–You don’t need to drown. You just need to understand who the sharks are and how to avoid them.

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

This is a note to those who have fallen for the Tea Party’s, anarchist nonsense that “government is the problem,” and the Republican’s suck-up-to-the-rich nonsense that there is too much government regulation, which is stifling the economy. I recommend this article titled: Tiny Rule Change at Heart of MF Global Failure

Here are a few excerpts:

Laurie R. Ferber has quite a resume. She is currently the general counsel of MF Global Holdings Ltd., the New York-based futures and commodities brokerage that filed for bankruptcy on Oct. 31, listing some $40 billion in liabilities.
Before that, she spent more than 20 years at Goldman Sachs Group Inc., where first she was general counsel for J. Aron & Co., a commodities business that Goldman Sachs bought in 1981, and then was the co-general counsel of Goldman’s principal business, known as FICC — for Fixed Income, Currency and Commodities — when J. Aron was merged into the rest of Goldman’s fixed-income division.

But at the moment, her greatest significance may be as a long-time advocate for revisions to a little-known and vastly underappreciated Commodities Futures Trading Commission rule called Regulation 1.25.

Before 2000, the rule permitted futures brokers to take money from their customers’ accounts and invest it in a number of approved securities limited to “obligations of the United States and obligations fully guaranteed as to principal and interest by the United States (U.S. government securities), and general obligations of any State or of any political subdivision thereof (municipal securities.)” That is, relatively safe securities with high liquidity.

The banks, however, pushed the CFTC to expand the investment options that would allow firms to practice “internal repo.” In this scheme, money is taken from customer accounts and invested short-term in a variety of securities, with the futures brokers reaping the not- insignificant financial rewards from their customers’ money.

And, lo and behold, such efforts were successful. In December 2000, the CFTC agreed to amend Regulation 1.25 “to permit investments in general obligations issued by any enterprise sponsored by the United States, bank certificates of deposit, commercial paper, corporate notes, general obligations of a sovereign nation, and interests in money market mutual funds” — in other words, riskier investments that could make more money for Wall Street.

Then, in February 2004 and May 2005, Regulation 1.25 was further amended and refined to the liking of Ferber and the banks. In the end, the door was opened for firms such as MF Global to do internal repos of customers’ deposits and invest the funds in the “general obligations of a sovereign nation.”

This practice, of course, may well be the centerpiece of the MF Global disaster.
In a nifty bit of Washington irony, about a year ago, shortly after the Dodd-Frank Bill was passed, the CFTC proposed vastly restricting the way customer money could be invested. . . Unsurprisingly, the reform effort went nowhere. Equally unsurprisingly, one the many comment letters from financial professionals to urge the CFTC to keep the status quo came from Laurie Ferber.

Too much regulation? Too much government? Ask the Tea Party. Ask the Republicans. No, better yet, ask the thousands of people who have lost billions of dollars to crooked financial companies, for lack of regulatory oversight – you know, that stifling stuff that keeps the rich from cheating the poor.

On the same web page, you will find an editorial from Jesse’s Café Americain:

History shows that it is never the initial criminal action that brings down a government, but it is always the subsequent coverup and obstruction of justice that destroys careers and cripples administrations and their parties.
The ideological fantasy that government is the problem, and simply getting rid of it is the answer, is a great propaganda slogan for white collar criminals to promote, but it makes little sense in the real world of flawed human beings and a persistent rogue element in any society.

For it is the constant weakening of regulations by the banks and their lobbyists that led to the financial crisis and the looting of the public trust. If the criminals have corrupted the policeman, one does not get rid of the police department as a solution . . . One reforms what has been corrupted, and prosecutes the criminals more vigorously.

The problem is the weakening of government by corruption. And the solution is reform, not more of what went wrong with the rule of law, replacing it with lawlessness.

The danger is that when, in the name of libertarian reform or some other misguided anarchist movement, the laws are knocked down, and the social fabric is torn, very often the worst of us, the truly ruthless opportunists, put forward their ‘strong men’ or a ‘great leader’ to bring back order and act as the law, or merely preside over the law of the jungle.

And then begins the real descent into hell.

A brilliant analysis, and one you should remember the next time a politician tries to convince you that the solution to your problems is to cut spending on regulations, untie the hands of business, and let the good times roll.

In summary, you are being lied to. You are being lied to when you are told the federal deficit is too high, as the media claim. No, Social Security and Medicare should not be cut to “save” them. No, payroll taxes should not be increased. No, the federal government is not “broke,” as John Boehner famously lied, nor is it “living beyond its means,” as Barack Obama continues to lie. No, big government and all those nasty business regulations are not the problem, except for cheaters.

The problem is the 1%, whose control over the politicians, the media and the university schools of economics. They preach the lies, because in every case, the so-called solution benefits the 1% at the expense of the 99%.

And the greatest irony of all: When those of us, who understand Monetary Sovereignty, Modern Monetary Theory and other factual descriptions of our economy, try to explain the truth, the response from 98% of the 99% is something along the lines: “Everyone knows that’s stupid and you’re stupid, too.

Or as Bruce Dold, editor of the Chicago Tribune wrote to me last week, “Thanks again for your thoughts, Rodger. As we’ve discussed before, the editorial board takes a different view on the supercommittee and the importance of deficit reduction.

The possibility that Bruce Dold and the editorial board of the Chicago Tribune are part of the 1%, surely has nothing to do with their view.

Anyway, the 99% don’t reach for, or even recognize, a life saver when it is thrown to them, even as they drown cursing in this man-made, economic disaster. Their blood is in the water and the sharks still are hungry.

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


4 thoughts on “–You don’t need to drown. You just need to understand who the sharks are and how to avoid them.

  1. “Too much regulation? Too much government? Ask the Tea Party. Ask the Republicans. No, better yet, ask the thousands of people who have lost billions of dollars to crooked financial companies, for lack of regulatory oversight – you know, that stifling stuff that keeps the rich from cheating the poor.”

    Actually the regulaters are liberals (dems). They missed the stealing because the people did the stealing (Goldman Sachs, BOA, Citi, Chase, Wells, AIG, and Fannie/Freddy are all liberal groups. Don’t think so? You need to read who are who in TARP bail out $$$$ (1407 banks got money – over 50% foriegn). You liberals are some piece of work.


    1. John,

      The government is the our country’s biggest single customer. When your business is doing bad, do you tell your best customer to stop buying from you?

      Anybody that does is no job creator.


  2. Liberals or conservatives. Tiger sharks or hammerheads. Why should you care? The point is you’re being eaten alive, and it’s the 1% (of which there are both liberals and conservatives) who are doing the eating.

    Name one politician who understands and is willing to speak for Monetary Sovereignty. Today, the House almost voted on a balanced budget amendment, which would have been an economic disaster. Mostly conservatives, but a few liberals, too.

    Know your enemy. Fight your enemy, not your fellow victims.

    Rodger Malcolm Mitchell


  3. Galt,

    You are absolutely ridiculous. How do you construe this into a liberal-conservative debate. What the hell is the difference? Stop with the demagoguery and your libertarian dogma.This about reality and Rodger is, as usual, hitting the nail directly upon the head. This is not about the little Russian girl’s novels. Have a strong cup of coffee, sir, possibly you’ll awake?


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