Friday, August 28, 2020

Musings on a Biden/Harris Administration

   By Rudy Barnes, Jr.

If voters evict Trump from the White House in November--and that’s still a big if--can a Biden/Harris administration promote a politics of reconciliation for America’s polarized partisan politics?  Only if an ambitious Kamala Harris doesn’t pander to leftist Democrats to promote her own presidential ambitions at the expense of a centrist Biden administration.

Biden can provide America with a four-year breathing spell, and a reborn GOP could offer a future alternative to an increasingly leftist Democratic Party.  Since Biden will likely be a one-term president, a centrist GOP will have to rise from the defeated party’s ashes, or a third party will have to fill the political vacuum to end America’s polarized partisan politics. 

In the meantime, what would a Biden/Harris administration look like?  Until November Harris will undoubtedly present a picture of harmony with Biden, supporting his campaign with criticism of Trump and his Republican minions.  Harris will probably wait until well after Biden’s inauguration in January 2021 before she begins her own presidential campaign for 2024.

After the inauguration we will see whether Biden and Harris are on the same page.  The Republican Party will be in a shambles, providing an opportunity for Biden to promote a politics of reconciliation, but his success will depend on the composition of the new Congress and on whether Harris continues to support a centrist Biden, or chooses to do her own thing.

Kamala Harris is the darling of an increasingly leftist Democratic Party and Joe Biden represents the more centrist Democratic Party of the past.  Biden knows he cannot bridge partisan differences with a leftist political agenda, and that to promote a politics of reconciliation in Congress he will need Harris to help him maintain Democratic support for his centrist agenda.

Biden is between a rock and a hard place.  He knows he needs the support of Kamala Harris and the Democratic Party to promote a bipartisan political agenda.  That support will depend on whether Harris continues to support Biden or begins her own campaign for president during his term; and that remains an open question.

Trump has to run on his record, while Biden must provide a vision of the future.  Biden must address a pandemic economy with a massive national debt and Fed policies that have propped up a booming stock market while creating vast disparities in wealth.  Biden must also redefine racial justice, find a way to end police brutality and promote racial reconciliation, while avoiding those objectives of Black Lives Matter that would further polarize race relations.

Both political parties have had their conventions.  The Democrats celebrated the integrity and experience of Joe Biden while Republicans did a make-over of Donald Trump that rivaled his glorification by white evangelicals as their political messiah in 2016.  The race is on, with truth and justice the major issues; and the future of American democracy hangs in the balance.    


Daniel B.Baer has opined that The Democrats Stole the Republicans’ Turf.  “This week’s Democratic National Convention ...rejected the false premise that in order to run a politically viable campaign, Democrats needed to abandon the party’s focus on fairness. Democrats chose to position the party to speak for all Americans, rather than obsessing about how to speak to particular Americans.”  See

Jim Rieger recalled 1989 to consider how Two men shaped by a different era are vying to lead America through a reckoning.  “On Sept. 5, 1989, Donald Trump and Joe Biden appeared on nationally televised broadcasts that aired less than an hour apart, both making statements that were revealing about the legacies they were creating on issues of race. Biden that night criticized then-President George H.W. Bush for being too soft on crime, and Trump told NBC News that “well-educated” Blacks have an “advantage” in business.  Now, 31 years later, their handling of race will converge in a bigger way: during a presidential campaign in which the issue of race is more central than at any point since 1968. As the largest civil unrest in U.S. history plays out, more Americans than at any point since 1968 say race relations is the most important problem facing the country.” See See

Kathlene Parker described the election as a choice between Donald Trump--and Kamala Harris.  “Biden, at 78, would be older than Ronald Reagan was when he left the presidency. If 78 seems old for a grueling job known to turn younger men gray, imagine what it will feel like at the end of the first term, when he will be 82.  But, of course, age matters a great deal when the presidency is at stake. Even if Biden serves out his full term, it is unlikely he will run again, which means Harris will run for president in 2024 and, though it is impossible to know for sure, likely emerge in that circumstance as the front-runner for the Democrats.” See

Max Boot has compared Trump’s reliance on grifters and misfits with Biden bringing an A Team.  See

Robert Samuelson has noted Biden’s challenge on economic issues and a massive national debt with a trillion here and a trillion there--pretty soon it’s real money! See


