TRUMP’S MOST IMPORTANT PICK-As the Trump Transition careens along, proposing that free speech be sanctioned by depriving Americans their U.S. citizenship, we come to the most important appointment – California’s Steven Mnuchin as Secretary of Treasury.
As explained previously in a CityWatch article, Little Timmy Giethner turned Obama’s Administration into an American tragedy, setting the stage for the rise of Trumpism. Rather than risk being turned into a pillar of salt like Lot’s wife for looking back upon destruction, let’s affix our gaze to the future.
What are the primary duties of the Secretary of the Treasury?
(1) Protect the Price System (aka Price Structure.)
(2) Institute policies to ameliorate the swings of the business cycle. Since we are in a mild upswing, the focus is to protect the economy from the down phase, i.e. recession.
The Price System.
Neither businessmen nor family members can make wise economic decisions without knowing the actual value of everything. If a homeowner is deceived into believing that the true value of healthcare insurance is $1,500 per month when it is only $800 per month, he is losing $700 per month. That is $8,400 per year which simply disappears from his wealth and he gets nothing in return.
On the other hand, if the homeowner is deceived into believing that a healthcare plan will insure his family for only $300 per month, but when a catastrophic illness befalls the family, he discovers that it pays only 45% of the medical bills, bankruptcy follows the illness.
The law of supply and demand is often invoked along with some quasi-religious belief that if everyone is allowed to lie their heads off about the value of everything, the law of supply and demand will magically arrive at the correct price for everything. Troglodytes who adhere to this theory oppose regulations which would keep false data out of the Price System. Wall Street is filled with thieves who want no regulations on their power to lie, cheat, manipulate and thereby financially devastate the American people.
We saw a fine example of the destruction of the Price System during the Subprime Mortgage frauds where Wall Street firms forced the rating agencies like Standard and Poor to rate junk securities as top grade. This practice was widespread when Henry Merritt "Hank" Paulson, Jr., the last Secretary of the Treasury, who was a scion of Goldman Sachs, reigned supreme in the Bush Administration. As a result of Hank’s treachery, America lost $22 trillion in wealth, but we hasten to add that Little Timmy Geithner gets more than honorable mention in guaranteeing that we’d never have a real recovery.
The first step to protect the Price System is for Secretary Mnuchin to propose a stronger Glass-Steagall law to replace the laughable Dodd-Frank Act. Investment firms need to be restricted to their vital role of raising capital from sophisticated investors for needed projects. They need to be restricted not only as a means to stop trillions of dollars in fraud, but also to make certain that the capitalist system has a functioning institution for raising capital. That can only happen when investment houses have no access to commercial banking funds.
Needless to say, many volumes can be written about protecting the Price System, especially for a society which has just elected a predatory real estate developer to be President. Even prior to the arrival of Trumpism, however, the fraud which has become pandemic in our financial institutions was rotting our economic system: ninety percent of all productivity increases since the Crash of 2008 have gone to the top One Percent.
Secretary Mnuchin’s Duty is to Tame the Business Cycle.
The upswing in the economy is a dangerous return to the Business Cycle with its Booms and Busts. Due to the reactionary economic policies of little Timmy Geithner, the Obama Administration failed to institutionalize additional safeguards to modulate the next Bust Phase. For some reason, people habitually believe that the Boom Phase will last forever. Let’s be blunt about who warned the world that the Boom Phase of any economy has a short life span. GOD told us and GOD told us what to do. People are usually surprised to discover that GOD is the true father of Keynesian Economics.
Way back then, Pharaoh’s dream alerted him to the short life span of the good times. When he did not understand the significance of his dream where the seven lean cows ate the seven fat cows and remained lean, Joseph instructed Pharaoh in the first principle of Keynesian Economics. The wise Pharaoh saves during the fat years so that he can release grain from the storehouses during the lean years and avoid famine. Secretary Mnuchin’s Torah portion seems to have been Parashat Vayaeshev (Genesis 37.1 - 40.23) which stops just before the section where Joseph explains the basics of Keynesian economics to Pharaoh. Shall we mystically wonder whether Secretary Mnuchin is standing on the threshold of perfidy or greatness? Did he peak ahead to Genesis 41 et seq.?
What Economic Policies Should Mnuchin Institute for the Trump Administration?
While the Trump is obsessed with the idea that the boom phase of the business cycle will not only be infinite but should be 6% growth per year, Secretary Mnuchin’s real duty is to institute programs to prepare for the famine years.
The income level on which Social Security contributions are based, for example, needs to be raised immediately. Currently, it stops at an income of $118,500 per year. Social Security payments protect businesses when the economy hits a down turn, but unless the government has saved more funds during the fat years by raising the income level for contributions, the fund will not have accumulated enough money to increase Social Security payments. This measure should have been undertaken in January 2010, but it could not be done due to Little Timmy Geithner’s reactionary policies.
Because private pensions have all but evaporated for the average citizen, Social Security payments need to increase by 5% to 10% per year each over and above the annual increase of the CPI. The problem is that first we needed the seven fat years of increased contributions before we can responsibly increase payments. We do not have that accumulation of cash.
Secretary Mnuchin faces a crisis. The recession will arrive before he has enough time to collect sufficiently more Social Security contributions to have instituted these increased payments. Thus, Secretary Mnuchin needs to maximize contributions as fast as possible so that the increased payments can begin as the recession starts. Ideally, the legislation which increases the contributions will also set an objective benchmark for when to start the increased Social Security payments. Keynesian mechanisms function best when they are automatic, as the politicians are mostly economic ignoramuses who think spending should be cut when a recession starts.
How to Interface Mercantilism with Modern Economics
From what one can tell, Trump’s plan to make America Great Again is a reversion to the Mercantilism of the 1500s to 1600s. That places Trumpism in direct conflict Secretary Mnuchin’s duty to modulate the severity of the Boom and Bust Phases of the Business Cycle.
Will Mnuchin side with the goniff impulsive of Trumpism or will he be a mensch who promotes the general welfare of human beings?
(Richard Lee Abrams is a Los Angeles attorney. He can be reached at: Rickleeabrams@Gmail.com. Abrams views are his own and do not necessarily reflect the views of CityWatch.) Edited for CityWatch by Linda Abrams.