Well, Steve Lunetta is back, by popular demand. Good for him. It’s difficult to do this every week and to avoid opprobrium and to remain likeable, relevant and interesting.
Steve waxes on about Bernie Sanders’ proposals to fund (invest in) the education of our citizens for “free.” I present another perspective that might represent the conundrum from the viewpoint of a young person trying to forge a future in modern Amerika.
First, I notice Steve makes an argument on cost grounds. How positively unmodern.
The crux of most new proposals is what is termed “modern monetary theory” and it has real traction. If you need evidence, you need only look at the performance of the U.S. economy, and the world economy as a result, and you find that with each application of the modern theory the strength of the economy was augmented. Reagan was the first modern president to use this tool in order to dismantle the USSR.
Money is only a commercial, trade-based medium for exchange. It has value in transactions alone, and the total of all transactions is economy. A miser can be happy with a giant pile of money, but our world of money is based on our belief that paper scraps or numbers in a computer can be traded for objects, services, or other paper scraps or numbers.
All the while, human activity and efforts are the underlying value of that medium. Unmined and unextracted metals have no value until a man raises a pick and learns to assay and refines and then sells the metal. Raw earth alone has no value until man takes a swipe at it or puts a fence around it.
About 12 years ago, a test of the modern theory came unto the world. A system of bond ratings and very light regulation of these ratings and marketing of debt based upon them led to a calamity that, according to the GAO, cost upwards of $22 trillion. It was remedied by printing money. The scoundrels who emerged from the crisis were the sellers of these securitized obligations, and the “losers” were those who invested in them. Really, nobody lost because money was printed to bail out the whole enterprise.
A scapegoat or financial vehicle had to be crafted to wrap up and discharge the effluent from this debacle. In the end, the fed collected interest well in excess of the loaned (printed) “money.”
The money printed (or issued as numbers in a computer) was an investment by the Fed in an action called quantitative easing. The Fed since has mastered its seignorage by carefully tweaking interest rates to maintain economic stability. The Fed profits from its arbitrage of the rate of interest paid on what it lends/prints/issues and rate that is paid on government debt underpinning its borrowing. QE coexisted and abetted U.S. finance while the U.S. was paying for expensive foreign wars, and all the while it continued attract (and thus repatriate) money that was earned by foreign nations through trade. For most of the recovery, China has been the largest holder of U.S. government bonds.
Since that grim chapter, the U.S. and the world has been riding an economic rocket ship; the longest economic expansion in U.S. history. Judging by results alone, this is very compelling.
As a young person might see it, the world challenge is not paying off a debt as Steve might believe, but causing the world and their lives to advance. Young people have always had this view because that is the currency of their lives. They have time to spend and they need to figure out how to best spend it. Those two goals are in little competition to them, and their choice is obvious. It always has been.
Money is a motivator and a store of value, but it also has little meaning if hoarded. Hoarding, saving, capitalizing are all good human habits, but the medium must serve the master, not the other way around.
For the past 400 years, education has been a key to advancement both personally and for the broad human race. It is reasonable to conclude this pursuit is worthy. Schooling is “free” until college, so to those truly pursuing education – those who are active in living/learning – it is sensible to make the pursuit universally free. As a young person, you might observe other nations’ success in this same “free” service to citizens and question the motives and rationale for regress and question the exclusion of education as a prime objective of living.
I recently participated in an evaluation of young people headed for college. The most disheartening part was the large number of promising candidates whose decision on which college they would apply to/attend was economically based, even if their grades and SAT scores were outstanding.
USC recently found magnanimity by relieving any household earning less than $80,000 of tuition costs. Change is underway. I hope Steve can understand the point of view a young person might adopt. I hope he and others consider the reasons we are here. Those go beyond collection of scraps of paper, numbers in a computer, or property or cars or boats or…
One last thing. Keep writing, Steve. You are relevant, interesting and likeable. And you raised a nice young man.