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Chapter 150 Surpassing Keynes
Chapter 150 Surpassing Keynes
"You're stuck on this, Leo."
Roosevelt's voice rang out.
"I understand what you mean. You want to find more industrial demand, and you want to recreate the industrial miracle of World War II."
"But don't be too naive."
"This is not 1941. There is no global war waiting for you to produce tanks and airplanes, nor is there a Marshall Plan waiting for you to rebuild Europe."
"Demand is currently weak in the United States."
"You're just the mayor of Pittsburgh."
"You're not the president; you can't force Californians to buy your cement."
"Expanding outwards to seize those already shrinking markets is as difficult as climbing to the sky for you right now."
"Since the outer door is closed, let's look inside."
"Right now, you can only stimulate domestic demand."
"And to drive demand for meat, the most important factors are only one."
Roosevelt paused for a moment before uttering the word.
"Liquidity".
"Because you made a common-sense mistake."
"You're treating money like inventory."
Leo frowned: "Isn't money just inventory? It's in a bank account, and every penny spent is a penny less."
"wrong."
Roosevelt corrected him.
"In my eyes, money is fluid."
"As long as it circulates, one dollar can become ten dollars."
Roosevelt's voice suddenly became deep and resonant, like a sound coming from an old radio, instantly enveloping Leo's consciousness.
The surrounding scenery began to distort and fade.
The floor-to-ceiling windows of the Pittsburgh mayor's office had disappeared, and Leo found himself standing on a cold, windswept street.
It's 1933 now.
There was a bank in the direction Leo was looking.
The gate was tightly closed, and hundreds or even thousands of people were crowded at the entrance.
They were dressed in worn-out suits and top hats, clutching their bankbooks tightly, and frantically pounding on the door.
"They're panicking," Roosevelt's voice rang in Leo's ears. "They want to take the money out and stuff it into their mattresses because they feel it's safe there."
The camera suddenly zooms out, shooting through the bank's walls.
Leo saw the bank vault.
The room was actually filled with cash, but the bankers sat on top of it, trembling with fear.
They dared not lend the money. They were afraid the factory would go bankrupt, afraid the farmer wouldn't be able to repay the debt, and afraid that once the money was lent out, it would never be returned.
So they chose to lock the vault.
The camera then shifts to a massive steel mill.
The towering chimneys were lifeless, and the huge flywheels were motionless.
The machine wasn't broken; the raw materials were piled up in the warehouse.
The factory owner stood in his office, looking out the window at the job seekers lining up, but could only shake his head helplessly.
Because the bank wouldn't give him a loan, he had no money to buy coal to start the machinery, nor did he have money to pay his workers' wages.
And what about the workers?
Leo saw the men lining up in the street to receive relief soup.
They are strong and eager to work.
But because they don't have wages, they can't afford bread, clothes, or houses.
The bakery went out of business because nobody bought bread; the textile factory went out of business because nobody bought clothes.
"Did you understand, Leo?"
Roosevelt's voice was cold and stern.
"This is a type of cyclic necrosis."
"This country has the most fertile land, the most advanced machinery, and the most hardworking workers in the world. The resources are there, and so is the demand."
"However, the lifeblood connecting all of this—the circulation of currency—is frozen."
"Bankers hoard their money out of fear; factory owners stop production because they have no money; workers have no money to spend because they are unemployed; the decline in consumption leads to further factory closures, and banks become even more reluctant to lend."
"This is the deadlock of 1933. The heart of the entire economy stopped beating, the blood froze in the veins, and the body rotted away bit by bit."
The scene changes.
An office building in Washington, D.C., came into view of Leo.
The atmosphere there was completely different.
The typewriters clattered, the telephones rang incessantly, and a group of energetic people were stamping checks one after another.
"To give this heart a pacing, I founded an organization."
"RFC, Renaissance Financial Corporation."
"It looks like a bank, but it's not a bank; it's an injector for national capital."
"Wall Street was dead at that time, and private capital was hiding in bomb shelters and refused to come out, so I made the government the biggest banker."
"We are directly using the credit of the national treasury."
