95/5 is a ridiculous ratio that only feeds the bankers and causes misery for everyone else. Once we take into account the drains on the money supply, not the least of which is wealth accumulation, it represents contraction, not expansion. On top of satiating the desires of the wealthy to hoard more wealth, we also have to account for trade deficits and inflation. When we vote for politicians that have no clue how our monetary system actually works and promise to cut the deficit we are literally voting ourselves a pay cut and more dependence on private debt to maintain our lifestyles. The red ink of the government is the only net source of black ink for the private sector and a balanced budget is a 100% tax rate that allows no storage of value in the nation’s currency.
While banks can create “credit”, they can’t actually create the high power money that is acceptable to net retire that credit or be net saved. Only Congress has that power via appropriations. If we accept the US Dollar as the unit of measure in which we store value and denominate commerce, we create deflation if we don’t allow the money supply to keep pace with economic growth (poorly measured as GDP currently) and our lifestyles suffer. Funding our economy with bank debt that can never be retired, and can only be rolled over with GDP expansion or the system fails in default is not the prescription for success.
The wealthy are guaranteed a minimum of whatever percentage we set as the overnight rate on reserves when the Fed sets its base interest rate. The natural rate for a sovereign fiat currency is zero, so anything above that must be manipulated upward. This is the only use that Treasury bonds now serve since we left the gold standard and we really should think about eliminating them or setting a permanent zero rate. At the very least, we should use some description other than debt for what amounts to our national savings. It only offers fodder for ignorant/corrupt politicians and causes voters to vote against their own best interests.
We didn’t make the transition from a cost-free commodity, the fiat currency, to bank debt as our main funding source overnight. It was a decades-long campaign engineered by people like Pete Peterson and a multitude of think tanks they created to vilify anything related to the federal government that caused us to abandon fiscal policy and any benefit of government for the people. When a majority of voters came to believe that “they” fund the monopoly issuer of the currency with “their” tax dollars a whole dynamic was set loose on our nation that includes the unhealthy worship of the wealthy and vilification of anyone “they” deem as unworthy “users” of federal funds.
The desire to force “efficiency” on the federal government is responsible for a multitude of problems, including growing racism and the general erosion of our society. Anything that can’t support a “market” is not allowed, being seen as a “waste” of tax dollars and the very institutions that support a society decay and crumble, including our vital infrastructure, both hard and soft (people). There will never be sufficient funding for socially beneficial spending as long as the population sees itself, rightly, as on a constant precipice of failure and the source of the nation’s currency as a competing “cost” to their already tenuous position.
Until we can free ourselves from those markets for our basic survival and demand that Congress fulfill its Constitutional mandate to create the currency for the “general welfare” again we will continue to degrade as a civilized society and threaten the rest of the world with our insatiable appetite for resources to feed the gluttony of our most entitled. Any misery in this economy is strictly a political, not economic, decision and we only have to shift our perspective back to the reality of our monetary system to fix our many ills that have culminated in our destructive and dangerous position of power without a conscience, which is the core description of a corporation, not a society.