On the issues of race and the economy, see the following recent commentaries:  

(8//8/20): Musings on Religion and Racism: Belief in a White Jesus and White Supremacy

(8/15/20): Musings on Racism, Reparations, Racial Disparities and the Federal Reserve

(8/22/20): Musings on America’s Two Economies: One for the Rich and One for the Rest

Friday, August 21, 2020

Musings on America's Two Economies: One for the Rich and One for the Rest

     By Rudy Barnes, Jr.,

America has two separate economies: A booming stock market for the rich, and the wreckage of a pandemic economy for the rest.  The Federal Reserve orchestrated a booming stock market that has increased disparities in wealth between the rich and the rest, and those disparities reflect a diminished middle class that threatens the stability of America’s democracy.

The Fed began propping up the mega-corporations of Wall Street following the recession of 2008 with low interest rates and subsidies euphemistically known as quantitative easing, but those generous benefits never reached Main Street.  The stock market made a quick recovery, but the Fed policies favoring the rich over the rest continued to further disparities in wealth.

When the stock market crashed in March 2020 the Fed responded with $Trillions more in subsidies to mega-corporations and even lower interest rates, and Congress borrowed $Trillions to compensate the jobless.  That produced an unprecedented recovery on Wall Street in just six months and a boom in the housing market that benefited the rich, but they did little for the rest.

Keynesian economists support modern monetary theory (MMT) that promotes more aggressive Fed monetary policies to benefit mega-corporations and the rich.  They advocate more government spending and grants to stimulate consumer spending, and argue that creating more money and increasing the national debt do not threaten the economy.

Those Keynesian views conflict with traditional economic theory that creating more dollars reduces the value of existing dollars and that a national debt must one day be paid.  America’s policy makers need to reconcile those conflicting monetary and economic theories and then find a solution to the increasing economic disparities between the rich and the rest.

The dominant issue over the next four years will be a post-pandemic economy.  An astronomical national debt of $26.5 Trillion and increasing Federal Reserve purchases of bonds and corporate debt of over $4.5 Trillion threaten to crash the economy.  Can America control its national debt and limit new money created by the Fed to stimulate the economy?

Ironically, Donald Trump used similar strategies of borrowing excessive amounts that he never intended to repay to create his own wealth--or the appearance of it.  Bankruptcy is the remedy to end such financial fiascoes, but Trump used bankruptcy to intimidate his creditors to his advantage.  MMT claims the U.S.can print its own money to avoid bankruptcy--but can it?

Before Trump reshaped the Republican Party and an economy that serves the rich and ignores the rest, the GOP supported responsible economic policies--even a balanced budget.  That’s wishful thinking today.  The future of America’s democracy depends on eliminating vast disparities in personal wealth, controlling its national debt and preserving the value of the dollar.


Catherine Rampell has noted, “The U.S. has two economies.  How much longer will the losing side stand for that?  There’s the segment of the economy where retirement accounts are flush. Stock markets recently hit record highs, after all, thanks to loose monetary policy. Then there’s the large segment of the economy that owns no stocks, has little to nothing saved for retirement and isn’t sharing in this wealth creation. President Trump claims to have already vanquished the nation’s economic challenges — presumably because he’s looking at the economy as experienced by Mar-a-Lago members, and also because he hasn’t bothered to learn how little his own executive actions actually do. ...He proclaimed that any workers harmed by his boycott could easily “get another good jobs” because (thanks to his leadership) the labor market is already great again. Meanwhile, overall unemployment remains higher than it ever was during the Great Recession. New jobless claims are ticking up. Layoffs once hopefully considered “temporary” are being officially recategorized as “permanent.” 

In the last presidential election, Trump rode to victory on a narrative that fat-cat Washington elites had ignored the struggles of the common man. Now Trump’s beloved working class has increasingly become an involuntarily non-working class, and Trump doesn’t bat an eye. To the extent he occasionally remembers their hardship, his administration’s chief strategy for helping them involves more tax cuts for the rich.  “You want to help the blue-collars, cut the corporate tax rate. And I would put the capital gains rate in that category,” National Economic Council Director Larry Kudlow said last week. For context, the top 1 percent of households received three-quarters of all long-term capital gains last year. It’s truly a phenomenal feat of propaganda that the public still rates Trump as better on the economy than his presidential opponent, Joe Biden, despite the economic collapse the incumbent has presided over. Trump clearly believes it. Maybe Americans in the “good” economy do, too. At some point, though, the Americans left behind may start to notice, and resent, the victory party happening without them.”  See


Robert Samuelson has cited a study by Stephen Rose that indicates a significant rise of the upper-middle class while there has been a drop in the lower middle-class and middle-class.  It reflects increasing disparities in the wealth of Americans, and a diminishing middle class portends political volatility.

