Creating a Quality Economy, Part 3

fannie-mae.gifby Mark Pash, with Brad Parker —

Education is very, very important to individuals in a capitalistic system – especially math and science education in our high tech world. It is also very important to a democratic society in general. But, it is only one of the important components for a successful economy. Brazil, Russia and India – before recent economic booms – had well-educated populations with nominal success economically.

What is important in the United States is that we must begin to educate the general population in matters of personal finance and capitalism. We live in capitalistic society and world. The more educated the public is – the less reliant they will be on government-fiscal programs. Every high school student should be required to take a course in personal financial planning in order to graduate.

Since money can be created at no cost by the government, except for excess inflation, and education is a primary social policy, the government can make long-term college loans – 20 to 30 years – at a cost of about 3%, with repayment starting after graduation. The interest charge just covers administration costs and defaults. The government does not have to make a profit and it does not matter how long it takes to be repaid, as long as it is repaid. This allows almost everyone to afford a student loan and relieves the burden on the fiscal side of government.

Statistics and Forulas
Beware of economic Statistics and Formulas. They reduce the human economic conditions to numbers and we over rely on them. They can be unreliable from errors in collection and they can be interpreted in many different ways. Most of the economists do not agree on their own definitions like growth and productivity. The savings statistics are also very misleading. They do not include pension contributions and subtract them when they are paid out. They also do not include investments. The highest savings rate in the world is in Japan, which has been in a deep recession for 15 years.

Ownership should be encouraged for everyone in a capitalistic system. It is very difficult to continue to raise wages so that workers can save and build wealth. Therefore, the government, to promote ownership by every citizen, should implement laws and regulations that enhance that outcome. Not necessarily direct ownership in business and real estate but in stock markets and other equity avenues. We should continue to encourage all pension, profit sharing, ESOP, 401k, and IRA plans. In the long run, it will mean less reliance on government fiscal services.

Moderate inflation is good and excess Inflation is bad. Growth and wage increases do not cause inflation in the overall economy. The economic boom in the 1990s proved this. The only thing that creates excess inflation is too much money issued by the banking system and Federal Reserve chasing an inadequate supply of goods, services and assets.

Balanced Annual Federal Budget
A balanced annual budget has a positive compounding effect. It generally lowers interest rates. This means the interest charges on the total national debt declines. This makes it easier to balance the budget and/or increase fiscal spending. Since there is no new debt added, the national total debt can be retired by the gradual monetarization of the debt by the Federal Reserve without excess inflation. This again makes it easier to balance the budget. So, the comments we often hear, that building debt that our children and grandchildren have to pay off, is not completely true.

Of course, in an extreme recession or war a budget deficit might be warranted. I foresee a possible deficit used for Medicare to get the baby boomer generation through retirement. Therefore, it is important to balance the annual budget as soon as possible.

In the not too distant past, certain principles of money were not subject to alteration by society’s money managers. They might be ignored or forgotten for a time but they could not be repealed. One of these principles was the ancient biblical injunction against usury. The definition of usury may have vacillated over the centuries but the moral meaning was the same. When lenders insisted on terms that were sure to ruin the borrowers, this was wrong. This was usury.

There were practical, as well as moral reasons, why usury was considered a sin. It was more than a social plea for fairness and generosity from the wealthy. No social system could tolerate usury, not as a permanent condition, because it led to an economic life that was self-devouring. The money monger collected his due until he owned all the property and the peasants had nothing. No one could really survive. Who would buy from the money monger if he had all the money? And what kind of life would the peasants have?

We have had usury laws in our country. Currently there are none. Consequently, moneylenders can charge as high a rate of interest as they want – 20%, 30% or more. Usury laws pegging the highest rate that can be charged to the Federal Reserve Funds rate must be enacted to preserve the buying power of the quality customer and reduce bankruptcies. Those rates must be reasonable for both the lender and the borrower.

Progressive Economic Principles
• Capitalism is a wonderful freedom-oriented and wealth-building system. It is the best economic system on earth but it is NOT PERFECT.

• Economies need checks and balances for successful operations just like the government.

• Reduce competition based on minimizing wages as it reduces the number of quality customers.

• Insure more long-range planning by business and government – i.e. infrastructure, education, and environment – long-term versus short-term profits.

• Promote competition by limiting and/or regulating monopolies and oligopolies.

• Balance the fiscal budget except for severe recessions and/or war.

• Government spending is not anti-growth it is a recirculation (redistribution) program that aids the economy. It provides for an ample supple of quality customers.

• Government policies need to encourage and not hinder business formations, operations, incentives, initiative, innovation, productivity, investment, competition, research and development.

• Government needs to insure a level playing field in the business environment to insure competition.

• Governments need to insure Property Rights are always protected while also protecting human rights and community interests (i.e. the rule of law).

• Governments should not over regulate the good but look more for the bad and increase their penalties.

• Taxation should not be based on how much one pays but how much one has left over to raise a family – be a quality customer – and save for retirement. Progressive Income and Estate taxation are the fairest taxes as they are based more on the ability to pay.

• We need to compete on a global basis by protecting the wages of our customers and encouraging other countries to do the same. This is accomplished by a change in our current tariff charges and by encouraging the formation of labor unions.

• Insure there is an ample supply and diversity of access to capital from our monetary system with interest and equity return.

• Moderate Inflation is good. Excess Inflation is bad.

• Beware of economic statistics and formulas.

