Shah Gilani: The problem with the U.S. government’s stimulus efforts to create jobs, and the Federal Reserve‘s quantitative easing to foster full employment, is that banks are the only direct beneficiaries.
There’s just no good pool of jobs being formed from the trickle-down effect that first bathes bankers in bonuses, and then showers shareholders with buybacks and dividends.
There is a better way.
And, in spite of the details which additionally involve two necessary but minor structural changes that can be accomplished with the stroke of a pen, there are only two primary steps we need to take to create good-paying, long-term jobs and crank up economic growth.
Step 1 to Growth and Better Jobs
First, the two minor structural changes, which aren’t minor if you’re a fat-cat banker or crony capitalist, are:
1.) Eliminate the Federal Reserve’s ridiculous “dual mandate”
2.) Enact the 21st Century Glass-Steagall Act and simultaneously break up all the too-big-to-fail banks that would still dominate the landscape after separating commercial banking institutions from investment banking shops.
[Please listen to my interview last week with Senator Angus King, a co-sponsor of the 21st Century Glass-Steagall Act, along with his cohorts, Senators Elizabeth Warren and John McCain. You can listen here.]
The Fed’s dual mandate is to maintain “stable prices and moderate long-term interest rates,” as well as to “promote effectively the goals of maximum employment.” It was bequeathed to them in 1977 by Congress and a president and his administration who couldn’t manage the country’s downward economic spiral.
Besides the disturbing abrogation of Congress’ constitutional duties, tasking the Trojan Horse Fed and its belly full of soldier bankers with being a receptacle for the government’s outpouring of debt, and simultaneously tasking it with managing GDP growth to engender trickle-down (from the banking fountainhead) jobs growth is a testament to how government emasculated itself.
All this became possible and desirable for our government when the Fed showed its prostituting backers their secret playbook.
By rigging the yield curve to slope steeply upward the Fed manufactures profits for its constituent banks. As long as the interbank lending market is fluid and short-term borrowing rates low, banks can finance buying government issues (which no matter how low their yields, offer a positive carry and good return) as well as mortgage-backed securities. And the Fed can take in worthless collateral (in times of need) to keep banks afloat when they’re insolvent and let banks run full-out flush at all other times.
That’s the program. Benefit the banks to benefit the economy, which will foster job creation.
It starts with the banks and ends with the banks. That’s the problem. Banks and financial services have become too big a component of GDP and too powerful. They are the tail wagging the dog, which is what our economy has become.
We need to do away with the Fed’s dual mandate and break up the banks to make them serve free-market capitalism the food it needs to grow — namely capital. Banks should be reconstituted as utilities providing power to the economic grid, as opposed to being the owners and lever-pullers manipulating the grid.(...)Click here to continue reading the original ETFDailyNews.com article: Two Steps To Ignite The EconomyYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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