Housing Bubble, Pseudo-Recovery, & Cheap Labor Lobby

[unlawflcombatnt]

THE HOUSING BUBBLE, PSEUDO-RECOVERY, & CHEAP LABOR LOBBY

The consumer income and demand that provided the "recovery" from the recession came from increased consumer borrowing, not increased income. This was the direct product of the Greenspan-induced housing bubble. By decreasing the prime rate, he increased the dollar-value of a home that could be purchased with the same amount of money. More money could be spent on the actual selling price of the home, if less was spent on financing charges. Again, this increased the price of homes that buyers could purchase, as well as the number of buyers who could purchase homes. In turn, this increased the DEMAND for homes, which further increased the overall price of homes. This demand increase also increased assessed home values, increasing home equity value. Thus, there was an overall increase in aggregate, nationwide home equity value. This increased the amount of money available for home equity loans. This increase in money available for loans also increased money available to spend. Thus, consumers were able to increase spending, while incomes decreased.

This increase in spendable consumer wealth provided the demand necessary to keep American industry from completely collapsing. Consumers were able to spend more, in spite of declining wages. Had more attention been paid to increasing wages, and less to stimulating unnecessary investment, consumer income might have recovered. It might have recovered enough to offset the huge reduction in demand that will occur when the housing bubble bursts. Unfortunately, corporate profits and inflated equity values were the emphasis of the Bush administration, not consumer income. The inflation-adjusted wage decline has continued unabated under Bush.

Bush's labor-cost reduction policies have actually worsened the consumer income loss.The "cheap labor lobby" has succeeded in greatly reducing aggregate consumer income. They have taken advantage of simple supply-and-demand laws regarding labor. By increasing labor supply, they reduce the price of labor. By reducing labor demand, they further reduce the price of labor. Reduced "price" of labor means reduction in wages for American workers.

The "cheap labor lobby" has reduced American wages by increasing the supply of available workers and reducing the creation of jobs. This has been done by 2 general methods. The 1st method is the encouragement of unrestricted inflow of impoverished workers into the U.S. This increases the labor supply, decreasing labor cost. (There are simply more workers competing for the same number of jobs, driving wages downward.) This decreases average individual wages, as well as aggregate labor and consumer income.

The 2nd method has been OUTSOURCING. The effect of outsourcing is to open up the American labor market to competition with impoverished 3rd-world workers. American workers must now compete globally for wages with semi-slave labor in impoverished foreign countries. American labor has already lost many jobs to foreign competition. Thus, the DEMAND for American labor has also been reduced, due to the shipment of jobs out of the country. (Decreased demand for labor decreases the "price" of labor, which means American wages.) The effect of outsourcing is to decrease the number of jobs, as well as the average wage of those who have jobs. This results in decreased aggregate consumer income, causing decreased demand for American goods, and decreased demand for workers to produce goods.

The "cheap labor lobby" has thus decreased aggregate consumer income by increasing immigration and outsourcing. They have reduced labor demand, and increased labor supply. They have opened up the American labor market to competition with foreign workers. There is NO long-term benefit to ANYONE from such policy. It does not help American industry in the long-run, nor does it help American workers. Corporate America is taking short-term profit gains at the expense of a long-term consumer market decline.

This does not help foreign workers in the long-run, either. Their minuscule wage gains do not make up for the massive American wage losses. This trade-off results in an aggregate reduction in global consumer income, and global demand for production. This, in turn, results in a global reduction in labor demand. The end result is a REDUCTION in global wages, not an increase.

American labor income is not only essential to American domestic consumer demand, it is essential to global consumer demand. Many foreign economies will be hurt if their ability to export to the US declines. And this ability WILL decline if American income is insufficient to purchase their products.

The American consumer market is THE major consumer market of the world. Declining aggregate American income will reduce this market. It will reduce both the American consumer market, and the global consumer market. Bush's "cheap labor" policies are accelerating this reduction. When the "borrowing" bubble collapses, so will the consumer market. It's only a matter of time.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/
_____________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for factory production creates jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[rzemanfl]

1. I tried to explain the first part of your two part argument to a Bush

lover today based on the opinion piece in the New York Times of this week. He said "the tax cuts have made the economy better than it's been in years, the New York Times is not a reliable source of information, people don't mind paying more for gas because they are working and making money...etc., etc." He is beyond hope.