• Encourage ownership and financial education by all.

• The government can fund it but it does not have to run it. Governments can fund, regulate and operate certain functions if they do not lend themselves to market competition.

• The question is not more or less government involvement in the economy but the right government involvement in the economy.

• Implement a variable maximum percentage interest that can be charged on loans, so that we can avoid usury in our credit system.

Vision for a Progressive Economic Future
The conflict between business and social interests does not arise from the entire capitalistic system itself but from it’s three major flaws:

• Inadequate Recirculation of Money
• Failure to Create Quality Customers
• Lack of Long-Term Planning

In order to create a quality economy we must commit ourselves to overcoming the flaws of capitalism, while steadfastly following the essential Progressive Economic Principles. Conservative Economic Policy has run into a dead end. Progressive Economic Principles can rescue America and the world from this calamity and lead us into a future where wealth is created and enjoyed by every citizen in a quality economy by creating a new framework of economic decision-making.
Capitalism and social well being are not antithetical but are both enhanced when the government is run with sound progressive economic policies.

A properly empowered government with an intelligent mandate, both monetary and fiscal, can accomplish these objectives for the 21st century. However, the current structure of a significantly unbalanced budget and an expansive single monetary distribution channel – banking – does not completely meet the needs of the economy and usually causes excess or hyperinflation. Any government policy that combines the opposite, both a constrictive fiscal and monetary policy, can only lead to a disastrous recession or depression.

The current structure does not make common sense for long-term growth. Keep in mind though, that changing a major structure and operational system is very difficult to accomplish, especially in good times let alone bad. Change has to be slow and gradual to reduce economic turbulence.

One of the major structural changes should be to continually increase investment by diversifying the monetary delivery systems. The major problem with capitalism is that governments do not increase the monetary supply in an efficient manner. The best doctrine is an expansive fiscal policy with no deficits and an expansive monetary policy with multiple delivery channels under the central bank – Federal Reserve.

In an economy guided by Progressive economic principles the legislatures will continue to fight over how much to tax, regulate and where to spend. What is eliminated is the economic philosophical debate that the government should not be involved in the economy and the death of laissez-faire-libertarian economics, forever. The legislatures should also debate over the best policies to increase competition and promote growth in our economic environment.

Another major challenge for future governments is; how do we combat the flaws of capitalism in a globalized economy, where enterprises move from country to country to avoid regulation and the flaws? Eventually, in a Century or so, they are going to run out of countries! It is also very important in the debate on reducing the negative effects of globalization to include suggestions on creating a global level playing field and promoting growth in the entire global economy. Remember that increased growth brings in more tax revenues, without increasing rates, for our favored fiscal long-range programs, which advance the human condition. Economic logic is circular. It is not linear. Everything affects everything else.

With this economic blueprint I have endeavored to provide the Democratic Party with an outline that charts a path to the future. My hope is that Democratic and Republican elected officials as well as candidates and economists will study these concepts and implement them at every level of our government.

We can expand the economy by reducing the flaws of capitalism and encouraging the favorable factors of commerce. This increases the standard of living for all, while eliminating poverty. Thus, capitalism becomes a system that provides for all even though many have more. Diversity of ownership further enhances this growing sustainable economic possibility for the entire globe.

Creating long-term wealth for the maximum number of quality consumers is the direct product of creating a quality economy. Creating a quality economy requires a more reasoned knowledge of and application of Progressive Economic Principles, which create the quality customer and entrepreneurial opportunity for the greatest number of citizens. Economic well being for all requires a balance between business and community needs that work together in everyone’s best interests.

We need to explore the solar system, the seas, cure diseases, stop poverty and urban blight, and promote democracy and capitalism in the old Soviet bloc and Third World nations. We are capable of accomplishing most of these tasks. The only thing stopping us is macroeconomics.

Macroeconomic policy based on Progressive Economic principles will offset the flaws of capitalism creating an adequate standard of living and community for all. By raising overall business growth through competition and diversity we will foster local, sustainable, renewable and humane communities living in a quality economy.

by Mark Pash, with Brad Parker

Read Creating a Quality Economy, Part 1.
Read Creating a Quality Economy, Part 2.

Reprinted with permission from Economics for Democrats.

Brad Parker is an award winning artist, songwriter, producer and musician. He has recorded, toured and produced hits in North America, Europe and Asia. Parker owns Indie label Riozen records and is a co-founder of “”. Brad is a prolific political writer and speaker as well. Parker is very involved with Democratic political organizations including: President, Valley Democrats United, Vice President, Progressive Democrats of Los Angeles, Platform Committee of the California Democratic Party and Delegate, CDP Central Committee from the 42nd Assembly District.

Mark Pash has been in the financial industry over 35 years. He received his BS and Masters in Business Administration from UCLA and USC respectively. He is a Certified Financial Planner from the College of Financial Planning. He served on Senator John Edwards Committee of Economic Advisors.

Articles by Brad Parker:


  1. Emprestimo Pessoal says

    Very interesting article! Financial education is a very important thing for everyone. Although it is important it could be that even with this education people choose to get into big loans just because they are big consumers by nature.

  2. says

    One of my friends mentioned about this post and I just thought to have a look. Nicely written by the way. And hopefully the economy will come back to a good situation in the following months. I’m not sure if it’s totally possible but lets have hope.

  3. says

    Thanks for the really awesome article. Economy is a vital part and hope President Obama can get the economy back on track soon. Good job with the article.

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