May 31st 2017

[Also for commiserating more-or-less populist allies and certainly dear friends Matthew Francisco, Richard Meyer, Ruba Awni, Timothy Hayes, Akhter Alim, Bapu Billy Sample, Alan Sabrosky, Daud Pidcock, Muhamed Sameer, Sherry Amanpour, and Mic P J Fletch ]

Nominal interest rates are not high. The Discount Rate, now of 1-1/4th percent, at which the 12 Federal Reserve Banks lend to lending institutions in their districts and the Federal Funds Rates, now at 1.0 percent at which banks lend overnight to other banks are low. Rates for a 15-year fixed refinance loan are 3.06%., for a two year Certificate of Deposit 1.70 percent; earned by a money market savings account at City Bank 1.15 percent; and the the Prime Rate at which blue chip corporate borrowers borrow is 4 percent (I remember this one at 18 percent in the late 1970s).

If nominal interest rates are low how come the rich are getting richer at such a fast rate while domestic investment and domestic industrial output remain depressed?

The biggest reason for this is that the moneyed rich are holding idle money deposits -- excess reserves for the banks, big idle cash balances for domestic and overseas dollar-denominated accounts and these rich with these idle balances and holding all of those dollar-denominated IOUs promising payment by households, businesses and governments, find they can add most to their financial wealth by having monetary authorities and the banking system engineer deflation because deflation increases the purchasing power of each dollar they will be receiving as creditors from borrowers and the purchasing power of each dollar that they simply keep as idle deposits in their bank accounts. The rich ruling class want deflation and that means debt burdens swell for the borrowers, defaults, business failures and bankruptcies remain high, as domestic real-economy businesses continue in depression, in depression that is ignored by economists and business journalists.

When interest rates are low and the rich are getting richer and the producing classes are experiencing real income and living standards decay, the reason can only be that the creditor class are again playing the deflation card.

But you say that can't be true. You say that prices are increasing, not decreasing. You say that GDP is rising not falling. The stock market has been going up. You say that QE has put lots of money into the economy in recent years, so monetary deflation cannot be happening. You say that the Federal Reserve is fearful of signs of inflation and has been taking some steps to head off inflation by raising the discount rate and talking about eventually doing so more.

My reply to you is that prices are increasing in grocery stores because of deflation, not because of inflation -- which happens when deflation forces domestic producers out of business for lack of sales, or forces them to downsize to cut fixed costs, which causes them to produce less and to replace less of worn-out machinery -- because revenues have fallen because consumers have less real income (purchasing power) from falling or stagnant wages and increasing debt burden. We are always told that inflation (more money in general circulation) causes price increases by moving the downward sloping demand curve to the right, but we are never reminded that price levels also increase when upward-sloping supply curves shift to the left because deflation (less money in people's hands) causes price increases because there are fewer sellers (due to downsizing and and shutdowns due to lack of revenue).

I reply too that real interest rates are very high, because of deflation. It is far too expensive to borrow when deflation -- the increased scarcity of money in the domestic real economy loop, the "gentile" economy where QE purchases of securities of bad securitized loans and other debt by the Fed pays with new dollar deposits that never find their way to the domestic real economy to benefit the household sector, domestic production, local revenues for local public goods etc.

I also reply that the QE money never touches the domestic real economy of the nation, but merely goes to buy up existing land and capital as it is forced on the market by a real domestic economy in deflationary depression. Ownership is transferred, firms are bought up and bought out by the Money Power. Wealth becomes concentrated, but that does not mean investment in new productive capacity by the new owners. The new owners are content with being the landlords of a slum economy -- slum households, slum business sector, slum government sector -- and that is satisfactory to the new owners because they continue to make money, first by slum rents, but more than that by the wealth windfall that ongoing deflation continues to bestow upon them. The prices of food and fuel and rent may go up for the debt slaves, but the prices of rental properties, of bankrupt businesses with their patents, trade-marks and reputations are dirt cheap, and utilities and lands being privatized by financially strapped state and local governments deep in debt are all coming on the market at distress-sale and bankruptcy-sale prices.

This is not going to change any time soon. Slum lordery is the final stage of empire. The next stop is foreign conquest.

It's no good trying you in a populist poltical movement to save everybody from this fate. I really should stop writing right here. We are an unorganized majority being ruled by a tiny organized minority that thinks of us as their livestock to be farmed for their profit while maintained at a standard of living calibrated to serve the maximization of their wealth regardless of how that comes out for us. Do do this they needed to capture your education and your source of news and your choice of politicians to vote for. And they have. So talk about the fact that the all-borrowed national money supply is nothing but a racket to exploit the many gets nowhere with you.

When you are told by someone that every dollar in wallets or in deposited in our accounts was co-created with a debt-obligation to pay principal equal to all money created in the loan plus additional money that was never created to pay compound interest on the loan -- meaning that whatever stimulus is created by borrowed money eventually turns to no-stimulus and then to deadly money drain for the entire domestic real economy, for the household sector and the business sector and the public services sector -- you just blink your eyes. Someone says we can repudiate the fraudulent system of the all-borrowed national money supply and have government create money for free out of thin air and have it appear as an autonomous dividend paid to each member of each household for them to spend into circulation as they themselves see fit; and says we can repudiate the debt to the international lenders because we have discovered the scam money and lending system they set up -- called the Bank-of-England/East-India-Company/Rothschild System -- and know it for the fraud that it is -- and we also know that fraud vitiates all contracts including loan contracts -- so we can repudiate the bad deal -- because we know the game has been rigged at the macro-economic level as the lending class have been in collusion and conspiracy to deflate or inflate the entire domestic real economy money supply for their individual gain at the expense of everyone else -- costing everyone else the burden of trillions upon trillions of dollars of debt that need never have been incurred if the government provided its own permanent fiat money as a public service, as necessary infrastructure for our country's market economy. But when you are told that by a populist you just blink again and close this window and move on to the next message. And I am left wondering why I did not see the hopelessness of trying to move you into supporting efforts toward establishing a Populist Republic where money is handed out to every player to ensure that the market economy is a fair game where the household rules in perfect economic democracy and consumer sovereignty.

Dick Eastman

Yakima, Washington