[unlawflcombatnt]

2. Housing Bubble, Pseudo-Recovery, & Cheap Labor Lobby

rzemanfl,

Thank you for your comments, and your attempt to explain my statements to a Bush-lover. As you probably realized, that's an uphill battle. Bush-lovers live in a world of "alternate reality." They rarely think. They just regurgitate the party line. It's easier to believe in simple soundbites, than to comprehend real ideas. I used to be a Republican, because I didn't do any thinking. Once I began to review how our economy works, I saw the error of my ways. Investment doesn't create jobs, unless demand necessitates it. "Trickle-Down" economics is pure fantasy. Bush economics is nothing short of "economic terrorism."

In general it seems Bush supporters fall in to 2 categories. Those that don't know better, and those that profiteer on his regressive policies. Most fall into the former category. There just aren't enough people in this country who are doing well to fall into the latter. We'll never convince that group. But we might get to those who don't know better. But we'll have to get them to think a little. That'll be the biggest challenge. However, it is in their own best interests to do so. An overwhelming majority of those who voted for Bush are doing worse under his corporatocracy. They just aren't aware how much of it IS Bush's fault. That't where we come in. We need to make them aware of this. The Democrat's populist economic policies would benefit most of Americans, including Bush's supporters.

Demand-side policies would actually "grow" our economy, instead of only increasing short-term corporate profits. This is the challenge for us Democrats - convincing Republicans to stop voting agains their own best interests. We can start this process by convincing Republicans, as you attempted today, to realize that Bush policies work AGAINST their best interests.

unlawflcombatnt

EconomicPopulistCommentary
http://www.unlawflcombatnt.blogspot.com/

_________________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for factory production creates jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[rzemanfl]

3. The guy I spoke of falls into the stupid category and will never

change. I am sitting in the middle of the bubble in a home that is supposedly worth over three times what I paid for it in 1997 (69K). When this bubble bursts it is going to be ugly, especially here in $750,000.00 condo on the beach land.

[unlawflcombatnt]

4. "Changing the Course"

Bob,

I still have to commend you for trying to convince someone in the "stupid" category. Sometimes repetition does work. I know I've had to change some of my very firmly held ideas when I discovered I was wrong. In all cases, it took much repetition of the arguments against my own misconceptions. Interestingly enough, in many cases, it was I who disproved my previous misconceptions. This is especially true with economics. I used to believe in "trickle-down" economics, and that "investment creates jobs." I voted for Ronald Reagan twice, based on those beliefs. However, I had ignored certain concepts I had learned in Economics. When I later delved into the logic behind these beliefs, I realized there was no logic. (The Laffer Curve truly is laughable.) My previous beliefs were convenient, but illogical, soundbites. They were the same kind of un-truths that got Bush re-elected (though fraudulently), and put our economy on the path to destruction.

Maybe with enough repetition, we can change some minds. Clearly Bush is having some success with the "repetition" method. If Bush can convince people his lies are true by simple repetition, then we should have at least equal success by repeating the truth often enough.

We need to keep trying. I post my letters everywhere I can. I would encourage others to do likewise. This applies to other's statements, as well as my own statements. If anything I've written is compelling, feel free to quote, copy, re-state or republish my statements anywhere you'd like. We're heading toward an ECONOMIC ARMAGEDDON. We need to "change the course." If anything I've written helps, please use it .

Many people, including myself, have lived too long in a world of "economic alternate reality." I hope I can help others emerge from the world of "economic alternate reality," into the world of "factual reality." Hopefully it will come easier for others than it did for me. But even the most stubborn can change their thinking. I'm living proof of that.

Mike (unlawflcombatnt)

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

__________________________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for factory production creates jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[rzemanfl]

6. How'd you know I was Bob? Anyway, this guy would never

READ anything and has been so brainwashed it is like trying to fill a sieve to talk to him about anything that interferes with his preconcieved notions. I think it better, with him, to chip at the edges, for instance, he was really pissed about Bush involving himself in Schiavo.

[pgh_dem]

7. he knew because "Bob" is in your sig line... n/t

[unlawflcombatnt]

8. How to talk to a Bush-ite

Bob,

I fully understand your dilemma. Maybe you could start chipping away at him by asking him what he likes about Bush. As far as economics goes, start with the widely publicized economists' consensus that consumer spending is 2/3 of all economic activity. (If you read Yahoo News, you'll see this mentioned at least 3 times per week. It's a pretty well accepted concept. It's not really a contestable assertion.) If he accepts that, mention that profits are made by SALE of goods, not production. (Making a product that no one buys results in NO money being made.) If he follows you this far, tell him that consumer income is what provides the money for the sale of products, and the profits made from sales. Thus, the sale of products is limited by consumer income. The total sale of products is limited by total (or Aggregate) consumer income. Anything that reduces spendable consumer income, reduces the total (Aggregate) sales. Reduction in sales also reduces profits. Thus, in the long run, reduction in consumer income reduces corporate profits as well. (Demand and Sales can be increased through borrowing. But this obviously cannot maintain demand and sales indefinitely.)

