“First do no harm.” How “Dr.” Jerome Powell will worsen the inflation and cause a recession

 

“Dr.” Jerome Powell: I am going to cure your anemia by applying leeches to drain your blood.

A medical doctor will tell you, if you want to prevent and/or cure a disease, it helps to understand and address the cause(s) of the disease. But first, do no harm.

And to identify and determine the cause of the disease, look at the symptoms.  Today’s economy is diseased, and the symptom is inflation, which can precede a recession.

Inflation is a general increase in prices. 

Every price increase can be attributed to scarcity. Barring government interference (i.e,. price controls, taxes, etc.) market prices do not rise on any product when there is a surfeit of that product.

“Dr. Powell’s treatment for inflation are:

  1. Raise interest rates
  2. Reduce money growth.

And he wishes to do this without causing a recession .

Today’s inflation is caused by multiple scarcities: energy, food, supply chain, fertilizer, computer chips, lumber, baby formula,  rare earth elements, labor, etc., etc. 

Powell believes that the inflation is caused by the federal government’s massive spending to prevent a COVID recession. In that regard, the spending worked.

Because of massive federal spending, COVID was able to cause only the briefest possible recession: Two quarters.

COVID killed almost 1 million Americans and hospitalized many millions more. Yet the federal government was able to limit the drop in GDP to just two quarters. The 4th quarter of 2019 and the first quarter of 2020.

This was an amazing feat, and will be remembered as a great financial success for the government..

Why did federal spending limit what otherwise would have been a long, harsh depression? You might remember that the Great Depression ended in 1941, the same year we entered World War II. 

That was not a coincidence. Recessions and depressions are symptoms of shortages, and most shortages are symptoms of a lack of money.

Look again at the partial list of today’s shortages, and see what the causes are:

  1. Energy: Lack of federal money spent on oil drilling and refining, exacerbated by the lack of money spent on the development of alternative energy sources (wind, nuclear, hydro, geothermal, solar. )
    America has vast deserts and other areas that receive plentiful sunshine, perfect for solar energy.
  2. Food: Lack of federal money spent to resolve supply chain issues, labor issues, factory issues, workers’ inability to travel to jobs, fertilizer costs, import restrictions. (See: 5 Reasons Why a Global Food Shortage is Becoming a Real Concern)
  3. Fertilizer and many other products: A big culprit is lack of money to create a safe, viable supply chain. Our current ports, truck lines and other segments of the supply chain all are at the minimum level required for normal times, with no backup. This always was an existential risk for the U.S. economy,
    The Midwest and shore areas of America are good locations for wind energy.
    and now COVID has disrupted the entire length of the chain. To protect America, the government should help strengthen the chain.
  4. Computer chips: Most are produced in foreign nations. This is too vital a product to rely on foreign production. The federal government should provide money incentives for domestic production to safeguard our economy.
  5. Labor: People won’t work for low salaries. Federal spending FICA and providing Medicare for All would give businesses financial room to raise salaries. Additional tax incentives for salaries would encourage businesses to raise pay.

None of the above problems will be addressed by “Dr. Powell’s” prescription of interest rate increases or by federal spending decreases. He is applying leeches to cure anemia. 

Chairman Powell thinks the problem is too much money in the economy, when exactly the opposite is true. Too little money is available to cure the shortages that are the real cause of inflation.

The economy is not “overheated,” as Powell claims. Despite trillions having been spent, the current problem is lack of continued spending.

When COVID hit us, the federal government’s spending was good economic medicine that addressed the symptoms and prevented a deep recession, but the underlying shortage “diseases” remain.

Powell wants to discontinue the medicine because he wrongly believes, despite ample evidence, that federal spending causes inflation and recession.

This image has an empty alt attribute; its file name is image-3.png
The blue line shows changes in federal deficit spending. Diagonal lines show reduced deficit trends leading to recessions. The vertical gray bars are the recessions caused by reduced deficit growth — exactly what Powell wants to do.

The trend lines show that recessions begin after periods of reduced federal deficit growth. Recessions are cured by increased federal deficit growth.

Inflation (red) vs. federal deficit spending (blue). Data do not indicate that federal deficit spending causes inflation.