In the footage, with the injection of RFC funds, the lifeless steel mill is once again emitting black smoke, the bank doors are reopened, and workers are walking into shops with their wages in their hands.
The gears were forced into motion.
"That's the problem of that era, Leo."
The surrounding black and white images gradually faded away, and color returned to Leo's vision. He was back in his Pittsburgh office.
Roosevelt then gave a summary.
"The problem back then was systemic blood clotting, which led to cardiac arrest. That's why I needed a powerful extracorporeal circulation machine like the RFC to replace the heart in pumping blood."
"But the situation is different in Pittsburgh now."
"The United States is not in a Great Depression, Wall Street remains greedy and active, and global capital is still flowing."
"The problem with Pittsburgh is that, due to industrial decline and a low credit rating, the city has become a gangrene on its body."
"Blood flows in other parts of the body, but it just won't flow into Pittsburgh. Wall Street's money would rather speculate on Bitcoin in Silicon Valley than flow into the factories here."
"The external blood supply channels are blocked."
"So you can't expect the federal government to create a national RFC for you like it did back then, and Sanders doesn't have that capability either."
"You have to build a miniature RFC yourself in this Pittsburgh area."
"Force the blood to flow between Erie, Scranton, and Pittsburgh, create prosperity in this local area, until outside capital is attracted in."
Leo understood what Roosevelt meant.
"You want me to start a bank?"
Leo shook his head.
"That's impossible, Mr. President."
"Pennsylvania law has strict regulations prohibiting local governments from engaging in commercial banking activities. We cannot accept deposits, nor can we lend money as freely as commercial banks."
"This is the deadline."
"Those guys at the state banking regulator are just looking for an excuse to deal with me. If I dare to open a bank, they'll be in my office tomorrow with seals and handcuffs."
"Then don't call it a bank," Roosevelt corrected.
"A name is just a label; functionality is the core."
"You can call it a regional industrial turnover fund, or a supply chain settlement center."
"As long as you don't display a bank sign and don't accept deposits from citizens, the regulatory bureau can't do anything to you."
"We want to establish an accounting system within the rust belt, a regional credit closed loop."
Leo paused for a moment, then asked, "A closed-loop credit system?"
"Yes."
Roosevelt began to articulate his bold idea.
"You have five hundred million dollars in cash on hand right now."
"For traditional bureaucrats, this is money to be spent."
"But in the eyes of financiers, this is the best reserve fund."
"Listen, Leo."
"Starting tomorrow, when you pay Yili's steel mills, do not pay in full cash."
"You can pay 30% in cash."
"You'll pay for the remaining seventy percent with something new."
"We call it a consortium credit note."
Leo's brain raced as he tried to keep up with Roosevelt's train of thought.
"A receipt? That's just a simple IOU."
"That's right, it's an IOU. But it's backed by the city of Pittsburgh and guaranteed by $500 million in cash."
Roosevelt continued.
"Yili's steel mill got this invoice. What can he do with it?"
"He can take this receipt to Scranton to buy cement, or to Johnstown to buy glass."
"Because Scranton and Johnston are also members of the alliance, they recognize the value of this note."
"The cement plant in Scranton received the invoice, which they can use to pay for shipping to the Pittsburgh logistics center."
"The Pittsburgh logistics center received the invoice, which it can use to pay taxes to the city government or to pay rent for the premises."
"Look."
Roosevelt painted a vivid picture.
"This ticket went around in circles between Erie, Scranton, Johnstown, and Pittsburgh."
"It completed four transactions and drove four production runs."
"But throughout this entire process, not a single penny of cash was touched in the Pittsburgh city government's account."
"Cash will only actually flow out when the bill eventually needs to be converted into US dollars, or when it flows out of the alliance to purchase from external suppliers."
"This is the multiplier effect."
"As long as you're in this circle, this ticket is money."
"In this way, your five hundred million dollars can be spent as if it were two billion dollars."
"You're not just doing engineering, Leo."
"You are creating liquidity."
"You are issuing our own currency on this wasteland."
Leo sat in the chair, feeling a chill run down his spine.
This is a crazy idea.
This is equivalent to establishing an independent "currency zone" in western Pennsylvania under the existing dollar system.