“The Federal Reserve is undergoing an overhaul. Conceived to keep inflation in check and oversee the country's money supply, the central bank is now essentially directing the economy and moving away from worries about rising prices.” Scott Minerd, CIO of Guggenheim Partners, has asserted that ‘Free market enterprise no longer exists.’  The Fed ...has taken control of the market. ‘The definition of market prices is whatever the Fed says it will be,’ says Minerd.’” Since the Fed's unprecedented intervention into credit markets in late March, it has become a general understanding stated openly by economists and asset managers, including those at high-profile investment firms like Deutsche Bank and Bank of America.  But not all of the Fed's new programs have worked as planned. After significant delays, its $600 billion Main Street Lending Program has provided less than one-tenth of 1% of its allotted funding to needy small businesses even as the Paycheck Protection program has whiffed and business closures have spiked. Compare that to the trillions it has used on QE and the billions it has purchased in debt from some of the country's largest companies using a backstop of taxpayer money and it's no wonder politicians and economists have called the Main Street program a "failure" and an "unmitigated disaster." See

See also, The Federal Reserve’s new Inflation target redefines the meaning of inflation at

Wolf Richter has observed: “We now have the Pandemic Economy with the Incredibly Spiking US Gross National Debt, which spiked incredibly by $4.45 trillion over the past 12 months to $26.5 trillion. Whoosh go the trillions, flying by. These are all Treasury Securities, and someone had to buy them, but who? With the Treasury Department’s Treasury International Capital (TIC) data through June 30, and with other data released by the Federal Reserve, we can piece together who bought those $4.45 trillion in Treasury Securities over the past 12 months. Foreign central banks, governments, companies, commercial banks, bond funds, other funds, and individuals, all combined added $90 billion to their holdings in June. Over the 12-month period through June, they added $413 billion. They now hold a total of $7.04 trillion, a huge record pile. But given the incredibly spiking US Treasury debt ($26.45 trillion on June 30), their share of this debt plunged to just 26.6%, the lowest since 2008. Japan and China, the two largest foreign creditors of the US, combined held 8.8% of the US debt, the lowest share going back many years. Back at the end of 2015, their combined holdings were still 12.8% of the total US debt. Japan maintained its holdings in June for the third month in a row at $1.26 trillion, but over the 12-month period increased its holdings by $138 billion. China cut its holdings in June by $9 billion, to $1.07 trillion, and over the 12-month period by $38 billion. Despite the mega-trade deficits that the US has with Mexico and Germany, their holdings of US Treasury securities are relatively small: Germany held $80 billion and Mexico $47 billion.

The Social Security Trust Fund, pension funds for federal civilian employees, pension funds for the US military, and other government funds added $50 billion in June and $112 billion over the 12-month period to their holdings, which reached $5.95 trillion, or about 22.5% of total US debt. These Treasury securities, often called “debt held internally,” represent assets that belong to the beneficiaries of those funds. They’re a true debt of the US, and they don’t go away – just because American beneficiaries are indirectly the holders of these assets. In June, the Fed added just $95 billion to its pile of Treasuries, having already cut back its purchases, after having added $1.6 trillion from March 11 through the end of May, bringing its total holdings at the end of June to $4.2 trillion. It holds about 15.9% of the US debt.

Over the 12-month period, the Fed added $2.1 trillion in Treasuries to its holdings, about doubling its pile over the period (weekly chart through August 12): Just over the month of June, US commercial banks added $121 billion in Treasury securities, to a total of $1.07 trillion. This brought the 12-month increase to $220 billion. They hold about 4.0% of the total US debt. That’s everything that is not included in the above. By the end of June, over the course of the tumultuous second quarter, these US entities added $1.6 trillion, after having been big sellers of Treasuries in prior quarters. This brought their total holdings to a mega-record of $8.13 trillion – about 31% of the total US debt.  For charts on the above, see

Bloomberg (8/14/2020) reports: “Like it or not, Modern MonetaryTheory (MMT) Experiment is Underway. 

