Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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Robert Morris: The Dark Side
The richest man in America suddenly was locked in debtor's prison, $12 million in debt. While in prison, he reduced that to $3 million, and got released under a new bankruptcy law he helped devise.

New topic 699 2020-09-15 17:51:02 TITLE Federal Reserve :
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Federal Reserve Banking: A Summarized Condensation

The shift to public ownership eventually led to the second discovery that even a gold standard was too inflexible for World War II. Since the time of Presidents Nixon and Johnson, the currency has no metallic standard at all. The system of limiting spending depends entirely on managed by a single man or firm, as the Spanish-American War and the War of 1812 had been financed, for example. John Maynard Keynes, the British economist and originator of the "science" of macro-economics, was beginning to see that one metal, gold, (that "barbarous relic"), could no longer suffice. What eventually replaced it, over a half-century of patching, is the subject of this for this essay. Its present form was devised by Ben Bernanke, its Chairman, after the 2007 stock market crash. arges help newcomers grasp the need for radical change. In a Republican democracy, the public needs to understand things.l Too often in the past, "something better" has proved to be something worse in disguise.

A rare-metal backing (representing the currency, without a vault around it), is fairly easy to understand; obscuring a new system that otherwise requires four-syllable words to hide changes. A spreadsheet is a simple method for simplifying a complex mixture of every penny the Fed controls, down to a single number. Please excuse its lumping of academic accuracy. Trillions of dollars are visualized as a a two-column balance sheet which an accountant would use, and so a balance sheet is our representation of assets and liabilities, ultimately matching each other. The only thing different is the term used to describe the virtual difference created when they don't match up -- the surplus or deficit. Spending beyond our means has been made so easy for Congress, it seems to have no limit. Our balance sheet, long in surplus after we won the second World War, has been in deficit since 1966. Our "balance of payments" has been heavily in deficit since the Vietnam War, and now has climbed to trillions of dollars. Spending is fun, and it has been made almost effortless.

Originally published: Monday, May 18, 2020; most-recently modified: Thursday, June 25, 2020

 

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