade over extended time is needed. This mechanism is the tariff, whereby the deficit nation that is spending more currency than is covered by sales to foreign nations imposes a tax on imports to reduce the size of the imbalance by curbing demand through effectively higher prices for imports. Reinstating tariffs as a trade balance mechanism is a necessary step for the US to undertake. Tariffs also protect domestic industries to maintain a diverse economic base that assures the economic self-sufficiency of the country.
Reinstate the Glass-Steagall regulations which partition the financial, insurance, and real estate industries into distinct businesses. This formed a kind of integrity infrastructure for the entire system. A business had to choose to be one and only one of a: commercial bank, a broker, an investment bank, an insurance company, a real estate company, etc. The goal was to insulate the various segments from problems in other segments. However, the one most important goal of this law is the separation of commercial banking, which creates the US money supply, from brokers and investment banks which often engage in speculation. This separation ensured that the public money supply was not leveraged to purely speculative, financial instruments. Instead, these brokers or investment banks would need to raise funds from private investors rather than use leverage from the US money supply. Any loss incurred by the speculative activity would be borne by the investors and not the US treasury, or taxpayer, nor impact the money supply. Today, these rules would apply to hedge funds and other investment organizations as well. This and the trade tax (see below) would serve to greatly limit the creation of derivative securities which are purely speculative in nature and threaten our financial system.
Institute a ½% trade tax on all trades of financial instruments and make this iterative such that financial instruments that in turn trade underlying instruments must pay the tax on those trades as well. This would discourage financial speculation that contributes little if any value to the economy. The financial system is currently too liquid. Like a car that bounces down the road because its shock absorbers have failed, financial flows today gyrate wildly with ‘flash crashes’ and massive inflows and outflows of money to regions. This tax would act to damp out these fluxuations and smooth the operation of the financial system as well as raise badly needed revenue from a sector that largely has avoided taxes in the past. Impose this tax on the trade of US securities anywhere in the world so that these activities will not be merely moved offshore.
Stop bailing out banks. As part of the return to Glass-Steagall, commercial banks will once again be regulated in their entirety by the FDIC, which will again be able to set lending standards for these banks. Any bank that is in terminal trouble can be seized by the FDIC and cycled through bankruptcy so a healthy, functioning bank will emerge ready to make loans to credit worthy borrowers. Brokerages and investment banks will merely fail as private enterprises often do.
End ‘naked’ shorting of securities. Traditional shorting of securities involves borrowing securities from an owner, typically a client of a broker, then selling those securities with the promise of returning them in the future. Naked shorting simply sells the securities without actually borrowing them! This is nothing but market manipulation. And there is no limit on the pressure a trader can put on a security through this method.
Return to the uptick rule where a security can only be shorted after the price has risen from the previously posted trade price. This prevents the kind of short manipulation of prices that occurs by short position traders making one short sale after another thus artificially driving down the price of a security, so they can then buy back, or cover, at the bottom.
Reassert US sovereignty, which includes regulation of all border crossing activities. These include: people, goods, services, money, securities, etc. The flow of illegal aliens across the border must be stopped. The transit of over 12 million illegal aliens over the last decade could not have occurred without the tacit consent of the Federal government. Legal methods of immigration exist and should be used.
Reinstate the draft. A democratic republic is based on government of the people, for the people, and by the people. Thus it is a responsibility of all able citizens to participate in defending the nation. Medical and conscientious objector exceptions only can be allowed, and these folks can perform some form of public service instead. This would have the side benefit of reducing the endless wars of empire that the US currently conducts as people of influence would have little stomach for such wars when they realize that they or their children would have to go fight and die in them.
End the wars of empire. The US does not need to be an empire in order to be great. America does have interests around the world, but these interests are largely not protected by military intervention or all out wars. These interests, such as access to commodities such as oil and minerals, navigation of the seas, flows of ideas, and equal access to markets can be achieved through diplomatic means. Returning to the principle of self sufficiency will allow the US to lessen its dependency on foreign resources. The US interests should include spreading the message of the American system, as expressed e.g. in the Declaration of Independence and the Constitution, around the world.
Return the age of majority from 18 to 21. This experiment in granting adult status to minors has been an abject failure. Today conditions for young people are less certain and more confusing than ever. Scientists now know that the maturation process does not complete until age 25, which is something that apparently auto rental companies already know as one can’t rent a car until that age.
Reinstate the Estate Tax. A fundamental principle on which this nation was founded is that we should have no aristocracy. An aristocracy is primarily vast inherited wealth passed from generation to generation and the interrelationships of these wealth passing families. After some time these families also create titles for themselves which give them rights beyond that of the general population. A confiscatory estate tax would prevent the creation of these aristocratic families. Note that estate taxes are not levied on the deceased. There is no ‘death tax’ and never has been. Rather estate taxes are levied on the recipient of the estate. If the entire estate is left, for example, to charity, then currently no estate tax would be imposed.
Return Social Security to the pay-as-you-go system that it was at inception and as it had operated for many decades. The currently “finacialized” system put in place by Alan Greenspan in 1987 likely only had the intent of creating a large trust fund that could be privatized in the future. Social Security is an economically sound system that provides the economic security for retires that only the Federal government can ensure. The trust fund should be drawn down through reduced employee payroll tax. This will have the highly beneficial side effect of stimulating the economy by putting money in the hands of those who need it most and are most likely to spend it.
Reduce tax breaks for corporations and the wealthy by closing the myriad of loopholes. Greater tax rates are not needed as significant additional income for the government can be gained merely by closing these loopholes which allow vastly profitable companies and individuals to pay little or no taxes.
Expand spending on infrastructure and public works. From the 1930s to the 1960s the government at all levels spent lavishly on these areas in the form of highways, bridges, waterways, water and sewage, schools, hospitals, libraries, parks, public spaces and buildings, etc. Thus was created a more livable, attractive, and friendly environment for citizens and companies to flourish. This spending is also a chief stimulant for the economy as many citizens are employed in these enterprises and they in turn spend their incomes in the private sector thus stimulating a wide variety of industries.
Expand public spending for liberal education, the arts, and cultural institutions and activities. The creation and sustainment of proper citizens of a republic requires a liberally and culturally educated person. A proper citizen is one who is conversant in history, literature, art, philosophy, religion, music, etc. so that he can comprehend the myriad of issues facing our nation and society at a level that allows him to detect when specious arguments are being used to manipulate our nation to nefarious ends. The acceptance of such sophistry is the means to the end of a republic.
There are many more efforts that the Federal government and local governments can undertake to bring opportunity and stability back to our nation. But, the ones listed above can form a basis for that activity and start getting this country back on track to being the exemplar nation of what a modern, successful, and free republic is, and what they should seek emulate.