–A few simple questions that never have been answered

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

The nonsense in Washington boils down to a few simple questions that never seem to be answered

First the background:
The federal government is the largest customer and money provider in America, spending about $3.8 trillion dollars per year on goods, services and benefits. This compares with under $12 trillion for the entire domestic business sector.

(http://www.gpoaccess.gov/usbudget/fy11/hist.html ) and (http://research.stlouisfed.org/fredgraph.png?g=1jb )

The U.S. government also is America’s largest employer, with about 4.6 million full time employees:

Military: 1,430,000 (Department of Defense, Active Duty Military Personnel Strengths by Regional Area and by Country, September 30, 2010); 700,000 defense employees worldwide (Department of Defense Civilian Personnel Management Service); 2009 Number of Full-Time Federal Employees – 2,518,101 http://www2.census.gov/govs/apes/09fedfun.pdf

The federal government employs as many people as the top nine civilian employers – Wal-Mart, McDonalds, UPS, Sears, Home Depot, Target, IBM, GM and GE — combined.

( http://nyjobsource.com/largestemployers.html )

The President, the Tea (formerly Republican) Party, the Democrats, the media, most columnists and old-line economists agree federal spending should be reduced and/or federal taxes increased. The goal: To reduce the federal deficit.

The two biggest problems facing America are the recession and the related unemployment.

Now for the simple questions:
1. What do businesses do when their biggest customer reduces purchases? Do they fire employees, reduce purchases of goods and services or both?

2. When businesses fire employees, or reduce purchases of goods and services, how does this stimulate the economy or cut unemployment?

3. What do individuals do when their salaries and/or benefit checks are reduced? Do they spend less, save less or both?

4. When individuals spend less or save less, how does this stimulate the economy or cut unemployment?

5. Considering all of the above, how does a reduction in federal spending and/or an increase in taxing (aka “deficit reduction”) solve our two biggest related problems: the economy and unemployment?

These questions never are asked, much less answered, because the politicians do not care about the answers. Their prime concern is not the working (or non-working) Americans. The politicians prime concern is who gets elected, i.e., power.

President Obama, the Tea (formerly Republican) Party and the Democrats all have the same goal, with the differences being only in the execution. And I use the word “execution” intentionally, because whoever “wins,” the American public will lose. We, our children and our grandchildren will suffer the execution of joblessness, poverty and loss of health and lifestyle. Our great American dream will be shattered — needlessly — all for the greed, ambitions and ignorance of the politicians.

While we stress about traitors at Fort Hood, we give a free pass to traitors in Congress, who intentionally do more harm to America than al Qaeda ever could.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.


29 thoughts on “–A few simple questions that never have been answered

  1. “1. What do businesses do when their biggest customer reduces purchases? Do they fire employees, reduce purchases of goods and services or both?”

    Well, that is easy, do it the Apple Way. Apple has no real presence in any government. For years federal IT shunded Apple, going with Microsoft, Del, HP, IBM, and even Zenith Data Systems for desktop computing. What did Apple do? They stayed away and look at them now. BTW the feds stil don’t allow iPhones or iPads withing their borders, but they allow BB who requires ALL US government emails go throught their system in Canada. Do you really want to trust these guys with money?


    1. Actually, Apple’s lack of presence in the federal government has a lot to do with differences in business strategy between MS and Apple and also the fact that Apple appears as a sole source provider (like MS isn’t!) while PC’s come from a plethora of manufacturers. PC’s appear cheaper because capital costs are lower (although that is really a fiction that is starting to fade) despite total operating costs generally being higher. And finally, Macs have always had a presence within the federal government’s scientific community and that presence is starting to grow beyond that community. A lot. Including iPhones and iPads. And lastly, I really don’t think the story of Apple is relevant to the question you were addressing. They have a business strategy that doesn’t support the lowest bidder concept. But consumers have recognized the value they bring to the table. Businesses started recognizing it as well and now the federal government is recognizing it.


    2. Obama has an iPad. http://www.macobserver.com/tmo/article/president_obama_totes_his_ipad_2_onto_marine_one/

      But the reality is already stated. The Government requires bidding and accessibility. The government puts out their requirements, and companies offer bids meetings those requirements. Apple is a closed architecture, so they’re out of the running.

      Apple’s success now isn’t because they avoid government contracts but mainly because of iTunes (very low overhead).


  2. John,

    “. . . shunded. . . “??

    Anyway, got it. You hate the government, and don’t want give them tax money. Right? Well, I’m with you — partly. I despise the current Congress and the President, for what they are doing to the country. And I’ve long said federal taxes should gradually be reduced until they are gone.

    But as far as trusting them with money, you have no choice. The federal government creates dollars every time it makes any sort of payment.