Federal deficit spending does not cause inflations or recessions. The opposite is true. The lack of federal spending causes inflations and recessions.

In Summary, Chairman Powell figuratively is applying leeches to cure anemia. He is doing exactly the wrong things to cure inflation and to prevent recessions. 

Increasing interest rates will not cure the problem that actually causes inflation: Shortages of key products and services. Nor will cuts to federal deficits prevent a recession.

The Fed cannot do what it was not designed to do. Congress, not the Fed, can and must act to cure the shortages that cause inflation.

Democrats beware: Powell’s policies will worsen the inflation and cause a deep recession, and unless Congress acts to cure the shortages, we will have a depression.

And Democrats will receive the blame.

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[No rational person would take dollars from the economy and give them to a federal government that has the infinite ability to create dollars.]

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty

Facebook: Rodger Malcolm Mitchell

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Will the Fed be able to fight inflation and not cause a recession or depression?

Congress has given the Federal Reserve the task of controlling inflation without causing a recession.

When a product or service is in short supply, the price goes up. As you have read on this blog, inflation always is caused by shortages of key goods and services.

Not by government spending, not by government waste, not by interest rates — inflation always has the same cause: Shortages.

In this regard, the single most important group of inflation-causing products is energy: Oil, gas, solar, wind, geothermal, and nuclear, with a focus on oil.

The blue line is inflation. The purple line is oil pricing. The vertical gray bars are recessions. Inflation tends to parallel oil pricing. Oil shortages cause oil prices to rise, which in turn, leads to inflation.

Other factors play some inflationary role, of course, but oil has been paramount. Thus, a powerful method for combating inflation would be to combat an increase in oil prices.

Lower oil prices can result from increased oil supplies and/or by increased use of alternatives to oil. All of this can be facilitated via federal deficit spending.

The government can reward directly or via tax laws, additional oil drilling, refining, and transportation. It  can do the same for all other energy sources: Natural gas, solar, wind, ocean, geothermal, hydrogen, bio, and nuclear energy.

Additionally, it can reward and fund alternative energy uses: Electric cars, busses, planes, trains, energy-efficient appliances, homes, offices, and buildings.

Thus counterintuitively, the proper application of increased rather than decreased deficit spending can reduce inflation.

So-called “excessive” federal spending, and a so-called “overheated” (rapidly growing) economy, do not seem to cause inflation. Generally, they cause prosperity.

Again, the blue line is inflation. The red line represents federal deficit spending. No parallelism here.

The above graph also shows that the growth of federal deficit spending declines in advance of recessions and rises during recessions (to cure recessions).

The reason: Economic growth requires money growth, and federal spending helps boost economic growth.

Without sufficient money growth we have recessions, and the only way those recessions are cured is with the federal input of dollars. That is how the government cured the short-lived COVID recession of 2020 and all previous recessions.

Reducing federal input now, will put us right back into a recession.

The Federal Reserve tells us it needs to increase interest rates to “cool” the economy. What does cooling the economy really mean? Why would we want to “cool” economic growth?

Again, the blue line is inflation. The red line shows interest rates (Fed Funds rate). The lines are reasonably parallel.

“Cooling” an economy means to backoff on federal deficit spending, which will recess the economy, i.e. move it toward recession.

The Fed has hoped to “cool” the economy without causing a recession. That is like draining blood while hoping not to cause anemia.

The above graph indicates that high interest rates are associated with high inflation and low interest rates are associated with low inflation. The Fed raises interest rates when it expects inflation, but that doesn’t cure the causes of inflation.

Compare interest rates to recessions (those vertical gray bars). We see a very strong tendency for interest rates to rise in advance of recessions and to come down during recessions. This demonstrates the recessionary effect of raising interest rates.

The Fed’s Data Show:

  1. Inflations are caused by shortages of key goods and services.
  2. Inflations are not caused by federal deficit spending, which if applied toward reducing shortages, actually can cure inflations.
  3. Oil shortages cause the price of oil to rise. Oil prices affect the prices of most goods and services, which directly links shortages of oil to inflation.
  4. The federal government has many financial tools to prevent oil shortages, including tax and money benefits for production plus tax and money benefits for reduced usage.
  5. Federal deficit spending grows the economy by adding dollars to the economy. Reductions in deficit growth lead to recessions. Increases in deficit growth cure recessions.
  6. Increasing interest rates can have a modest ability to temper inflations by increasing the dollar’s value. But these increases also lead to recessions by making investments more expensive.
  7. The economy (i.e. the private sector) never should be “cooled,” in that “cooling” implies the recessionary slowing of economic growth.