Robert Hormats says the pandemic has forced the ‘involuntary utilization’ of MMT. ‘Well, now we have a particularly unusual set of circumstances whereby we're in the midst of forced, or involuntary, utilization of modern monetary theory…This is not unheard of. ...It was done during World War II, where the Fed guaranteed the Treasury that it would buy Treasury bonds at a very low rate to keep interest rates low to keep the debt servicing costs of the government low. So theoretically, this can last a very long time as long as the Treasury is making these big bond issues a regular occurrence as it appears. And the Fed’s Jay Powell has said he is going to, in effect, continue to keep rates low. But he said also: ‘The Fed can't do it all and the Fed cannot do this indefinitely.' But what is indefinite? How long can this occur? What are the end results of this, at some point, if trees don't grow to the sky? What could disrupt the markets and what could cause either the Treasury to run into trouble with its issues, or the Fed to feel uncomfortable underwriting those issues for the indefinite future? We don't know that. This is all terra incognita.’” See  See also, article on MMT below. 

Gareth Huttchens provides an overview of Modern Monetary Theory by listing six claims made by MMT proponents: “First, they say we've been thinking about budget deficits incorrectly. They say that budget deficits are not always bad. In fact, deficits are often necessary and beneficial. A budget deficit is merely evidence of extra government spending, and government spending boosts the wealth of private sector businesses and households. Investments that will enhance productivity through better health, greater knowledge and skills, improved transport and the like are worth funding, even if it results in a budget deficit. Second, MMT economists say we've been thinking about government spending incorrectly.  They say the argument that national governments must tax or borrow before they can spend is wrong.  MMT argues it's the other way around--national governments have to spend money into the economy before they can tax or borrow. Government spending actually precedes taxation. Third, they say taxes are necessary, but not for the reasons you may think.  Government taxes can be used to keep inflation under control, to control our behavior (via fees and levies and rates), and to get us to produce things the government needs.  They say governments use taxes to create demand for their own currency--that is, if a citizen has to pay tax then they're going to have to work to earn the currency to pay the tax in that currency.  Essentially, governments use taxes to put everyone to work. Fourth, MMT economists say countries that issue their own fiat currency can afford to buy anything that's available for sale in their own currency, and they can never go bankrupt in their own currency. "Fiat" money is government-issued currency that isn't backed by any commodity, such as gold. Fifth, MMT economists say "full employment" is not only possible, it's a moral imperative. Anyone who wants a job should have one.  They say we must prioritise genuine full employment and governments should spend whatever is necessary to achieve it — no matter the debt or deficit. Sixth, MMT economists say the national government should run a permanent "Job Guarantee" (JG) program to provide a job to everyone who wants one. It could be linked to other economic and social programs, such as a ‘Green New Deal’ advocated by MMT proponents linked to US Democratic senator Bernie Sanders to create jobs with zero-emissions technologies.”

Among the many critics of MMT is Stephen Grenville, a former deputy governor of the RBA.  He argues, “There's no free lunch.  The chief vulnerability of the MMT narrative, and where MMT economists "are a little vague, even slippery," is the MMT assumption that budget deficits can be funded without adding to official debt. "The government might get the cash to spend in its deficit by giving the central bank a bond in return for the cash."  But the bond is just a government debt which it owes itself, so in the view of many MMT supporters, the bond could be deleted from the central bank balance sheet by offsetting book entries in the accounts of the government and the central bank.  "This seems to be 'free money'," he said. "It's hardly surprising that this is an attractive narrative [but] this is clearly wrong."  

Another concern about MMT is in bond markets, where “traders may decide that your currency will become nearly worthless if your leaders start printing money and expanding the budget deficit. Financial market participants may take a lot of convincing.” 


Friday, August 14, 2020

Musings on Racism, Reparations, Racial Disparities and the Federal Reserve

  By Rudy Barnes, Jr.