    By the way, the following is on the Apple web site: “The Apple Federal Employee Purchase Program is a benefit provided by Apple Computer, Inc. (“Apple”) to employees of the U.S. Federal Government.”

    And this: “To better meet the purchasing needs of Federal agencies and employees, Apple has created two online Apple Stores that offer powerful desktop and portable computer solutions at special prices. . . Shop for your agency . . . This store is designed exclusively for Federal customers to purchase Apple and third-party products using their federally issued SmartPay credit card”

    Whoops, there goes another theory. 🙂

    Rodger Malcolm Mitchell


  3. Osama bin Laden said that his strategy was to bankrupt the US. I laughed at that thinking that this was impossible since the US can never go bankrupt as the sovereign issuer of a non-convertible floating rate currency. Now we see what his plan apparently was, and it is working in spades.


  4. I certainly don’t want to take credit away from our abhorrent politicians, but it seems to me they are just pawns in the game of global finance tyranny.

    There was an Adam Smith discussion at the NC website. This is from Damon Vrabel.

    “It seems ridiculous to point this out, but sovereign debt implies sovereignty. Right? Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions? How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? why would they be subjugated to the whims of auctions and traders?
    A true sovereign is in debt to nobody and is not traded in the public markets. For example, how would George Soros attack, say, the British royal family? (reference to currency speculation against the pound, etal) It’s not possible. They are sovereign. Their stock isn’t traded on NYSE. He can’t orchestrate a naked short sell strategy to destroy their credit and force them to restructure their assets. But he can do that to most of the other 6.7 billion people of the world by designing attack strategies against the companies they work for and the governments they depend on. The fact is that most countires are not sovereign (the few that are are being attacked by [the big Western intelligence services] or the military). Instead they are administrative districts or customers of the global banking establishment whose power has grown steadily over time based on the math of the bond market, currently ruled by the US dollar, and the expansionary nature of fractional lending. Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty by forcing debt-based currencies on countries.

    We longa ago lost the free market envisioned by Adam Smith in the “Wealth of Nations” [the book widely considered to be the foundation of modern economic theory]. Such a world would require sovereign currencies…Only then could there be a “wealth of nations.” But now e have nothing but the “debt of nations.” The exponential math of debt by definition meant that countries would only lose their wealth over time and become increasingly indebted to the global central banking network.”


  5. “Anyway, got it. You hate the government, and don’t want give them tax money. Right?”
    Wrong. I don’t hate my government nor do I hate my country. I, like many, just want our government to be responsible and stop taking the American people for granted. We do understand what is going on and we want business as usual to stop.

    By the way, the following is on the Apple web site: “The Apple Federal Employee Purchase Program is a benefit provided by Apple Computer, Inc. (“Apple”) to employees of the U.S. Federal Government.” True only to extent that Apple makes their products available for government to purchase. Apple doesn’t pursue government sales like IBB, Microsoft, Dell, HP, and tons of other smaller companies do. Apple doesn’t have the government in their strategic plan. What little government customers do have (NIH, NASA, and shrinking education sector) are all legacies. I should have this clear in my 1st post.


  6. Pete,

    “Instead they [countries] are administrative districts or customers of the global banking establishment whose power has grown steadily over time . . . “

    U.S. banks are so “powerful” they had to be bailed out by the “weak” federal government.

    ” Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty . . .”

    Damon should know, as he was from Harvard. I agree that the old-line, Nobel winning economists are mentally stuck in the gold standard days, and their theories are ridiculous today.

    “. . . by forcing debt-based currencies on countries”

    Although there is no reason for any Monetarily Sovereign nation to borrow, the elimination of T-securities would not change the fact that all money must be debt. Even if you got rid of all banks and all bank deposits and all borrowing, federally issued money would be the debt of the federal government.

    Rodger Malcolm Mitchell


  7. Rodger,

    Don’t you think the bailouts intensified the monopoly? “weak”? Insolvent and toxic perhaps, but it seems to me that shoveling loot their direction by way of the U.S. Govt. as a reward for criminal and fraudulent behavior was a demonstration of extraordinary, above the law kinda power.

    The oligopoly has tightened. Chase, Wells Fargo, BofA, all got bigger by swallowing other institutions.

    Can anyone explain conceptually why banks are allowed to counterfeit money but e.g. the mafia is not?

    And why is the attack on currency we know as counterfeiting illegal (with the exception of banks), while speculative attacks are just fine? Why aren’t the latter crimes? Why aren’t they considered acts of terrorism or war?


  8. Pete,

    One of the most serious problems in economics is language. People tend to invent clever new meanings for familiar words.

    The U.S.is not an “administrative district” of banks. Banks do not “counterfeit” money.

    Economics is tough enough to understand without sophistry.

    Rodger Malcolm Mitchell


  9. RR1White,

    Functionally, there is no upper limit. The government could credit each bank account in America, trillions of dollars, tomorrow.

    Legally, there currently is a limit called the “debt ceiling,” a useless, obsolete law that exists in no other nation in the world.

    Practically, the limit is an inflation that interest rates can’t control.

    Rodger Malcolm Mitchell


  10. Roger,

    I’m new to this arena and have much to learn. I am engaged though. I have spread your analysis throughout my discussion channels as it is the most educational stuff I’ve come across while researching. It seemed like you brushed aside some legitimate points regarding the banks.

    Oh well. Let me rephrase my question regarding “counterfeiting”. Im unclear on how a bank can create a loan, which as I understand it- is injecting new money into the money supply that is neither a deposit nor their own money- all at the strike of a computer key. Wouldn’t this be considered akin to the definition of counterfeiting if by some other institution (I like the Mafia as an example)? I realize that technically speaking it isn’t considered “counterfeiting”. Theortically speaking, isn’t it the same? Why the special privilege for lending institutions?

    Thanks, go easy on me ~ Pete


  11. Pete,

    The difference is the law. Counterfeiting is illegal; bank lending is legal. Banks don’t have a special privilege. If you lend your friend $10, and receive an IOU, you have created money. If you buy a traveler’s check, you and the issuer have created money.

    The law exists because lending benefits society. Mortgages, money markets, bank accounts are loans the benefit society. They are money.

    Rodger Malcolm Mitchell


  12. “The law exists because lending benefits society. Mortgages, money markets, bank accounts are loans that benefit society.”

    If one were only on this planet for the last 10 years they might find that statement debatable.

    Don’t I actually have to cede $10 of my dollars when I lend my friend my money? I actually lose $10 in the transaction. No?

    Boy, fractional reserve banking is a hoot. Seems like being able to create money at 10 to 1 on your reserves and charge interest on it is quite the racket… legal or otherwise.


  13. Pete,

    I’ve been on this planet 76 years. Does that count?

    If you give your friend $10, you lose $10. But if you lend your friend $10, you lose nothing. His IOU is money in your pocket.

    Fractional “reserve” banking operationally does not exist, because banks can get all the reserves they want, from the Fed and the public. Also, lending creates reserves. It’s actually fractional capital banking.

    If you think the banks have it good, you yourself could do even better. You could lend 100% of your money, and then lend even more, if you borrow money. The banks actually are limited by their capital. You aren’t.

    Rodger Malcolm Mitchell


  14. I guess what I was trying to clarify is the difference (seemingly) between my personal transaction with my friend and the loan from the bank.

    When I loan my friend the tensky, I get the I.O.U., even steven, I get that. What I’m saying is that I gave up something that already existed in exhange for repayment.

    Is that the same as when a bank just creates credit digits from nothing as the out going loan? If they aren’t actually using a deposit or their own money, and are creating it from something that didn’t previously exist, isn’t that like a financial magic wand? Or is this a just a necessary tool to assist banks in facilitating “growth”?

    My comment regarding the last 10 years was only to point out that many of the lending practices that have been exposed recently have appeared more predatory and weapon-like than what might be “benefiting society”.

    Hopefully I’ll be better equipped to break this down for my fellow lil’ brained peers in the personal roundtable. Getting them to wrap their heads around Monetary Sovereignty was daunting to say the least. Baby steps…

    Regards, Pete


    1. I think what you’re trying to say is that a bank that only has $10 capital can lend out $100 to ten different people, creating $100 in money on $10 of capital. But if I were to have $10 in my pocket, I can’t loan it out ten times, but I could give out ten $10 IOU’s.


  15. Pete,

    When you loaned your friend $10, you created $10. Before the loan, there was $10 in the economy (yours). After the loan, there was $20 (the IOU and the $10 you loaned him).

    Same for the bank. In exchange for dollars, they receive an IOU. It’s called a loan document. Exactly the same scenario. Financial lending creates money, no matter who does it.

    Your friends will not believe you. They will tell you you’re crazy. They think federal finances are the same as personal finances.

    They can’t comprehend Federal Deficits = Net Private Saving. They don’t understand that when the government pays a bill it creates money, but when they pay a bill they transfer money. They don’t understand that states and cities are different from the federal government. They think federal taxes pay for federal spending.

    I would much rather teach strangers than try to educate my friends. Remember, “A prophet is not without honour save in his own country . . .”

    Rodger Malcolm Mitchell


  16. “Your friends will not believe you. They will tell you you’re crazy. They think federal finances are the same as personal finances.”

    Yep, with a friendly dash of hostility to boot…Despite the fact that I found your MS summaries easy to read and understand, not mired in financial jargon (although as you say “counterintuitive”), most can’t escape the mental box they are trapped in when you put it in front of them.

    Keep fighting the good fight.

    ~ Pete


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s