Inflation should be fought by federal spending to increase the supplies of scarce products or services and by helping the people afford to spend on goods and services. That is what made the COVID recession brief.

Given its Congressional mandate to control inflation, what tools does the Fed have to accomplish its mission?

Here is the opinion of a website named “the balance.”

How the Federal Reserve Controls Inflation
The Fed has several tools it traditionally uses to tame inflation. 

Open Market Operations (OMO)
The Fed buys or sells securities, typically Treasury notes, from its member banks. It buys securities when it wants them to have more money to lend. It sells these securities, which the banks are forced to buy. 

Selling securities (which the Fed is doing now) reduces the private sector’s liquidity, which is recessive in that it effectively reduces the economy’s spending-money supply.

Fed Funds Rate (FFR)
The FFR is the interest rate banks charge for overnight loans they make to each other.

Discount Rate
The Fed also changes the discount rate. That’s the interest rate the Fed charges to allow banks to borrow funds from the Fed’s discount window.

Interest rate increases supposedly mitigate against inflation by increasing the demand for (and price of) U.S. dollars (with which to purchase dollar-denominated bonds).

But that effect, if it exists, is quite small, as inflation does not seem to respond as the Fed predicts.

Managing Public Expectations
Former Chairman Ben Bernanke noted that public expectations of inflation are an important influencer of the inflation rate. 

Once people anticipate future price increases, they create a self-fulfilling prophecy. They plan for future price increases by buying more now, thus driving up inflation even more.

Tellingly, none of the Fed’s tools addresses the fundamental cause of inflation: Shortages of key goods and services.

Today’s inflation is due to shortages of food, lumber, computer chips, labor, supply chains, etc., and particularly of energy.

None of these shortages will be ameliorated by the Fed’s actions. In short, the Fed has been told to battle inflation and has been given, no weapons for the fight.

The Fed’s history of responding to inflation gives you an insight into what may work and what doesn’t.

Bernanke said the mistake the Fed made in controlling inflation in the 1970s was its go-stop monetary policy. It raised rates to combat inflation, then lowered them to avoid recession.

That volatility convinced businesses to keep their prices high.

It wasn’t the “stop-go” policy. The Fed failed, and still fails, to recognize that inflation is not caused by the oft-quoted but mythical, “Too much money chasing too few goods.”

Inflation, very simply, is caused by shortages — i.e. the “too few goods” part of the quote. In effect, the Fed has tried to cure a sprained ankle by an amputation.

Supply Chain Woes: There is a shortage of shipping containers because so many are full or stuck on vessels waiting to unload.

Big rig trucks are sitting idle and unable to move goods to alleviate the backlog because mechanics are waiting on parts for repairs which are at the port waiting to be trucked.

Equipment such as water pumps, NOX sensors, and rebuild kits are delayed for the want of a truck to deliver the parts.

And manufacturers of new trucks are running into the same problem as car manufacturers — a chip shortage — creating a reported backlog of 260,000 truck orders.

Nothing the Fed has the power to do will alleviate the supply chain woes. Congress, however, does have the tools at its disposal.

It can pay for the import and/or production of shipping containers. It can pay for more truck imports or production. It can pay for more truck drivers. It can pay for more chips to be imported or manufactured.

Congress and the President uniquely have the power to fix what is wrong with the U.S. economy, including inflation, but to do so, they must recognize that the problem is scarcity, not “heat.”

The problem doesn’t seem to be getting better. It’s beginning to look like the supply chain crisis will persist through all of 2022.

The most pressing problem in the supply chain is the shortage of semiconductor chipswhich has damaged many sectors, and is expected to last beyond 2022. This is the most critical shortage impacting manufacturing.

If a product has any sort of electronics, it’s got a chip.

Suppliers are planning on upping production, but the new facilities won’t be online to alleviate the shortfall until 2023 or 2024. Other experts are more optimistic.