Using that $500 million as a guarantee, an internal settlement tool was created through administrative power and the forced binding of the supply chain.
This is a transgression against the existing financial order.
"Is this... is this legal?"
Leo asked instinctively.
"If it's not called currency, then it's legal."
Roosevelt answered very simply.
"We call this supply chain finance services. It is a transfer of debt between companies, which is a legitimate business activity."
"As long as those mayors agree, as long as those factory owners agree, even if the Harrisburg bureaucrats figure out the trick, they won't be able to find any legal provisions to stop us."
"Because we don't print money, we just keep accounts."
Leo stood up and walked to the huge map.
He looked at the circle he had drawn himself that read "Pennsylvania Industrial Revitalization Alliance".
Previously, this circle was just a loose community of interests.
It survives by receiving one-way blood transfusions from Pittsburgh.
But what if this "credit closed loop" is added?
This circle has come alive.
It will become an organism with an independent circulatory system.
Erie's steel, Scranton's cement, Pittsburgh's logistics, Johnstown's energy.
They will be tightly locked together through this invisible network of tickets.
This not only solved the problem of funding shortage, but also created a deep political bond.
Once these cities get used to using these tickets, once their economies depend on this system.
They could never leave Pittsburgh again.
They had to uphold Leo's authority and ensure the financial security of Pittsburgh, because that was the anchor of value for the bills in their hands.
This is stronger than any agreement.
But Leo did not let this grand idea cloud his judgment.
He remained silent for a moment, his brows furrowing even more deeply.
"But isn't this still like drinking poison to quench thirst?"
Leo asked himself the question in his mind.
"No matter how we redefine it, no matter how we design a closed loop, it is still essentially mortgaging the future."
"We used $500 million as leverage to create a $2 billion false boom. But if no new real money flows in from outside, and if Yili's steel can't eventually be sold outside of Pennsylvania, this closed loop will eventually collapse due to the backlog of debt."
"At that time, it won't just be Pittsburgh that collapses, but the entire league. That will be a disaster ten times worse than what we are experiencing now."
Leo paused for a moment; he was waiting.
He expected Roosevelt to chuckle as usual, then point out the blind spot in his thinking and tell him that there was a perfect economic principle that could avoid this outcome.
But Roosevelt responded with frank admission.
"you're right."
Roosevelt's voice was calm.
"This is like drinking poison to quench thirst. Once that $500 million in margin is exhausted, and no new funds are injected, the game will end, and everyone will die."
Leo felt a chill run down his spine.
"What are we doing? We're leading everyone to their doom!"
"We are buying time," Roosevelt said. "As long as the balloon is inflated big enough, we still have a chance before it bursts."
"What opportunity? How do we break this deadlock?"
There are only two options.
Roosevelt held up one finger.
"First, I pray that another world war breaks out in this world."
Leo was stunned.
"My new policies did not actually end the Great Depression. It was the gunfire at Pearl Harbor, the battlefields in Europe, and the endless arms orders that completely absorbed America's excess capacity and allowed the country to truly recover."
"If World War III breaks out tomorrow, Pittsburgh's steel will immediately become a scarce strategic resource, and all your problems will be solved."
"That's impossible," Leo gritted his teeth. "I can't expect the world to end to save my city. What's the second option?"
Roosevelt's gaze pierced through the void and landed on Leo, carrying an undisguised ambition.
"Then hurry up, even faster."
"Before the money in your hand runs out, before that balloon bursts."
"Climb up."
"Climb to the highest position."
"When you become the President of the United States of America, holding the Federal Reserve's printing press, and can decide the flow of trillions of dollars in this country."
"This small debt crisis can naturally be resolved."
Roosevelt's voice was incredibly seductive.
"For a mayor, five hundred million dollars in bad debt is enough to land you a lifetime in jail."
"But for the President of the United States of America."
"Five hundred million dollars?"
"That's just a trivial statistical error, a simple adjustment of monetary policy, or even just a stroke of the pen, and it will become a national strategic investment."
"No debt can catch up with you once you climb high enough."
Roosevelt's laughter echoed deep within Leo's consciousness.
"Go, child."
"Turn this doomed crisis into the loudest salute for your coronation."
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