–Lesson in double talk: The government is broke. To hell with Joplin and the South.

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Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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In the post titled: “Might Irene have a positive effect,” I wondered whether this disaster would bring Congress and the President to their senses, and begin a move away from the ridiculous, “small-government,” Tea/Republican, economic hypotheses.

Washington Post: FEMA, to pay for Irene damage, delays funds for rebuilding in tornado-ravaged areas: By Ed O’Keefe, Published: August 28

The Federal Emergency Management Agency is temporarily suspending some payments to rebuild roads, schools and other structures destroyed during spring tornadoes in Joplin, Mo., and Southern states and other recent natural disasters to pay for damage caused by Hurricane Irene.

Has our Monetarily Sovereign government – a government with the unlimited ability to pay any bills at any time – somehow run short of money? No. A Monetarily Sovereign government cannot run short of money.

But Congress, caring little for the human suffering in Joplin and the Southern states, prefers to cut off the funding these people so desperately need, rather than increase the federal deficit. Why? No reason. None at all.

Imagine a drowning person begging for a life line, and the Tea/Republicans refusing: “No, although I have an unlimited number of life lines, it is against my principles (and the 2012 election) to assist you unless I unnecessarily can steal a life line from some other drowning person.

With initial damage assessments from the storm potentially in the tens of billions of dollars, the Obama administration will need to request supplemental funding from Congress, possibly provoking another fight over federal spending as a new congressional “supercommittee” prepares to identify trillions of dollars in government spending cuts.

You remember the “supercommitte,” don’t you? That’s the group assigned to the task of applying leeches to cure the nation’s anemia. They will be judged on the amount of blood they can drain from this dying patient.

FEMA said Sunday it will still pay people eligible for individual storm assistance and some states recouping emergency response costs from previous disasters, but it will restrict payments for older, longer-term public rebuilding and mitigation projects to ensure the solvency of the federal disaster relief fund.

The decision affects projects tied to spring tornadoes and other disasters dating back several years and “prioritizes the immediate, urgent needs of survivors and states when preparing for or responding to a disaster,” said FEMA spokeswoman Rachel Racusen.

If you owned a home in Joplin, now destroyed, I’m sure you won’t mind if the government takes care of the East coast, first. After all, they have priority, and the government is “broke.” How do I know? John Boehner said so.

Federal officials Sunday would not estimate how much Irene’s damage could cost, but New Jersey Gov. Chris Christie (R), speaking Sunday on NBC’s “Meet the Press,” said damage estimates “are going to be in the billions of dollars . . . if not the tens of billions of dollars.”

Christie and other governors credited Obama for quickly issuing emergency declarations for their states in advance of the storm to provide money for their response efforts and to allow FEMA officials to assist state and local leaders in initial damage assessments.

Say, what? Republican Governor Christie is glad to receive federal money?????

But the moves will further sap the federal disaster fund, which over the weekend had about $900 million, according to FEMA, less than the $1 billion officials prefer to keep on hand.

On Saturday, House Appropriations Committee Chairman Harold Rogers (R-Ky.) called on the Senate to quickly pass the House GOP’s version of the annual Homeland Security spending measure, which includes $1 billion in additional money for the disaster fund this year and $2.65 billion for fiscal 2012.

Problem solved: The damage from Irene will be “in the billions of dollars . . . if not the tens of billions of dollars.” FEMA has $900 million and there is an additional $1 billion in the Homeland Security spending measure. Anyone see a problem, here?

The Obama administration “has let the fund reach critically low levels, putting continued recovery at risk, without a plan for the future or a clear method for dealing with new disasters,” Rogers said.

Let’s see now, the Republican House Appropriations Committee Chairman, perhaps the ultimate “cut-spending” guy is angry at Obama, for paying funds out of the disaster fund, when he should have (pick one):

1. Not paid for disaster relief and let the people suffer, or
2. Asked the Tea/Republicans for more money.

Sure.

Despite potential funding shortfalls, Obama said Sunday that the federal government would continue providing full assistance to affected states and cities.

“As I’ve told governors and mayors across the affected areas, if they need something, I want to know about it,” he said.

Huh?? Mr. President, didn’t I just read, at the beginning of this article, that FEMA will suspend “some payments to rebuild roads, schools and other structures destroyed during spring tornadoes in Joplin, Mo., and Southern states . . .” Did you forget so soon?

Ah, don’t you just love the political double talk when the reality of human need meets the obstinance of wrongheaded theory? America, wake up. These fools are stealing your lives and the lives of your children. The Tea/Republican’s “cut-deficit” effort is mean, misguided and harmful, and you are paying for their ignorance.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com


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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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Published by Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

Published

16 thoughts on “–Lesson in double talk: The government is broke. To hell with Joplin and the South.”

  1. Rodger,

    I was just trying (really hard) to explain MS to someone who is clearly still indoctrinated by pre-1971, high priest economics. While having trouble getting through, he finally switched the debate from “can we” to “should we” spend. While he ignored several of my points (drawn from your tireless website here), here are his two main arguments.

    1)”Again, the fed has created 2 trillion in liquidity over the past two years, interest rates are virtually zero and the economy is barely growing.”

    2)2) “MV = PT. You can create “money” until the cows come home but if the banks don’t lend, and the borrowers don’t borrow, the economy does not grow.”