Intel is back in the chip game and plans to open two facilities in Arizona at a cost of $20 billion. TSMC is also building a plant in the state as well at a cost of $12 billion.

Malaysia’s Unisem, a major chip assembler and tester, will close it’s Ipoh plants until September 15 to stop the spread of COVID-19 after three employees died.

Rohm, who supplies chips to Toyota and Ford, expects the shortage to continue through 2022.

The Fed can do nothing to correct the chip problem. Congress can aid financially, in the purchase and production of chips.

New Automobiles, Used Vehicles and Parts
“…the auto industry faces a volume drop of up to 36 million units over the next three years…”— AlixPartners

Due to a worldwide shortage of semiconductor chips, car manufacturers have cut back or stopped production on some new vehicles. An estimated 7.7 million vehicles will not be produced this year. This is driving up prices and demand for used vehicles, which is exacerbating ongoing delays for parts.

Demand for used vehicles has been climbing, mostly due to the downturn in new car production and COVID. Auto manufacturers are reporting shortages of wiring harnesses, plastics and glass, in addition to the chip problem. This is impacting auto parts supplies. Also, it looks as if there may be a tire shortagein the future, according to Car and Driver.

Arabica Coffee Beans:Coffee is one of the biggest imports. after petroleum for many nations. The price is the highest since 2014 and Arabica beans have risen 40%.

Colombia and Brazil account for two-thirds of the world’s Arabica production and both nations’ output has been slashed.

Lumber, Paper Pulp, Toilet Paper, Cardboard, Books. “Soaring lumber prices that have tripled over the past 12 months has caused the price of an average new single-family home to increase by $35,872.” — National Association of Home Builders

Labor shortages, and greater demand for boxes from online merchants is currently impacting many industries that rely on paper products. 

Wood pulp, a byproduct of wood used as a raw material for paper products, has increased 50.2% over the past year.

The toilet paper shortage is currently as bad as it was at the beginning of the pandemic. Only 60% of orders to retailers are being shipped. Costco is reinstating purchasing limits across the nation.

Labor shortages have two fundamental causes, both of which can be addressed by the federal government: Insufficient mechanization and insufficient net pay to workers.

The federal government could help fund labor-saving mechanization via tax breaks and/or via direct subsidy.

The federal government could encourage more hiring by eliminating the useless, regressive FICA tax, which penalizes businesses for hiring and workers for working.

Additionally, offering free Medicare for All would eliminate another hiring cost from those companies that now fund healthcare insurance for workers.

Increasing Social Security benefits would eliminate the need for company-sponsored retirement plans.

Shortages of wheat, barley, beans, peas:Probably no shortage is more disconcerting than food, especially a staple product like wheat.

You can blame a drought in Southwest, West, and Northern Great Plains states, affecting 98% of the spring wheat production.

The federal government should fund farmers for growing rather than paying them for not growing. This includes paying for labor and allowing more immigrant labor, in addition to funding farming education, equipment, and research into more productive crop species — things that will increase food production.

Shortages of HVAC equipment, parts, refrigerant: a decline of 40% of its annual production
Contractors are reporting difficulty sourcing parts and refrigerant due to the supply chain disruption and chip shortage.

The labor shortage has also visited the industry. Raw materials that go into these systems such as steel, aluminum, copper and plastics are in short supply. Also scarce are electrical components, such as motors and compressors, along with evaporator coils, resins for pans, and control boards.

Shortages of Silicone rubber: Silicone rubber prices have increased up to 25% and further hikes are predicted. This shortfall in supply appears to be driven by scarcity due to the supply chain, increased demand, and labor shortage.

Shortage of Appliances: COVID messed up both the supply and demand side of major appliances like refrigerators, freezers, dishwashers, dryers, dehumidifiers, and microwaves. 

Manufacturers are grappling with a shortage of stainless steel and a 20% increase in the cost of raw materials. Expect higher prices and delays of up to 8 months.

Shortage of Chicken Wings: Climate change, along with rising demand has created a shortage of chicken wings. The price of wings is up a reported 87%.

