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We can get our FEMA for free.    We regular folks have this Federal Emergency

Management Agency, and banks have their emergency backup – The Federal Reserve.

Why should we use tax revenues for FEMA?

The Fed can fund FEMA repairs with new money created to replace the monetary value destroyed by the storms.   More below.

The Federal Reserve supports the economy by literally creating new money, which is its job.   This new money creation doesn’t cost a cent – the Fed writes a check on itself and births new money out of thin air.    The Fed also creates new money for banks when banks make mistakes, or (very rarely) when a bank is involved in a natural disaster.    
Now, the danger of creating new money is that too much fresh money ends up chasing a limited existing supply of houses and things to buy – the extra fresh money causes price inflation of the limited supply.
By definition, after a natural disaster like Hurricane Sandy, the country needs a greater supply of brand new houses and goods – because monetary value just got destroyed by the storm.   (And some buildable land is now vacant and ready for smarter rebuilding – LEED certified, modern building codes, etc.    And bridges, roads and transit repair projects are immediately needed.)

After this storm and with the rise in sea levels, New York City needs a revamped subway and storm drainage.    Estimates are that going even one month without the efficient subway will result in $55 billion in costs to riders and affected parties.

Sandy destroyed much of the value of the subway.   The value that millions count on for a quick, low cost ride to work.     Remember, most New Yorkers don’t own a car – which saves them a ton of money and hassle.

The Fed should simply create the money to repair and upgrade the subway, and give the newly created money to FEMA to pay the repair contractors.   Work could start next week, with no political wrangling.  

The economic value lost by the storm would be replaced.    Riders shouldn’t have to pay higher fares to repair the storm damage.    The New York City Transit Authority shouldn’t have to go into debt – it didn’t do anything wrong, the hurricane did wrong.    So, just as it does for the banks, the Fed should replace the money lost.

A side benefit would be no more of Congress’ time need be taken up with debate about funding FEMA and disaster relief.    Disasters destroy, the Fed replaces, and the economy is back to where it started before the blasted storm.

If the Fed can provide “emergency” help to foolish bankers, it can provide emergency help to true emergency victims.    FEMA should be funded fully by the Fed, with brand new money created to replace the monetary value of public goods (roads, bridges, transit) that is destroyed.   Some “problems” really aren’t that difficult.   We care about the persons affected by this tragedy.    Let’s show them how much by replacing the things they count on that have been cruelly destroyed.


Should the Federal Reserve be required to fund replacement of public goods destroyed in disasters?

70%12 votes
23%4 votes
5%1 votes

| 17 votes | Vote | Results

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Comment Preferences

  •  Not sure how serious this diary is. (2+ / 0-)
    Recommended by:
    Bob Duck, Neuroptimalian

    Can we fund FEMA better and more?  Yes.

    Is there no negative consequence to simply printing more money to deal with any issue?  Of course not.

    That's not to say that we should be more concerned with the deficit, in a time of near zero interest rates, than with accelerating the recovery which has been going on for the last 3 years.  We should not be focused primarily on deficit reduction at this time.

    But I suspect you're kidding about simply printing more money to solve every outstanding issue.

    You should list "snark" in your TAGS list.

    •  Let's take this "thinking" to its logical (0+ / 0-)

      conclusion:  While we're printing money with abandon, why not go ahead and print enough to give every poor person a million bucks and make poverty disappear?  Politicians must be really stupid ... or cruel ... not to have done this already.

      (Yes, that WAS snark, lest anyone get all giddy thinking it's actually possible.)

      "Two things are infinite: the universe and human stupidity, and I am not sure about the universe." -- Albert Einstein

      by Neuroptimalian on Tue Oct 30, 2012 at 08:13:42 PM PDT

      [ Parent ]

      •  If ninety-three percent of income growth (0+ / 0-)

        has gone  to the top one tenth of one percent over the past few years and Bernanke has said he's going to create $300-500mm to buy mortgages from hedge funds and banks, can't you see where all the money is going.
        There should be enormous inflation considering the amount of money being created, BUT it's all going to a few (literally) people. Hundreds of billions of dollars created and no inflation because ninety-three percent of it is being robbed.  

      •  Difference is sudden destruction (0+ / 0-)

        You are putting words in my mouth.

        I'm talking about replacing public goods destroyed in an instant.

        Money destroyed is replaced by new money creation.  The money supply is not increased, so no inflation.

        My proposal is purposefully limited to disasters which destroy money.   Your snark helps make my point that it is impossible for the Fed to help individuals without causing inflation.

        But the Fed sure helped the stock market, without causing inflation.  It could do the same for the subway.