Racism is an ugly reality in American culture and politics.  Civil rights laws provide a remedy for racial discrimination, but not for racism and racial disparities in wealth, education, employment, health and criminal justice.  Such disparities are a norm in libertarian democracies that provide equal opportunity but not equality.  Political freedom and equality are incompatible. 

Black Lives Matter protests have demanded reparations to blacks for slavery and to end racial disparities caused by a variety of social, economic and political factors.  Kamala Harris has supported the demands of Black Lives Matter, and she is more popular with Democrats than Biden.  That may push a formerly moderate Biden toward more leftist Democratic policies. 

American democracy seems destined to remain polarized by partisan politics.  While Republicans are committed to Trump’s divisive radical right politics, Biden’s choice of an aggressive and ambitious Kamala Harris makes it questionable that he will be able to provide the moderate leadership needed to counter our polarized politics with a politics of reconciliation.

A healthy democracy requires altruistic policies that balance individual rights and political identity group wants with providing for the common good.  Most Americans claim to be Christians, and the altruistic teachings of Jesus are summarized in the greatest commandment to love God and to love our neighbors of other races and religions as we love ourselves. 


Last year Joe Biden was the only candidate in the Democratic presidential campaign who did not advocate reparations.  Even so, Jim Clyburn endorsed Biden in the S.C. primary and set him up to be the Democratic nominee for president.  Clyburn advocates repairing the damages of racism with programs that benefit blacks without entitlements based on race.

Democrats have introduced “The Federal Reserve Racial and Economic Equity Act that requires the central bank to take action ‘to minimize and eliminate racial disparities.”   The Fed controls the economy through monetary policies that have propped up megacorporations and created vast disparities in wealth, and it’s unlikely to agree to be responsible for ending racial disparities in wealth.  That would redefine the Fed and be a back door to socialism.  

The church and partisan politics are as split on racial issues today as they were before the Civil War; and the church remains racially segregated, with most white Christians voting Republican and most blacks voting Democratic.  There seems little prospect for change in our polarized politics and churches, unless caused by unforeseen consequences of the pandemic.

Racism and increasing disparities in wealth are once again threatening to unravel the fabric of American democracy.  The remedy is not racial preferences that exacerbate racism, but civil rights remedies that protect blacks and other minorities from unlawful discrimination, coupled with a moral reformation in the church that promotes a politics of racial reconciliation.


Congressman James Clyburn (D-SC) and Chales M. Blow have contrasting views on reparations: 

James Clyburn understands the importance of race relations to racism and has emphasized the need to repair what’s wrong with America:  “I always say the root word for reparations is repair, repair, repair. We need to repair what's going on in this country. These fault lines that have been opened up need to be repaired. ...When you start talking about reparations in terms of monetary issues, then you lose me because nobody can put a value on the loss of education. Nobody can put a value on the loss of a life. Let's repair what's wrong with America and not allow ourselves to spend the next 150 years studying what a monetary value needs to be assigned to the loss of these freedoms and liberties.” See

Clyburn said he fears reparations would lead to contested debates about who would be eligible due to the sprawling family trees that have evolved in the generations since slavery was abolished. ...Clyburn said he liked a recent comment by U.S. Sen. Bernie Sanders, who said in a CNN town hall last week that he would push to increase the usage of Clyburn’s “10-20-30” policy. That formula, which has already been inserted in some federal policies, calls for directing 10 percent of government funds to counties where 20 percent or more of the population has lived below the poverty line for the past 30 years.  ‘To me, that’s a much better way to deal with what reparations is supposed to be about,’ Clyburn said.” See

Charles M. Blow supports reparations, which he describes as “reasonable and right.”         

For a vast majority of black people’s time in this country, they have been suffering under an oppression operating on all levels of government — local, state and federal.  It is absolutely a good idea for America to think about how to make that right, to think about how to repair the damage it did, to think about how to do what is morally just.  And the idea that too much time has passed makes a mockery of morality. ...Furthermore, this is not about individual guilt or shame but rather about collective responsibility and redemption. America needs to set its soul right. The paying of reparations isn’t at all an outlandish idea. To the contrary, it’s an exceedingly reasonable proposition. Most of all, it’s right.”  See