Shortage of Pool Liners, Chemicals, Chlorine Tabs: Shortages of PVC pipe, valves, tile, heaters, and concrete used in other industries is causing construction delays. The ongoing national labor shortage is negatively impacting pool and spa businesses.

Chlorine tablets are in short supply after a fire at the BioLab facility, and of course, COVID-19. 

Shortage of Drywall: Thanks to the Texas spring blizzard, a facility producing latex was severely damaged. This, along with a shortage of synthetic gypsum, led to the a decline in inventory.

Shortage of Printers and Ink: One of the unforeseen consequences of millions of people working at home was the increased demand for printers and ink. 

There is a backlog of billions of dollars of consumer goods waiting at the nation’s ports — in addition to all the supplies to keep the economy moving.

The backlog at ports is stalling the moving of goods through the supply chain and now is threatening economic collapse on a global scale.

IN SUMMARY

The fundamental causes of all inflations are shortages. The fundamental effect of inflations is they reduce the people’s ability to buy.

Congress and the President have the tools to combat both the causes and effects of inflation. To combat the causes, the government can use its infinite financial power to reduce shortages.

To combat the effects of inflation, the government can use its infinite financial power to provide the populace with net, take-home money.

The Fed cannot address the shortages that cause inflations, nor can it cure the effects of inflations. It doesn’t have the tools.

Raising interest rates and selling Treasuries to cure inflation is like using a sponge to cure a flood.

Congress and the President have the spending and tools to control all aspects of the economy, including inflation, deflation, recession, depression, and growth.

They should use them.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

We love every detail of the law

We love every detail, every aspect of THE LAW

We are not political hacks

—–/////—–

Minority women are most affected if abortion is banned or limited

If you are Black or Hispanic in a state that already limits access to abortions, you are far more likely than a white woman to have one

By Emily Wagster Pettus and Leah Willingham, Associated Press February 1, 2022

In Texas, they’re 59% of the population and 74% of those receiving abortions. The numbers in Alabama are 35% and 70%. In Louisiana, minorities represent 42% of the population, according to the state Health Department, and about 72% of those receiving abortions.

“Abortion restrictions are racist,” said Cathy Torres, a 25-year-old organizing manager with Frontera Fund, a Texas organization that helps women pay for abortions. “They directly impact people of color, Black, brown, Indigenous people … people who are trying to make ends meet.”

Schools often have ineffective or inadequate sex education.

If abortions are outlawed, those same women — often poor — will likely have the hardest time traveling to distant parts of the country to terminate pregnancies or raising children they might struggle to afford, said Roberts, who is Black.

—–/////—–

The Turnaway Study conducted at the University of California, San Francisco, shows that women experience harm from being denied a wanted abortion.* These findings have far-reaching implications for lawmakers, judges, health agencies, and others as they consider policies that restrict abortion access.

Denying a woman an abortion creates economic hardship and insecurity which lasts for years.

• Women who were turned away and went on to give birth experienced an increase in household poverty lasting at least four years relative to those who received an abortion.
• Years after an abortion denial, women were more likely to not have enough money to cover basic living expenses like food, housing, and transportation.
• Being denied an abortion lowered a woman’s credit score, increased a woman’s amount of debt, and increased the number of her negative public financial records, such as bankruptcies and evictions.

Women turned away from getting an abortion are more likely to stay in contact with a violent partner. They are also more likely to raise the resulting child alone.

Physical violence from the man involved in the pregnancy decreased for women who received abortions but not for the women who were denied abortions and gave birth.
• By five years, women denied abortions were more likely to be raising children alone – without family members or male partners – compared to women who received an abortion.

The financial well-being and development of children is negatively impacted when their mothers are denied abortion.

• The children women already have when they seek abortions show worse child development when their mother is denied an abortion compared to the children of women who receive one.
• Children born due to abortion denial are more likely to live below the federal poverty level than children born from a subsequent pregnancy to women who received the abortion.
• Carrying an unwanted pregnancy to term is associated with poorer maternal bonding, such as feeling trapped or resenting the baby, with the child born after abortion denial, compared to the next child born to a woman who received an abortion.

Giving birth is connected to more serious health problems than having an abortion.