    I don’t want to give up on him. Can you provide a nice little condensed rebuttal?

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  2. Pete,

    1)a)The “2 trillion” was not enough to offset the enormous real estate and business losses, together with the annual 1/2 trillion negative balance of payments, and grow the economy. Is your friend suggesting that less federal spending would have grown the economy?

    1)b) Low interest rates do not grow the economy. Though they make borrowing more attractive, they make lending less attractive. So it’s a wash. See: https://rodgermmitchell.wordpress.com/2009/09/09/low-interest-rates-do-not-help-the-economy/

    2) The government doesn’t just create money and throw it into the economy. The government creates money by spending on goods and services, which directly benefits those companies that sell to the government, thus growing the economy.

    Ironic that the debt hawks hate borrowing by the government, which never has any difficulty paying back, but they love borrowing by the private sector, which does have difficulty paying back. Makes no sense at all.

    I suggest you check this post — https://rodgermmitchell.wordpress.com/2010/06/14/is-federal-money-better-than-other-money/ — to see why bank lending is not the key to economic growth.

    Rodger Malcolm Mitchell

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  3. Rodger — This move by FEMA is perfectly understandable, politically. The Obama people know they can’t win the Southern states in the election, but the Northeast is their bread and butter (not to mention their vacation homes). This applies to the banking cartel and Congress, also. In addition, Congress, as you well know, is paralyzed by the economic and monetary myths so prevalent today.

    And NONE of them care about the rest of us.

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    1. I’ve read parts of it. I like how the Fed is turned into a Bureau of the Executive branch.

      I think there needs to be a distinction between demand deposits and time deposits for banks. But I still don’t see a point in banning fractional reserve lending.

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    1. The way I understand it is that it attempts to gradually increase the loan sharks reserve ratio requirements from 10% to 100% to end them creating new money out of thin air to loan out at interest.

      The bill also directs the Treasury to eliminate the debt.

      – Create a full employment economy
      – Provide for public investment in capital infrastructure
      – Provide for a reduction in the cost of public investment
      – Retire public debt
      – Stabilize the SS retirement system
      – Restore the authority of congress to create and regulate money, modernize and provide stability for the monetary sytem of the U.S.
      – by eliminating budget deficit, eliminating $400+ billion in unecessary interest payments

      The money supply would be inreased steadily by the Treasurey at 3% per annum.

      Where does it go wrong?

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  10. Pete:

    The way I understand it is that it attempts to gradually increase the loan sharks reserve ratio requirements from 10% to 100% to end them creating new money out of thin air to loan out at interest.

    And the benefit of eliminating bank lending is . . . ?

    The bill also directs the Treasury to eliminate the debt.
    All federal debt (i.e. T-securities) could be eliminated tomorrow, simply by crediting the checking accounts of all T-security holders, and debiting their T-security accounts. But what would this accomplish?

    – Create a full employment economy
    – Provide for public investment in capital infrastructure
    – Provide for a reduction in the cost of public investment
    – Retire public debt
    – Stabilize the SS retirement system

    How, how, how, how and how?

    – Restore the authority of congress to create and regulate money, modernize and provide stability for the monetary sytem of the U.S.

    Congress has the authority to do whatever it wants. “Modernize” how?

    – by eliminating budget deficit, eliminating $400+ billion in unecessary interest payments

    In what way are interest payments any problem whatsoever?

    The money supply would be increased steadily by the Treasurey at 3% per annum

    Exactly 3%? Regardless of need? Whether or not there is a war, a hurricane or other natural disaster, recession, depression, inflation, stagflation? Why always 3%?

    I should mention that Kucinich has been thumping this so-called “plan” for quite some time, and I don’t think any economist — old line or new wave — understands it. I sure don’t. He thinks it will eliminate debt, but all money is debt.

    Rodger Malcolm Mitchell

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  11. “And the benefit of eliminating bank lending is . . . ?” It doesn’t eliminate lending, it eliminates what brought about 2008.

    “All federal debt (i.e. T-securities) could be eliminated tomorrow, simply by crediting the checking accounts of all T-security holders, and debiting their T-security accounts. But what would this accomplish?”
    Exactly. Eliminate phony crises and dishonest solutions by the politicians.

    “How, how, how, how and how?” Put the money directly to the streets and cut out the middle man. The FEd is unecessary and the banking monopoly are parasites who will just keep asking for more money, laundering drug money,buyingpoliticians and dialing up wars until they actually do what banks are supp osed to do.

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  12. By the way, I couldn’t fix/edit my post because at a certain point the email/name fields start blocking the bottom of the reply box.

    “Money is debt.” That’s the problem, where does it all end. Who owes who? Money/Debt is a social construct. Mainstreet are the ones who should’ve been “bailed out”, not only that, but compensated. Or perhaps we bring back debtor prisons and keep bailing out the creditor class.

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    1. Money, by its very nature, must be debt. Think about it. What gives a dollar its value? Since it has no intrinsic value, it must be backed by something else of value, and that something else is debt.

      In the case of U.S. money, the backing (the debt) is the full faith and credit of the U.S. government. That is what the government owes the holder of U.S. dollars.

      Rodger Malcolm Mitchell

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