The pitchforks are coming

My thanks to Gerard Foucher for pointing me to a fascinating article by a hugely succesful multibillionaire called Nick Hanauer, who openly admits to being a member of the 0.01% of the super rich. Published a couple of months ago, it is a warning message to his fellow zillionaires saying that unless they react soon, the Pitchforks will be coming. In other words, things are getting so bad for the vast majority of the population, that there is a serious risk of a revolution. I think he is quite right.

Hanauer argues that business leaders should be forced to pay better wages. He points out that businesses need customers, but if the general population is so short of money, they can't buy anything, then businesses cannot flourish.

In a comment on his paper, I note that you don't even have to pay workers to work to give them the money they need to be customers. Central banks could simply pay money directly to citizens on their back accounts in the form of an unconditional basic income. This would actually reduce costs for employers, because they woudn't even have to pay $15 an hour. They could thus be even more competitive.

And you want to know where the money could come from to make these payments? Well, sure, the central banks can just create the money out of thin air. After all, that's what commercial banks do when they make loans - they invent it, and then charge interest.

But as you probably know if you have been reading my blog, there's an even neater solution. Just impose a tiny financial transaction tax on all electronic transactions. BIS figures show that last year there were more than $3 quadrillion in transactions in the US - 0.01% on that would generate $300 billion to be redistributed. But the BIS numbers are almost certainly underestmimated. I suspect that the Options Clearing Corporation (not recorded in the BIS figures) may be doing between $12 and $16 quadrillion in trades per year - off the radar. Their webpage shows that they handled over 4 billion transactions last year, generating $1.3 trillion in premiums. Scaling up existing figures for NYSE Liffe (113 million transactions, and $46 billion in premiums for $474 trillion in transactions), implies that OCC really could be doing $12-16 quadrillion every year.

Put a 0.01% tax on that, and you could pump trillions of cash into customers pockets without even having to employ them. Best of all, no inflation, because the total money supply would be unchanged. It would simply move existing money from where it is mainly being used for pointless High Frequency Trading by computers (who will never buy anything of value) to citizens who would be able to go out and buy matresses, cars, books, CDs, meals, cinema tickets.... you name it.

In fact, this idea of simply getting Central Banks to pay money direct to citizens instead of trying to stimulate banks to lend more, is catching on.  Incredibly, the Council on Foreign Releations in the US has just published a tribune by two economists, Mark Blyth and Eric Lonergan, titled "Print Less but Transmit More - Why Central Banks Should Give Money Directly to the People".

The paper has been picked up by Ellen Brown and  Positive Money, and was translated into French in a piece in Liberation on the 27th of August.

Things really do seem to be moving.