• Women who were denied an abortion and gave birth reported more life-threatening complications like eclampsia and postpartum hemorrhage than those who received wanted abortions.
• Women who were denied an abortion and gave birth instead reported more chronic headaches or migraines, joint pain, and gestational hypertension than those who had an abortion.
• The higher risks of childbirth were tragically demonstrated by two women who were denied an abortion and died following delivery. No women died from an abortion.

Women who receive a wanted abortion are more financially stable, set more ambitious goals, raise children under more stable conditions, and are more likely to have a wanted child later.

Don’t think we Supreme Court Justices care only about punishing women, especially poor women or women of color.

We also plan to void all laws that aid immigrants and immigrants’ children,  birthright children, gays, Muslims, the elderly, and poor people.

We’re not going to feed them, educate them, house them, clothe them or help them to vote. We want them to be an impoverished, uneducated helpless underclass whom we can blame for crime and then imprison or enslave, like the good old days.

We’re pro-life except for guns and children already born.

And don’t kid yourself about us being independent arbiters. We’re as political as Chicago aldermen, and just as honest. (Hey, why would being married to a crazy white supremacist bar me from judging crazy white supremacists?)

In short, we will twist the words of the Constitution, while claiming we are “strict constructionists” (except for the 2nd Amendment, when we choose to ignore the first thirteen words).

We’ll also ignore changing times, so we can direct America into the most bigoted, narrow-minded, short-sighted, archaic, unAmerican, mean-spirited avenues available to us, so long as they don’t hurt the rich, white, and powerful.

We like the rich, white, and powerful, and the rich, white, and powerful like us (except for Justice Thomas who despises blacks even more than he despises whites).

We have lifetime appointments, so we can do anything we want. We love every detail of the law. Just don’t expect us to give a damn about you people, too.

First they came - Unitarian Universalist Service Committee

 

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Fed Chair Jerome Powell, maybe pigs will fly

Federal Reserve chair vows to curb inflation with hikes that risk economic pain | The Japan Times

Powell: I know that inflation hurts, but I’m going to try to reduce inflation without causing a recession.

Sad family - Frog Financial Management

Alice: Our landlord said he has to raise our rent because his costs have increased. I can’t afford that. What can you do about it?

P: I’m going to raise interest rates.

Alice: But that will increase my landlord’s costs. Won’t that make the situation worse?

P: Raising interest rates is what I always do to fight inflation. It may not really work, but the politicians think it does, so it’s what I do

A: There’s a food shortage, so our food costs have gone up. I can’t afford to feed my children. What can you do about that?

P: I’m going to raise interest rates.

A: But that won’t help the food shortage. It only will make it harder for farmers to borrow., which will increase farmers’ costs? How will that lower food prices?

P: It won’t, but I also plan to sell off my T-bonds.

A: I don’t know much about T-bonds, but won’t that take money out of the economy? How does taking money out of the economy help the food shortage?

P: Beats me.

A. And the price of gas has gone up due to a shortage of oil. What are you doing about that?

P: I’m going to raise interest rates and sell off my T-bonds.

A: How does raising interest rates and selling off bonds increase gas supply?

P: It doesn’t, but it’s what I do. I think it’s supposed to cool the economy, which by definition, is a recession.

A: You want to cause a recession — a reduction in trade and industrial activity?

Federal Reserve chair vows to curb inflation with hikes that risk economic pain | The Japan Times

P: Yes, but please don’t call it a recession. Let’s call it “a cooling process.”

A: I’m unemployed. I easily could get a job, but when I pay FICA taxes and income taxes, and my employer pays his share of FICA and our healthcare insurance policy, my net take-home pay won’t cover inflation. What are you doing about that?

P: I’m going to raise interest rates and sell off my T-bonds.

Sad family - Frog Financial Management

A: Will that increase my net take-home pay?

P: Of course not. I can’t eliminate FICA, provide Medicare for All, or increase the Standard Deduction, all of which would increase your net pay.

I also can’t stop taxing Social Security benefits and IRA distributions to provide you with more long term net pay.

But, raising interest rates and selling off my bonds is what I do. It doesn’t work, but it makes me look prudent.

A: I understand there’s a shortage of computer chips, which causes a shortage of everything that uses computer chips, and those shortages cause the prices of almost everything electric to increase. What can you do about that?