What reduces consumer income? Wage reduction. What reduces wages? 2 things reduce wages. The 1st is decreased labor DEMAND (Decreased jobs.) The 2nd is increased labor SUPPLY. (Increased number of workers.)

What decreases labor DEMAND? Outsourcing of jobs to foreign countries. In addition, forcing American workers to compete with starvation-wage workers. (This is not a "skill" issue. It is a matter of who will work for less. It's the infamous "race to the bottom.")

What increases labor SUPPLY? Again, outsourcing contributes here as well. It forces American workers to compete globally with a much larger number of workers (who are also paid much less.) In addition, immigration increases labor supply. When the SUPPLY of any item increases, it reduces the price. Here, that "price" is the wages of American workers. Thus, wages go down when the supply of workers goes up. Both immigration and outsourcing contribute to the increased labor supply.

If he is a "free" trade advocate, ask him to give specifics when he tries to counter you. Benefits of free trade can easily be discredited by either facts, history (NAFTA), or logic. First, however, you need to shift his thinking towards the importance of Demand and consumer spending. Free trade advocacy focuses almost entirely on cost reduction, while downplaying demand reduction. It's pointless to argue against a free-trader who fails to realize the importance of Demand and consumer spending. They need to understand (and accept) simple supply-and-demand effects, in addition to understanding AGGREGATE demand.

Let me know if this works. Also, let me know if he tries to play the "comparative advantage" card. It has NO application here, despite the claims by some economists. But I'll save that for another time.

unlawflcombatnt

EconomicPopulistCommentary
http://www.unlawflcombatnt.blogspot.com/
________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for production DOES create jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[Chicago1]

5. Excellent Post!!!

This was very informative. Great Job!!

Waiting for the IMPEACHMENT WHILE THE SCANDALS KEEP UNFOLDING
America's Work Stories
http://usaworkstories.blogspot.com
[e-mail]

[rustydad]

9. Well

The dilemma I see is in the system. The capitalist system is predicated on continuous growth. Without growth in GDP all the trillions of dollars in electronic money loaned out cannot be paid back with interest. So growth is essential. Yet Americans don't need growth as we have it. That is the middle class growing fat, stupid, and lazy, the upper class piling wealth on wealth and the poor class working harder for less. The cure is to funnel wealth to the lower classes through progressive taxation. Yet that is politically a no no. So the US faces the end of capitalism as we have known it. The triple whammy of dept, peak oil and natural gas, and foreign competition will all bring the US to it's knees. Bob

[unlawflcombatnt]

10. Progressive Taxation & Uneven Wealth Distribution

Rustydad/Bob,

I completely agree with you about funneling wealth to the lower classes through progressive taxation. This is completely consistent with Keynesian, Demand-Side economics. I have written a section on this issue on my blog site. It is titled "Captitalism & Wealth Distribution."


CAPITALISM & WEALTH DISTRIBUTION

It's important to understand America's uneven distribution of wealth. It is a requirement for capitalism. But in excess it is counterproductive. Though capitalism has been very successful, it can be hampered by its excesses. These excesses reduce the benefits. They can actually reduce the total wealth produced. An excessively uneven distribution of wealth is one of the drawbacks. The key word is "excessively." This applies to economic "growth" as well as social and economic justice. The "justice" issue is highly subjective. The economic issue is more objective.

The degree of uneven wealth distribution is crucial for the economy. Too little, as well as too much, can worsen the economy. There must be balanced "unevenness." Balance is necessary between the means of production and the means of consumption. There needs to be sufficient money for the means of production, as well as the means of consumption. (If balanced, consumption = production.) A shift in the balance in either direction hurts the economy.

Uneven distribution of wealth is necessary to create capital. Some members of society must have sufficient money left over from consumption spending to invest in the means of production. This 'extra' money is necessary to pay for the means of production-- factories, raw materials, labor, etc. More unevenness allows for more potential capital. However, benefits of this unevenness disappear if too large. Excessively uneven wealth distribution actually reduces the growth of the economy, because it reduces the means of consumption.

The "means of consumption" appear to be ignored by current financial analysts. But they are essential for a capitalist society. Money needs to be available to purchase the goods produced. Capitalists make money from the SALE of goods, not from the production. The value (or price) of the goods is determined by what consumers will pay for goods. The less spendable money consumers possess, the less the market value of the goods. If the total spendable money of all consumers decreases, the total market value of all goods decreases. Success of capitalistic society depends greatly on spendable consumer money. Too little consumer money decreases the total value of all goods produced, regardless of the quantity of goods produced.

When the sum total of money available to consumers decreases, there is no benefit to further "capital" investment. Further wealth will not be produced from more capital, because total dollar value of sales cannot increase. Total market value of goods decreases if total money to buy goods decreases. More goods production will not increase total value. Spendable consumer wealth limits total consumer good value. In the current U.S. economic situation, capital is plentiful. It is consumer wealth that is limiting our growth.

The Wall Street Journal states that the markets are "glutted with capital." Which means there is more capital available than necessary. Many investors are not investing this extra capital in the "means of production." This seems reasonable, given the limited ability to increase sale of products. Much of this extra money, or capital, is put elsewhere. Savings is one such place. Savings money does little to help economic growth. It may facilitate investment loans somewhat, but there is little benefit to further investment. Again, the benefits to that investment are limited by consumer ability to buy the products of that investment.

In our current situation, more "progressive" tax policies and economic agenda will increase economic growth. A more progressive tax policy would increase consumer take-home wages. A more progressive agenda would actually benefit capitalism. Any policy that reduced the current uneven distribution would result in production of more wealth and increase overall prosperity. Reducing the current "degree" of uneven wealth distribution would put more money in to consumer spending. It would increase demand for goods and services. It would increase the aggregate market value of all goods and services. It would benefit business, as well as consumers. It would increase the production and profits of corporations. It would increase the hiring and wages of workers. Thus, an initial increase in take home wages could initiate a self-perpetuating cycle of economic growth.

This would return us to a more "demand-side" economy. A return to more demand-side principles is not socialistic. It is not a move in the direction of socialism. It is a move towards capitalism. It would benefit capitalism, not hurt it. It is a move toward real economic growth, not fictitious economic growth. It would make our capitalistic economy thrive, instead of stagnate.

Remember the adage: "necessity is the mother of invention." And so it is that "demand is the mother of supply." Demand will increase supply. But supply will not increase demand. If society demands round wheels for cars, someone will produce them. But if someone produces square wheels, no one will buy them. And no matter how many square wheels are produced, no money will ever be made from them. Supply of square wheels will never create a demand for them.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

_____________________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for production DOES create jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[teryang]

11. Good post!

The only caveat that I would add is that the US is facing a relative decline as the major consumer market in the world. Obviously, if Americans can no longer consume as they have in the past this will impact major exporting nations. However, developing markets may be able to sustain growth with protectionist policies and growing their own domestic markets. The process will be painful as Americans sputter and groan under huge debt loads but inevitably what we do or don't do will become less important to other large markets.

[unlawflcombatnt]

12. Decline in US Market

Terryang,

You're absolutely right about the decline in the US consumer market. That's exactly what is happening as consumer income declines. However, I don't think protectionist policies will do much to increase 3rd-world labor income. The poorest countries don't need protectionist policies. They can't afford to buy our production in the first place. Even if they "open up their markets," they still won't have enough income to buy our products. And they'll still remain impoverished enough to supply US multinationals with an unlimited supply of cheap labor. But as you stated, the US consumer market will shrink. That will reduce American domestic demand, as well as American demand for imports. It's simply a lose-lose situation. A lesser portion of income from profits will go to workers. As a result, there will be less income to BUY the goods produced. Everyone will suffer. Even the corporations will eventually see their profits reduced. All because of their incomprehensible greed. Unfortunately, the greedy corporations are going to take the rest of us with them.

unlawflcombatnt

Economic Populist Commentary

http://www.unlawflcombatnt.blogspot.com/

_________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for factory production creates jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[teryang]

13. Protectionism is necessary

...to keep certain sectors economically viable. Korea and Japan have adhered to a strongly protectionist posture in order to keep foreign goods out while exporting strongly to the US and other nations. That's why they are capital accumulators. As for the effect on workers on the average I can't say. But if you are farmer in Japan or Korea and your country allows unrestricted American food imports, you are going to get wiped out. If you have a clothing industry and you allow unrestricted clothing imports from the world's cheapest labor markets that sector will be destroyed. Laissez faire internationalism is wiping out production in the US as corporations opt for the cheapest and most unregulated markets. Developing economies need to practice protectionism if they wish to accumulate the capital necessary to get ahead. Corporate dominated government circles could care less what workers make and where they make it as long as their profit margins increase.

Obviously protectionism provides great dangers to international commerce and requires political give and take in its application. A balanced approach is necessary to move gradually from one level of economic development to another.

India and China will benefit greatly from selectively applied protectionism. The US is victim of its own ideological claptrap about so called "free markets." What's in the globalist corporate interest is not in the national interest particularly when it comes to labor markets.

[unlawflcombatnt]

14. Tariffs & Pseudo-Tariffs

Terryang,

I can see where more affluent exporting countries, like Japan and Korea, would adopt protectionist policies. Their consumers have enough income to create a market, and therefore could be damaged by foreign competition. In contrast, China and the CAFTA countries just don't have enough consumer income to purchase significant amounts of US imports. They don't need protectionism. Their low consumer income "protects" them from competition from American imports. There's no real concern that poor countries will put up tariffs to keep American goods out. Their low consumer income acts as sort of a "pseudo-tariff."

American outsourcers want to "open up" the cheap foreign LABOR markets, not their consumer markets. Though poor countries don't have enough consumer income to buy American products, they have plenty of low-wage semi-slave labor to exploit. Foreign workers can do the "jobs Americans DO want" for the "PAY Americans don't want." This is the true benefit of "free" trade -- free SLAVES for Corporate America.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

_____________________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for production DOES create jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[unlawflcombatnt]

15. Protectionism

Today I read a reference from another post that showed that protectionist policies have been widely used over the last century and a half, and have been very successful. The actual amount of the tafiffs was given. The point of the article was the hypocrisy between what the free-trade advocating countries are currently advocating, and the policies they have actually followed. Clearly a case of "do as we say, and not as we do." I'll re-post that link here when I find it.

[dcfirefighter]

16. counter point

unlawflcombantnt:

I agree that the housing bubble is largely created by greenspan, AS WELL AS deficit spending; both politically calculated to keep republicans reelected.

I disagree on the need for tariffs, and protectionism. If wages go up elsewhere, markets are created elsewhere. I believe that Americans are well into the point of diminishing returns regarding consumption: even our poor generally have cars, airconditioning, and cable TV. There is also a matter of national security - poor countries breed discontent, and countries that aren't traded with, stay poor. That being said, I disagree with multilateral trade agreements such as CAFTA, as 1) they aren't really free trade, but selective protectionism, and they infringe on the freedoms of americans, as well as the self-sovereignity of the US.

While I agree that the majority of the world's economy is based on consumer spending, specifically American consumer spending, I feel you've missed a major factor. Consumer spending depends on disposable income, not necessarily wages. Due to the aforementioned real estate bubble, a larger and larger proportion of wages are being spent on 'location, location, location'. Unlike spending on consumer goods, spending money on real estate location does not cause more people to be employed in production. It is a non-produced good, and income derived from the sale of location rights are at the top of the pyrimid of 'unearned income'. It's so unearned that there could be a 100% tax on real estate appreciation tomorrow, and people would still have land, houses, and places to work.

I'm sure you've convinced yourself of the need for protectionism, so I'm also sure that the ripple argument will fall short with you, but I'll state it anyway. When particular industries are protected, two things happen: Americans must pay more for those products, which means that other things produced with those products cost more, which means that less gets bought, which means that less gets produced domestically, which means more people are out of jobs, which was supposedly the exact opposite of the goal of the tarriffs in the first place. The other thing that happens is that foreign producers cannot compete in the worlds largest consumer marketplace, and they remain poor, and unable to purchase the more expensive goods that advanced economies can produce. The classic case in point is the sugar tarriffs, which keep carribean and central american farmers poor.

Were I some sort of benevolent monarch, I would issue tarriffs for 2 reasons: as an internalization of the exporting countries world pollution and as an incentive for that country to achieve a GINI index approaching ours (or exceeding ours). I include the GINI index provision on the grounds that citizens of a generally poor country will generally work for less than US citizens - it doesn't necessarily make them slaves. If the wealth of that country is fairly distributed, trading with them will only improve them (while allowing every american consumer who doesn't happen to work in a politically well connected industry in a 'swing' state to spend THEIR wages more effectively).

Rustydad - the problem you speak of is a monetary one, and not necessarily associated with capitalism. But, I think you've hit the nail on the head as far as the problem - and it is a much bigger problem than protection or free trade. There are other options, my favorite is: The value of money depends on what people will accept for it: if it is accepted by the state as payment for taxes due, AND it has a fairly stable value, AND it's relatively portable, it will serve as money. I feel that instead of the US Treasury issuing debt to the (private) Federal Reserve in exchange for new, high-powered money; the US Treasury should simply print the money themselves, with no debt associated. The risk here is inflation, however, new money comes into use every day, through the banking process, it is needed to establish a stable money value in face of increasing demand for money. If that new money is created, debt-free, by the US Gov't, well, we don't have to tax as much, and we don't accrue additional debt.