    •  Said only one issue - disasters (0+ / 0-)

      We all know full well you can't print money to solve every issue.

      Sudden destruction of goods/money is unique, and the proposal is limited to this.

      I'm not snarking at all, nor am I expanding the proposal.

  •  Would that people understood this! (1+ / 0-)
    Recommended by:
    chuck utzman

    The whole concept of fiat money and the Federal Reserve is not well understood by the public at large.  I doubt 10% really know that "money" is created via debt, not some constant that must be raised from taxes or borrowed from China.

    Keynes came up with this theory and it was proven right in the 1930s and many times later.  It became accepted by everyone who mattered once Nixon proclaimed himself a Keynesian.  But then after the Banana Republicans moved ever-farther rightward, Keynes became their enemy again.  They excerpt pieces of Hayek's anti-Soviet screed out of context and thus use the name "Austrian economics" for what is basically old-fashioned Hooverism.

    Since Hoover economics ("a government should stick to a budget like a family") is intuitively obvious, and wrong, people gravitate to it.  President Obama understood Keynes with the Stimulus; he's not talking about it much now.   I get the politics but it's disturbing.  We've moving backwards.  Our public economics are now akin to flat-earth geography and young-earth creationist geology.

    Of course the whole Fiscal Cliff thing only exists because of the Democrats' kowtowing to teabaggers insisting on Hooverite solutions to a deficit.

  •  I'm not sure how well-thought out this is (1+ / 0-)
    Recommended by:

    But it makes more sense than creating a federal disaster insurance fund financed by purchases of private bonds.

    The Fed really doesn't print money, it loans money to banks--money which the banks have to pay back, which they do by loaning it to other people and so on.  And it buys federal debt on its own account, debt that the US Treasury has to pay off.

    What the Fed could do is have authority to make disaster recovery loans to state and local governments on terms favorable to those governments.  The states and governments could set up their own disaster relief banks to provide that loan money to folks that needed to finance their recovery.

    Alternatively, Congress could appropriate disaster relief loans and grants and have them administered through state disaster relief banks to the folks that needed them.  And appropriate grants and loans to states for disaster relief the way that FEMA currently does.

    In addition, the Fed could have a relationship with states that backfilled state deficits during recessions and was repaid from surpluses during booms.  And that same authority could be used for disaster-related recovery.

    50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

    by TarheelDem on Tue Oct 30, 2012 at 06:59:37 PM PDT

  •  You should post on right-wing blogs. (0+ / 0-)

    You could be the "See-what-I-mean guy", and then destroy them with pithy responses.

  •  For free? (1+ / 0-)
    Recommended by:
    Noisy Democrat

    yeah, if "for free" means devaluing the monetary value of pensions, etc of those retirees with savings (etc).

    But it's a good substitute for those not having the fortitude to confront the real problem wrt to a lack of government revenues - namely, the insanely low taxes paid by the very affluent.

  •  The diarist has a glimmer of the right idea. (1+ / 0-)
    Recommended by:

    Unfortunately, Congress must approve the spending (although there seem to be ways around the debt limit issue).
    Nevertheless, the idea that the government finances must run like a family's (or even Greece's for that matter) is completely, and destructively, WRONG.
    For a very thoughtful, and instructive explanation of how federal debt actually works see this post.

    Warren is neither a Clintonesque triangulator nor an Obamaesque conciliator. She is a throwback to a more combative progressive tradition, and her candidacy is a test of whether that approach can still appeal to voters.-J. Toobin

    by chuck utzman on Tue Oct 30, 2012 at 10:15:50 PM PDT

    •  Want a new approach to replace destructi (0+ / 0-)

      My proposal is NOT right wing, not snark, and not inflationary.

      Storms destroy things/money, and so hurt the economy.

      The Fed exists to control
      the money supply to ensure funds are available.

      And I submit that replacing a bridge shouldn't compete with Pell Grants for funding.

      The Fed can (and should) just be required to create new money to replace the money destroyed by the storm.

      BTW, I did NOT say "The Fed should give money to the poor", which would be inflationary.

      Focus on the money/property that was helping us all on Sunday, and boom, isn't there anymore on Wednesday, and has no hope of coming back (unlike the 2008 stock market).
      Disasters are unique in permanently destroying money.

      We care about programs for the poor, and we don't want them to compete with emergency relief for scarce funds.

      BTW, I support higher taxes, including a small national sales tax, VAT taxes, and Social Security taxes on capital gains and all income.    Even if we got enough revenue coming in, I still don't think disasters should disrupt our other budget priorities.

      Indeed, this is just the germ of an idea, but merits more thought.  Thanks for thinking and comments, but don't call me dirty names like "R".

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