P: The usual. I’m going to raise interest rates and sell off my T-bonds.

A: Again, how will that cure the shortage of computer chips?

P: It won’t. It only will make borrowing more expensive, and there’ll be less money in the economy, so people like you will have less money to spend. Fundamentally, I’m going to impoverish you to fight the shortage of goods and services that is causing inflation.

A. That’s crazy. Why make borrowing more expensive, which is recessive, and take money out of the economy, which also is recessive?

Recession isn’t the opposite of inflation. Deflation is the opposite of inflation. Your policies could cause stagflation, which is even worse.

The only way to reduce prices without a recession is to cure the causes of inflation: Shortages of key goods and services.

P: Sure, you know that, but the public doesn’t. They think I know what I’m doing.

A: While we’re talking about inflation, and everything being more expensive, the cost of medical insurance has gone up. There’s a shortage of doctors, nurses, and hospital beds, along with a shortage of medical equipment. What can you do about all those shortages that are causing medical inflation?

P:  Don’t you get it? I can’t cure shortages of anything — not shortages of food, nor oil, nor houses, nor computer chips, nor shipping, nor doctors, nor nurses, nor hospital beds — nothing. I have no control over the shortages that are causing inflation.

All I can do is cause a shortage of money, and that, together with all those other shortages will cause the economy to cool, in other words, a . . . .

A: Recession.

P: Or maybe, that stagflation thing. In short, I actually will cause a recession to cure inflation, but I won’t call it a recession. Let’s call it “prudent management.”

A: So if you can’t cure the inflation without causing a recession or, God forbid, a depression, who can?

Federal Reserve chair vows to curb inflation with hikes that risk economic pain | The Japan Times

P: Congress and the President have the power to cure the shortages that cause inflation, and not cause a recession or depression.

To cure the shortages of food, Congress can pay farmers to grow. Previously we’ve paid them not to grow, so prices would be higher.

Now we can reverse that.

A: And oil shortages, computer chip shortages, shipping shortages, and labor shortages?

P: Yes, I’ll let you in on a little secret. Congress and the President could pay to solve all those shortages, which would bring down prices. They have the power.

All I can do is fiddle with interest rates.

Sad family - Frog Financial Management

A: So why . . . ?

P: Today’s Congress is hopeless.

The Republicans don’t care about the economy. All they want to do is win elections.

So they act outraged about everything, but they don’t have actual plans to do anything about the economy.

Let’s face it, white supremacists, bigots, anti-vaxers, anti-gay, anti-immigrant, anti-Mulsim, and anti-black dummies storming Congress are not the kind of people likely to have created coherent plans to improve the economy.

The Dems want to grow the economy, but they think federal spending to cure shortages would cause, not cure, inflation.

Frankly, I don’t understand how curing the shortages of food, oil, computer chips, labor, etc., etc., etc,. could cause inflation, but the Dems are terrorized by the word “debt.”

A: But isn’t debt bad?

P: Nah, debt is bad only if you can’t afford to pay for it. But the federal government never can run short of its own sovereign currency, the U.S. dollar. It can pay off any size of debt instantly, without levying a penny in taxes.

A: So why don’t you just tell the American people all this? Why do you pretend you can cure inflation without causing a recession or depression when you know you can’t.

P: There’s an old story that comes to mind:

The King sentenced a man to death. The man pleaded, “If you spare me, I promise that in one year, I will teach this pig to fly.”

The King laughed and said, “I will give you one year. If the pig doesn’t fly, I will kill you myself.”

When the man’s friends asked him how he could make such a ridiculous promise, the man replied, “Much can happen in a year. The pig might die; the King might die, or I might die.

“Or who knows, I might teach the pig to fly.”

So much could happen in a year. We could go to war with Russia or China, and everyone would forget about inflation. A meteor could fall on Washington. COVID could act up again. The Supreme Court could outlaw gays.

Many things could divert our concerns from inflation.

And maybe pigs will fly.

In any event, Powell’s claims have bought him some lucrative time as Chair of the Fed (over $200K per year, plus many great benefits), and who knows, inflation might just go away, and he’d get accolades, whether or not we had a recession.

It worked for Paul Volcker.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY