If my house burns down and is replaced it adds the same dollars to GDP as would building a second home. Ditto for bombs to blow up schools if we extend our thinking globally, which will be forced on us by climate change. America is reaching a point of being uninsurable now with the effects of climate change, so our future GDP growth will have to be financed with money creation, not markets and private sector debt.
America is still thinking in terms of available options in dealing with climate change as if we have a choice to recognize it as our reality. That won’t last much longer but will impact the cost of mitigation, both in economic and human terms. Using the same methodology to solve the problem as we used to create it will not work but the status quo is always the primary impediment to progress, so we will likely attempt to treat climate change piecemeal with profit potential being our guide and denying that the federal government is the only viable source of such massive funding as will be required.
The crash in ’08 taught us that we are not constrained by revenue at the federal level as almost the entire economy was recapitalized with remarkably little inflationary impact. This is because the only real constraint to money creation is the availability of resources, not money as we have been brainwashed to believe.
The estimates of the cost of recovering from the crash vary widely because much of the money creation was hidden in Fed purchases of risky assets that were removed via its shared spreadsheet with Treasury, effectively balanced to zero. If we assume the cost to be at the higher end of such estimates, as I tend to believe given the motivations against transparency involved, we are in the range of doubling the national debt that lights politicians’ hair on fire every election cycle.
We can continue to force the federal government to restrain from acting in the best interest of the people to favor the private sector banking system and Wall St, or we can use the economic advantages our fiat monetary system offers to fund a “real” effort to save our planet, much as FDR funded the recovery from the great depression and the mobilization required by WWII. There was “no” money in the private sector economy to be taxed or borrowed but only the most ignorant politicians asked “How will you pay for it?” when the options were so limited.
The end result of FDR removing the domestic economy from the gold standard and leading the nation against the extreme opposition of conservatives is still considered the most successful economic period in world history that was only pulled up short by RayGun convincing the people that “government is the problem” and pulling us back into gold standard type thinking that has degraded the Main St economy steadily while giving us the extremes of inequality doing so much harm to our democratic system today.
We have evidence of the right course of action in our own history and in other nations with far less wealth now beating our collective asses in every important metric. Only the stakes have changed. Winston Churchill once stated that “You can always count on the Americans to do the right thing after they have tried everything else.” I think we are once again at the point of having tried everything else.