Charles Blow showed contempt for race relations when he wrote: “I have never fully understood what [race relations] meant. It suggests a relationship that swings from harmony to disharmony. But that is not the way race is structured or animated in this country. From the beginning, the racial dynamics in America have been about power, equality and access, or the lack thereof.  ...So what are the relations here? It is a linguistic sidestep that avoids the true issue: anti-Black and anti-other white supremacy.  It also seems that the way people interpret that question is in direct proportion to the intensity of revolt that’s taking place at a particular time. ...After the rise of Black Lives Matter, satisfaction with race relations suffered a sustained drop.” See

Democrats are trying a new approach to eliminating racial disparities.  “They have introduced a  bill to give the Federal Reserve a new mission: ending racial inequality. The legislation would make minimizing racial disparities an official part of the central bank’s mandate.  The Federal Reserve Racial and Economic Equity Act requires the central bank to take action ‘to minimize and eliminate racial disparities in employment, wages, wealth, and access to affordable credit.’ It would be the first major change to the Fed’s mandate since 1977 and would significantly alter the central bank’s focus. The Fed’s current mandate from Congress is to keep prices stable and maximize the number of Americans with jobs.  While the legislation is not expected to pass Congress while Republicans control the Senate, it signals a growing consensus among Democrats that the Fed has played a role in deepening inequality and needs to be part of the solution to close gaps in employment and pay.  Presumptive Democratic presidential nominee Joe Biden recently released a similar proposal calling on the Fed to ‘aggressively enhance’ its monitoring and targeting of ‘persistent racial gaps in jobs, wages, and wealth.’ This latest bill in Congress goes a step further by explicitly requiring the Fed to work to close the gaps.

‘The Federal Reserve Racial and Economic Equity Act creates a new racial justice mission at the Fed to eliminate racial and economic disparities in all of its work," said Maxine Waters in a statement.

Critics of the proposal say the Fed already has clear goals to help every American and that the central bank’s tool kit is too limited to address long-standing inequalities in society. The Fed’s main policy action is to set interest rates, which makes it cheaper or more expensive to borrow money to buy a home, purchase a car or start a business.  “Isn’t this the job of Congress and, quite frankly, all of us?” tweeted Constance Hunter, chief economist at KPMG. “To put this on the Fed seems to set them up for failure Raphael Bostic, president of the Atlanta Fed and the only African American among the 17 members of the central bank’s top leadership, said the nation has a “moral and economic imperative to end racism," and the Fed “can play an important role” in addressing racism and inequality.  But Bostic also said that the Fed can only do so much and Congress and other institutions have a big role to play as well.

Fed Chair Jerome H. Powell...has said repeatedly that the Fed doesn’t have sufficient tools to address inequality. He has urged Congress to take the lead role in closing long-standing gaps.

“We don’t really have tools that can address distributional disparate outcomes as well as fiscal policy [can],” Powell said last week at a news conference. He added that Congress is generally “much better” suited to fixing education, health care and other problems.” See

There is a transformation of the Fed.  “The Federal Reserve is undergoing an overhaul. Conceived to keep inflation in check and oversee the country's money supply, the central bank is now essentially directing the economy and moving away from worries about rising prices.

…’Free market enterprise no longer exists,’ Scott Minerd, CIO of Guggenheim Partners, tells Axios. ‘The Fed by essence of what it's doing has taken control of the market.’

Why it matters: ‘The definition of market prices is whatever the Fed says it will be,’ says Minerd, a member of the New York Fed's Investor Advisory Committee on Financial Markets.’” The idea that the Fed is controlling or setting prices in financial markets was once the fodder of conspiracy theorists and cranks. But since the Fed's unprecedented intervention into credit markets in late March, it has become a general understanding stated openly by economists and asset managers, including those at high-profile investment firms like Deutsche Bank and Bank of America.   Yes, but: Not all of the Fed's new programs have worked as planned. After significant delays, its $600 billion Main Street Lending Program has provided less than one-tenth of 1% of its allotted funding to needy small businesses even as the Paycheck Protection program has whiffed and business closures have spiked.  ...Compare that to the trillions it has used on QE and the billions it has purchased in debt from some of the country's largest companies using a backstop of taxpayer money and it's no wonder politicians and economists have called the Main Street program a "failure" and an "unmitigated disaster." See

See also, The Federal Reserve’s new Inflation target redefines the meaning of inflation at